Amazon Isn't the Solution to Saks' Problems
When Saks Global announced its partnership with Amazon this week to open a new storefront on the long-fledgling Amazon Luxury Stores platform, the news was less notable than the timing.
It was inevitable that the e-commerce behemoth and department store chain would come together. After all, Amazon helped finance Saks Fifth Avenue's $2.7 billion merger with Neiman Marcus Group, alongside Salesforce, Authentic Brands Group and the holders of $2.2 billion worth of bonds that the retailer issued in December.
But Saks revealed the news amid a barrage of headlines about its tumbling bond prices.
Since late April, the value of Saks' bond has plummeted as the luxury industry grapples with the headwinds resulting from president Donald Trump's aggressive trade policies. A day prior to its Amazon announcement, addressing the rapid depreciation of its bonds, Saks Global told investors that it's exploring options to boost its liquidity, including the potential sale of some of its real estate assets and raising up to $350 million in new debt. The concerns around the viability of the business were not assuaged; Saks Global Enterprises' bonds sank another 10 percent Tuesday, though it has since recovered from that dip. It now trades at about 62 cents on the dollar.
The fact that the bonds have lost more than a third of their value reflects falling confidence among investors that Saks would be able to make interest payments, the first of which is due at the end of June. In other words, the market has signalled that Saks is in a precarious cash situation.
On top of interest, the retailer has begun making payments to vendors as promised in a February letter to brands outlining a plan to pay back late and missed invoices over the last two years. Vendors with overdue payments from Saks can expect monthly checks starting in less than two months.
'We are actively managing liquidity with rigour to drive results,' a company spokesperson told The Business of Fashion in a written statement. 'We have approximately $400 million of liquidity, and are working diligently to ensure we have the capital needed to meet our financial obligations, invest in our transformation and operate our business.'
But taking on further leverage is not a good sign for Saks — especially not in the form of what's known as a 'first in, last out' —aka FILO — loan, which is the specific type of financing that Saks is deliberating.
'A FILO is known as a last-ditch effort,' said David Tawil, president of Prochain Capital and an expert on distressed assets. 'Whoever's putting down the FILO, they'll be the most sharp-elbowed lenders in the business, the best vultures around.'
Similar to a term loan, a FILO is typically drawn as part of an existing credit facility. In the case of Saks, its FILO would be structured within its $1.8 billion asset-based loan, or ABL, 'meaning our ABL/FILO commitments remain capped at $1.8 billion,' the company said. 'This will give us greater flexibility, without any incremental debt capacity.'
Whatever additional capital the company can procure will not address the other elephant in the room: Saks Global's business performance. Theoretically, profits from sales — made greater by the economies of scale that come with a merger — would turn into cash flow that would then be used for interest payments and other costs. But since the Neiman Marcus acquisition closed, sales have softened.
'Fourth quarter 2024 performance at Saks Fifth Avenue was hampered by lower inventory levels, which we expect will continue to impact the first quarter of 2025,' the company said. 'Neiman Marcus performance through holiday was strong, but the effects of the macroeconomic environment on the consumer is contributing to continued softness in the consolidated business.'
According to credit card data pulled by research firm Consumer Edge, sales at Saks Fifth Avenue have fallen double-digits every quarter since fall 2023. Neiman Marcus fared even worse, posting declines since the end of 2022.
Saks Global said its new storefront on Amazon will help it reach new customers. So far, only a handful of brands have agreed to be on the platform, including Dolce & Gabbana and Balmain. Allocating merchandise to Amazon also means fewer products for Saks to sell directly, not to mention it runs the risk of further alienating brand partners who have yet to come around on the idea of selling on Amazon.
With lagging sales, mounting interest payments and inventory orders coming due, Saks Global is not in a good place, to say the least. It's unclear if its current selection on Amazon is alluring enough to move the needle for either the department store or Amazon, which has struggled to make headway in selling luxury apparel.
For now, it appears to be 'lipstick on a pig,' said Tawil.
THE NEWS IN BRIEF
FASHION, BUSINESS AND THE ECONOMY (Getty Images)
Prada posted industry-beating growth ahead of its Versace acquisition. The Milanese fashion conglomerate's first-quarter revenues rose 13 percent year on year to €1.34 billion ($1.52 billion). Sales were flat at flagship brand Prada while Miu Miu's sales soared 60 percent.
