On Friday, Saks Global CEO Marc Metrick sent a memo to all vendors stating that the company would be changing its operations and “breaking the traditional multi-brand model to drive growth for Saks Global and our brand partners”. With that comes a change in when it pays its brands across Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman.
The memo, seen by Vogue Business, said that, effective immediately, Saks Global will pay for all purchase orders 90 days from when the inventory is received, and that it will begin paying past due balances in 12 installments beginning in July 2025. Some of Saks Fifth Avenue’s vendors haven’t been paid in some seasons. Saks did not comment on how much money is owed.
Designer brands who rely on Saks as a retail partner were left shaken by the update. The new terms delay typical payment timings significantly: previously, while terms varied, payments would often be scheduled to the invoice date, which is when product is shipped out by brands. Scheduling payments for 90 days after inventory is received could invite delays thanks to shipping disruptions, as well as disagreements over timelines, some brands worry. “This is really disgraceful, and I can’t imagine what it will do to some of the smaller brands it carries,” says one designer. All designers and brand leaders in this story spoke on the condition of anonymity due to their relationship with Saks.
“A blanket statement like this is not normal,” says an executive of a brand carried by Saks, adding that typically negotiations are part of the discussion when payment terms change. “It shows that they feel very strong about their position.”
The deal for the two retail groups to join forces is complete. It’s the first step in Saks Global’s big ambitions.
In response to the criticisms from brands Saks has received, Metrick tells Vogue Business that the plan is not a “one-size-fits-all standard”.
“There are small brands that need a different level of attention, and we’re prepared to do that. Being the largest luxury retailer in the world comes with a responsibility to foster new and emerging brands and you can’t do that by putting financial strain on them,” he says. Saks will work with brands who share financial concerns on a case-by-case basis, though he didn’t offer what those terms might look like. “We’re in this with the small guys and we want to work with them. There will be different terms.”
“If these changes pave the way for retail profitability and vendors can absorb and adjust, the long-term benefits will outweigh the short-term struggles,” says Gary Wassner, CEO of fashion factoring company Hilldun Corporation. He says the 90-day terms are actually an improvement over Saks’s previous payment cycles, and that the 12-month payback plan offers reassurance. “Twelve months is a long time for brands to wait to be paid current, but it’s a better alternative than some others.”
Metrick says the new payment plan is just one element of the new retail group’s way forward, and is in line with how the dynamics in the world of retail and wholesale have changed in the past decade.
When Saks parent Hudson’s Bay Co completed the acquisition of Neiman Marcus Group in December, it created Saks Global, a $10 billion retail group comprising Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman and off-price retailer Saks Off Fifth. Metrick, a Saks and Hudson’s Bay Co employee for 30 years, has been charged with overseeing the group, and says he intends to cut costs up to $500 million — much of that from redundancies as the companies are integrated, he says — as well as cut the number of vendors by about 25 per cent, in an effort to “treat the remaining that much better”. “We had too many brands at Saks Global,” he says. Changing the payment terms could help cull the list of vendors by removing those who aren’t willing to abide by them. Metrick says it’s too soon to say if any vendors have pulled out in response to Friday’s memo, but that Saks is prepared for that to happen.
“The whole premise is that the current model doesn’t work. Look at where all the other luxury retailers have gone over the last 10 years,” he says over Zoom on Monday. He says that marketing, distribution and fulfilment have all gotten more expensive, while margins have contracted, creating headwinds across the industry. “Together as partners, we have to reset the model, or else there won’t be places for brands to distribute product anymore. There are things [brands] don’t fully appreciate right now, like the cost of having your own retail. The capital, staffing and real estate investments you need to make. There’s a reason for multi-branded distribution in the United States. And it was not going to survive under the existing model.”
Luxury multi-brand retail has gone through plenty of disruption in recent years. Barneys closed. Farfetch sold to a Korean version of Amazon. Matches, owing brands millions of dollars, shuttered last year. Mytheresa is in the process of acquiring Yoox Net-a-Porter, which has had a mismatch in ownership under Richemont since 2018. Neiman Marcus filed for bankruptcy in 2020.
In each case of retailer bankruptcy, sale or shuttering, it’s the independent designer brands who are the most vulnerable. Mass luxury brands, and those under ownership of the conglomerates, are able to cut off relationships when deals don’t go their way, and have more leveraging power to get the terms they want. Not so for the smaller players.
“What’s been happening at Saks has been extremely disruptive to us as a business,” says one brand founder. For small to mid-sized brands, the changes underscore how important it is that they sell through a wide mix of channels. One brand noted that the changes were “not disastrous” because they’ve built up their direct-to-consumer (DTC) sales. “Nobody going forward would be able to afford this as the centrepiece of their go-to-market strategy. It’s too risky. You would be out of business,” says the executive.
How did Saks get here? Metrick says that, typically, retailers pay for goods that aren’t sold for another 150 days or more, making retailers a “lending facility” for brands. But, “when times got very tough, the payment terms put retailers under duress”. This caused Saks to stretch payables out “beyond ordinary course”. In the memo, Metrick wrote that the updates should “provide the clarity and certainty you have been seeking”, regarding past due payments, though he concedes over Zoom that it’s not the answer brands wanted. “They wanted a big check. But it’s too messy, candidly,” he says.
“What we’re trying to do now is find the middle ground. We’re paying before we sell the product, on average, but in enough time to get the brands their money,” Metrick says.
What’s happening in luxury multi-brand as a whole also underscores the importance of Saks Global’s role in the industry.
“While I never support leveraging power to impose unreasonable terms, I do believe Saks understands the necessity of a strong, cooperative partnership with its vendors,” says Wassner. He adds that Saks had never missed a payment with Hilldun. “Saks, too, must stabilise its business. It’s too important to the industry to fail. It now represents $10 billion in retail sales, and has enormous opportunity. It needs its brand partners as much as they need it.” Wassner foresees the changes having an impact throughout fashion’s supply chain, with the new terms potentially prompting brands to rethink supplier agreements. “It’s a seismic shift in an already unstable retail environment, but it is a result of the truths we face today.”
It’s up in the air what the merging of Saks and Neiman Marcus will mean for inventory and selection (Bergdorf will continue to operate separately). Saks Global has eliminated the role of chief merchant; instead, Paolo Riva, the former general manager of merchandising at Neiman Marcus, has been appointed Saks’s chief brand partnerships and buying officer. A deal for Saks to have a presence on Amazon is also underway (Amazon was part of the group of partners that came together to complete the Neiman acquisition, alongside Salesforce, G-III and Authentic Brands Group), though Saks has yet to share more details. Metrick says: “People shouldn’t be guessing what that will be. Wait and see.”
Brands involved in the changes are figuring out next steps. Wassner says that as sales improve, “the time will come” for Saks to revisit its terms. None of the brands that Vogue Business spoke to say they intend to pull out of Saks. “We’re going to be working on our website, though,” one executive says.
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