Hilldun Corp.’s pause on Saks Global orders is going to drag on past Christmas.
“I am anxious to begin approving orders,” Gary Wassner, chief executive officer of Hilldun, told WWD on Friday. “If not for next week being a holiday for Saks’ [accounts payable] department, next week’s payment would have immediately opened up the credit line.”
That credit line is an important one for Saks Global, which has been vexed by a lack of goods to sell this year. Hilldun works with more than 140 brands that sell to either Saks Fifth Avenue or Neiman Marcus, paying the vendor up front for shipments, taking a cut and then collecting the payment from the retailer.
Without Hilldun’s support, brands are either holding back or have to ship goods at their own risk.
Wassner said he was “still in constant communication” with Saks Global executives.
Saks Global did not respond to a request for comment.
Originally, Wassner had hoped to start approving orders again the week of Dec. 15, but the timeline was pushed back. Saks Global skipped two weeks of payments to Hilldun and hit its credit limit.
Inventory is the lifeblood of any retailer and Saks Global has been struggling to keep its racks full and meet its other obligations, including what’s believed to be a roughly $120 million interest payment due on Dec. 30.
That interest covers the money taken on last year for the $2.7 billion acquisition of Neiman Marcus and Bergdorf Goodman, debt that had to be restructured in August.
While the idea behind of bringing Saks and Neiman Marcus together was to build a luxury retail powerhouse that could change the dynamic in the industry, money has been a problem from the start.
“It was never adequately funded,” Wassner said. “But couldn’t the investors and bankers see this from the start? So many missteps. Without merchandise they couldn’t compete. Without market credit they couldn’t get merchandise. This was the critical issue. Had they addressed this properly, the situation would be very different now.”
It is still not clear how the situation will play out.
The company has been shopping a 49 percent stake in Bergdorf Goodman, hoping to raise $1 billion to shore up its finances. There are players who are said to be interested in the retailer, but wary of the larger situation.
If Saks Global does not make its interest payment, it will have a grace period to figure something out, but concerns about a potential bankruptcy filing are growing.
“Sales with a proper margin is a formula for success at retail,” Wassner said. “You can only achieve a full margin if you have the merchandise at the same time as your competitors. This isn’t rocket science. Had their board allocated capital to obtain credit in the market from the onset of the Neiman’s acquisition, we’d be looking at a very different situation now.
“Brands can’t afford the risks they were being asked to take,” he said. “I protected our clients as best as I could. But Saks’ demand for merchandise always outstripped my willingness to take further risk. Hence, delayed approvals from us and delayed shipments to Saks.
“I want them to succeed!” he said. “The industry really needs them. It’s not a joke. Brands’ inventory produced for Saks is piling up in warehouses. I tried. But it was always too little too late. They could have fixed that problem.”