Burberry has begun looking for its next chairman. The British luxury brand is evaluating potential candidates to succeed Gerry Murphy as chairman, though Murphy is not expected to step down this year and the exact timing of his departure has not been formally decided. The news comes as Burberry got a buy rating from Citi for the first time in 17 years.
Adidas said Trump tariffs 'put a stop' to a boost in targets. After generating better-than-expected first-quarter profits, the German sportswear brand didn't raise its financial outlook for the year over uncertainty around US President Trump's tariffs. Following the news, Adidas shares remained largely unchanged in early German trading.
G-Star Raw named the designers of Botter co-creative directors. Rushemy Botter and Lisi Herrebrugh will reintroduce the Dutch denim brand's upscale 'Raw Research' line in January during Paris Fashion Week and influence G-Star's main menswear and womenswear collections.
Etsy topped quarterly revenue estimates on steady demand for apparel and gifts. The online marketplace which owns resale apparel platform Depop reported quarterly revenue rose about 1 percent to $651.2 million, surpassing analyst expectations of $642.7 million.
Trump's tariffs prompted a slump in shipments to US ports. The number of vessels scheduled to arrive at the Port of Los Angeles next week is down by almost a third year on year.
Chinese e-commerce exports plummeted in the face of tariffs, despite a rise in sales to the EU. Amid reports that Shein is considering a restructuring of its US operations to circumnavigate tariffs, exports to the US from Chinese online shops such as Shein and Temu have plunged. Total e-commerce shipping dropped 65 percent by volume in the first quarter but rose 28 percent in Europe.
Nike is forming a new team for its secretive brand with Kim Kardashian. The US sportswear brand is assembling a team of executives and designers to operate its new brand with the entrepreneur and reality TV star's apparel label Skims, and plans to release its first NikeSkims womenswear collection this spring.
Shein is weighing a US restructuring as tariff risks cloud its London IPO. The fast-fashion retailer is considering restructuring its US operations, including shifting production for the US market to countries outside China, as the 'de minimis' tax exemption ends.
Primark is committed to US expansion despite tariff uncertainty. Associated British Foods chief executive George Weston said its subsidiary fast-fashion retail company Primark is committed to expanding its US store count from the current 29 to 60 stores by 2026.
Textile recycler Eeden raised €18 million. The German recycling startup said Tuesday it had raised an €18 Million ($20.4 million) Series A round to fund construction of a demonstration plant in hopes of commercialising its textile-to-textile recycling process.
Alibaba co-founder Jack Ma was implicated in an intimidation campaign by the Chinese regime. Ma was enlisted by the Chinese government to pressure a businessman to help in the purge of a top official.
THE BUSINESS OF BEAUTY (Il Makiage)
Il Makiage's parent company raised its full-year outlook. Oddity Tech, which owns Il Makiage and Spoiled Child, announced Tuesday that it had raised its full-year outlook after posting a 27 percent year-over-year rise in first-quarter revenue with earnings of $268 million. Both Il Makiage and Spoiled Child posted double-digit revenue growth.
Estée Lauder's sales slid 10 percent. The US cosmetics giant forecast a bigger-than-expected drop in fiscal 2025 sales, indicating a slow down in the American market. Estée Lauder has been struggling to revive dwindling demand, mainly in China and Asia, for the last couple of years.
Puig posted an 8 percent rise in first-quarter sales. The Barcelona-based company behind perfume brands Carolina Herrera, Rabanne and Jean Paul Gaultier reported €1.21 billion ($1.38 billion) in sales during the first three months of the year, beating analyst expectations.
Unilever will shutter its Ren skincare business. The consumer goods company that produces Dove soap and Vaseline cited internal challenges that were exacerbated by market conditions as reasons for the Ren shutdown, which has no fixed date. The brand is expected to stop trading by the end of the 2025 third quarter.
Caroline Hirons' Skin Rocks landed its first growth investment. The UK-based skincare brand has received a growth investment led by firms Redrice Ventures and Jamjar Investments to fund its international expansion and the development of its professional line. A spokesperson said the brand has generated over £10 million ($13 million) in net revenue since launching in 2022.
