Shotgun wedding for Saks and Neiman Marcus?
A news report says private-equity firm KKR is angling for the luxury retailers to merge.
According to Bloomberg News, KKR, whose retail holdings include Dollar Tree (DLTR) and Toys R Us, is "weighing an investment in Saks," parent of Saks Fifth Avenue, with an eye toward pushing the company to merge with Neiman Marcus, which owns Bergdorf Goodman. It isn't clear how much of a stake KKR may buy in Saks or whether it has even approached the company, which is based in New York.
Nonetheless, shares of Saks closed sharply higher on Wednesday, up 13%, on the Bloomberg report. Neiman Marcus was taken private in 2005 by TPG Capital and Warburg Pincas at a cost of $5.1 billion.
Both Saks and Neiman have reportedly hired financial advisers to assist them in exploring their strategic options. Joining Saks and Neiman Marcus would create the second-largest U.S. luxury department store chain behind Nordstrom (JWN), according to the news service.
The two companies would be able to save money by closing stores and melding back-end systems and supply chains. However, assuming both brands survived, differentiating them would be a challenge, one that dissuaded the companies from merging a few years ago, Bloomberg says.
Things have changed since then. Although luxury retailers fared better during the recession than chains catering to more cost-conscious shoppers did, many so-called aspirational shoppers are keeping a tight grip on their wallets because they're concerned about incurring high amounts of debt.
Competition for luxury consumers has intensified, and companies are struggling.
Nordstrom (JWN) recently reported worse-than-expected quarterly results and slashed its sales forecasts. Sales were also soft at LVMH, parent of Louis Vuitton and Donna Karan.
Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
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