Freck Beauty founder Remi Brixton sold the brand and stepped down. The Sephora-stocked brand that rose to prominence for its viral freckle pen has been sold to an undisclosed group of owners, while Nameless CPG will operate Freck Beauty.
Chanel closed its NYC beauty concept boutique. Chanel's Atelier Beauté Chanel has permanently closed six years after opening in New York City's Soho. The location had offered beauty sampling as well as makeup services and consultations for skincare and fragrance.
PEOPLE (Courtesy of Pierre Castillon)
Louis Vuitton named Pierre Castillon its VP of communications, strategic planning and digital. Castillon will report to Blake Harrop, Louis Vuitton's executive vice president of image and communications. Prior to his promotion to the newly created role, Castillon was Louis Vuitton's global head of digital media for six years.
Harper's Bazaar Italia named new creative directors. The Hearst publication has appointed Michael Amzalag and Mathias Augustyniak, the founders of design studio M/M, its new creative directors. The duo has worked with publications like Vogue France and Man About Town, and with brands including Yohji Yamamoto and Jil Sander.
MEDIA AND TECHNOLOGY (Getty Images)
Ari Emanuel acquired the Frieze art group from Endeavor. The Hollywood super agent agreed to buy the contemporary art organisation from Endeavor Group Holdings, Inc. in a deal which reportedly values Frieze at nearly $200 million. Frieze CEO Simon Fox will remain in his current role.
Allure Magazine launched a Philippines edition. The Condé Nast-owned beauty publication is expanding its global footprint with the launch of its second foray into Asia following its Korean edition. The new edition will be led by Rissa Mananquil Trillo, a beauty industry veteran and founder of Filipina-focussed skincare brand Happy Skin.
Family Style launches a zine for Gen-Z. The independent magazine, which styles itself as a curated dinner party bringing tastemakers across culture together in its pages, is looking to expand its consumer base to Gen-Z with the launch of Takeaway.
Compiled by Jessica Kwon.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
14 minutes ago
- Yahoo
Trump is under water on some of his top issues — including immigration, poll shows
President Donald Trump is under water on some of his most favorable issues — immigration and the economy — according to a new Quinnipiac University poll released Wednesday. The poll shows Trump's approval rating at 38 percent among registered voters, a three point drop from April. He's also losing support on subjects that were crucial to his November victory. On immigration — an issue that the president hammered on the campaign trail — Trump's approval rating dropped five points from April, to 43 percent. His already low approval rating on the economy did not budge, remaining at 40 percent. The results show a majority of voters, 54 percent, disapprove of Trump's handling of the issue. The poll surveyed 1,265 self-identified registered voters from June 5-9, and has a margin of error of plus or minus 2.8 percent. The results come as Trump's approval has been steadily picking up since it dropped significantly in April, according to RealClearPolitics' polling average. The negative polling did not stop at the president himself. A majority of the voters polled also had objections to his premier piece of legislation, the 'big, beautiful bill' making its way through Congress. Fifty-three percent of the voters polled did not support the legislation. Divided among party lines, 67 percent of Republicans supported, while 89 percent of Democrats and 57 percent of independents opposed it. On Medicaid funding, an issue that has become Democratic messaging priority, 47 percent of those surveyed thought funding should increase, while 40 percent think it should stay about the same, and just 10 percent think federal funding should decrease. The bill as passed by the House is estimated to end Medicaid coverage for millions of people. Quinnipiac also asked voters what they think of billionaire Elon Musk, and his approval rating is crashing among Republicans following his very public breakup with Trump. Among Republicans, 62 percent had a favorable view of Musk, a 16 point drop from April. But while Trump's approval languishes, it's not clear Democrats will be able to take advantage of it. A vast majority of voters — 70 percent — disapprove of the way Democrats in Congress are doing their jobs, while 20 percent approved. That's 12 points lower than how voters viewed Republicans in the survey.
Yahoo
14 minutes ago
- Yahoo
Why Trump Is Losing His Trade War
The Atlantic Daily, a newsletter that guides you through the biggest stories of the day, helps you discover new ideas, and recommends the best in culture. Sign up for it here. Donald Trump's trade war is fast turning into a fiasco. When the president started the war, Team Trump advertised it as certain to be fast, easy, and cheap. Trump would impose tariffs. The world would yield to his will. The tariffs would do everything at once. They would protect U.S. industry from foreign competition without raising prices, and generate vast revenues that would finance other tax cuts. Americans could eat their cake, continue to have the cake, and trade the same cake for pie—all at the same time. 'There's not going to be any pain for American workers,' Trump's press secretary, Karoline Leavitt, vowed in April. The advertising rapidly proved false. The U.S. economy is slowing because of the Trump tariffs; China's is thriving in spite of them. Team Trump falsely promotes vague five-page outlines with alienated former allies as big deals; China is successfully wooing some of its former rivals, such as Vietnam. America's standing in the world is measurably sinking; China's is measurably rising. Courts are ruling that Trump's tariffs are illegal; public opinion mistrusts the tariffs, regarding them as expensive and unproductive. The promise of huge flows of painless money from tariff revenues is evanescing as the fantasy it always was. Oh, and the country's largest chain of Halloween retailers canceled its traditional summer grand opening because of Trump-caused supply disruptions. What comes next, as things go wrong? Trump's first instinct is to blame the targets of his economic aggression for not cooperating with his wishes. On May 30, Trump accused China of violating an imaginary agreement with him. On June 4, he complained that Xi Jinping was 'extremely hard to make a deal with.' But Trump seldom chooses to quarrel with foreign dictators, saying in the same breath, 'I like President Xi of China, always have, and always will.' Today, in all-caps emphasis, Trump announced that a deal had been done, declaring that his 'RELATIONSHIP IS EXCELLENT' with the Chinese president-for-life. The lack of details in the announcement strongly suggests that Trump yielded more and gained less than his publicity apparatus wants Americans to believe. That's because, in reality, Trump's global trade war has always been subordinate to his domestic culture war. Trump much prefers to vent his rage against enemies within. Get ready for him to blame the failure of his trade war on fellow Americans who did not support him enough. The Trump tariffs will be ballyhooed as an act of patriotism, a necessary sacrifice to be laid on the altar of the nation. One of Trump's television talkers reminded viewers that Americans melted down their pots and pans to win the Second World War. If the president needs to ration dolls and colored pencils, how dare any true American raise a contrary voice? The coming call for national solidarity with Trump's Great Patriotic War against imported Halloween costumes deserves all the scoffing it will get and more. Trump ordered the nation into economic warfare. He did not do any of the things necessary to create any hope of success in that war. The impending defeat is his personal doing, entirely his own fault. [Jonathan Chait: The good news about Trump's tariffs] Recall the classic Norm Macdonald bit in which the comedian marvels that in the 20th century, Germany decided to go to war with 'the world,' twice. That was meant as a joke. Trump adopted it as his actual strategy. Trump's rationalizers invoke anxiety about China as his justification. Yes, China numbered among the targets of Trump's 'Liberation Day' tariffs. But so did Australia. So did Brazil. So did Canada. So did Denmark. So did Egypt. And on and on, through the whole alphabet of American allies and trading partners. The United States is by far the planet's strongest national economy, producing slightly more than one-quarter of the planet's goods and services. Including its historic and recent partners, the United States could potentially lead a group of nations sufficiently influential to write economic rules that everybody would need to take into account. That fact underpinned the Trans-Pacific Partnership concept of the Obama years: Form a large-enough and attractive-enough club, and China will have no choice but to comply with the founding members' terms. Trump's alternative concept is for a quarter of the world economy to cut itself off from the other three-quarters, and then wait for the three-quarters to beg for mercy from the one-quarter. Unsurprisingly, that concept is fast proving a stinker. But suppose the president sincerely believed that the U.S. had no choice: The one-quarter must fight the three-quarters as a matter of national survival, or 'liberation,' from the tyranny of foreign goods and services, foreign fruits and vegetables. Crazy, but suppose he did. What would follow? A rational president would grasp that a U.S. economic war against the rest of the world would be a big, protracted, and painful undertaking. Such an enormous commitment would require democratic consent from a large majority of the public, all the more so because the United States is starting the war itself. Trump's trade conflict is very much a war of choice. The president must explain why he chose it. A rational president determined to fight an economic war would try to mobilize broad support from the public and from Congress. He would seek allies in Congress, and not only from his own party. He might, for example, compromise on some of his other goals. If he also wanted to tighten immigration at the same time as waging a global trade war, or to roll back DEI programs, or to cut taxes for the wealthy, or to relax anti-corruption measures, or to pardon the crimes of his violent supporters, or to plan any other ambitious but divisive project, he might think twice about pursuing them. You can't ask your opponents to pay more and do without if you won't forgo even a scrap of your partisan agenda. You can ask anyway, but don't be shocked when they answer with a Bronx cheer. That president would also lead from the front. A president seeking to inspire Americans to endure hardship for the greater good would certainly not throw himself a multimillion-dollar birthday parade at public expense. He would not accept lavish gifts from foreign governments, would not operate a pay-for-access business that collected billions of dollars for himself and his family from undisclosed favor-seekers. While asking other Americans to accept less, he would not brazenly help himself to more. He certainly would not troll, insult, and demean those who may not have voted for him, but whose cooperation he needs now. This president has, of course, done the most egregious version of every item above. His economic war is adjunct to his partisan culture war. He did not seek broad support. He gleefully offends and alienates everyone outside his base. Which works for him as long as times are prosperous, as they were in the first three years of his first administration. Allow things to get tough, though, and it's a different story. Trump cannot ask for patience and trust, because at least half the country has unalterably judged him as untrustworthy and out only for himself. [David Frum: The ultimate bait and switch of Trump's tariffs] Trump bet his presidency on the theory that trade wars are 'good and easy to win,' as he posted during his first term. His second-term trade war, however, is proving not so easy, and not so good, either. He is fighting it alone, without global allies or domestic consent, because that's his nature. It's now also his problem. In the 1983 movie WarGames, a computer thinks its way through dozens of terrifying nuclear scenarios and concludes: 'The only winning move is not to play.' In other words, the only safe way to conduct a nuclear exchange is never to have one. The same could be said of trade wars, at least when fought by one nation, however big and rich, against all the others, all at once. Trump decided he did not care about Americans' support for his economic war. He did not ask for their backing. He did not make any effort to win it. He willfully alienated at least half of the public. Now that he's losing, his supporters want to scold the country because it rejects the whole misbegotten project as stupid and doomed. Don't listen to their reproaches. This is Trump's war, and his alone. The only way to win now is to end Trump's trade war as rapidly as possible. And then end the excessive, unilateral trade powers of a corrupt president who blundered into a pointless and doomed conflict without justification, plan, or consent. Article originally published at The Atlantic
Yahoo
15 minutes ago
- Yahoo
Aldi is cutting prices on hundreds of items to help consumers deal with ‘sticker shock' in the rest of the world
Aldi is slashing prices on more than 400 items, aiming to ease consumer concerns over rising grocery bills. The discount grocer announced efforts Tuesday to help its customers across its 2,400 US stores save over $100 million over the summer months. From now until Labor Day, shoppers can expect lower prices on about 25% of its products, including grilling meats, organic produce, pantry items, and other popular summer items. 'Our customers count on Aldi for the lowest prices of any national grocer, every day, and we never take that trust for granted,' Jason Hart, Aldi CEO, said in a news release. 'While customers may see higher prices at other retailers, we're working hard to unlock even more value for our shoppers, just in time for summer's lineup of holidays and gatherings where food takes center stage. It's another way we're doubling down on our commitment to help shoppers fill their carts with great products for less.' The lowered prices come after the Department of Agriculture announced it expects grocery prices to rise by at least 3.3 percent this year. There have been fears of higher prices in the wake of President Donald Trump's 'Liberation Day' announcement of tariffs on goods from most countries around the world earlier this year, and the changing rates and policies since then. 'We want to do what we can to help shoppers,' Scott Patton, Aldi's chief commercial officer, said in a news release. 'Value isn't a trend at Aldi. It's been in our DNA since we opened our first store nearly 50 years ago.' In February, Aldi announced plans to open over 225 new US stores in 2025, aiming for 800 new locations by 2028 as part of a five-year growth strategy. There are currently over 2,500 Aldi stores in the US.
