Playing hard ball.
That’s how many vendors view Saks Global’s new approach to paying them for past and future orders, while expressing relief that Saks management provided some clarity about how and when they will get paid, even if they’re not pleased with the terms.
They’re being reassured by Saks Global management that in the aftermath of finalizing its $2.7 billion deal to acquire the Neiman Marcus Group, creating a $10 billion luxury retailer in the U.S., they have the wherewithal to pay vendors for upcoming receipts and can make good on what it owes them from seasons past.
“We are committed to fulfilling all of our obligations to our brand partners, and ask that you continue to partner with us, including by shipping merchandise, so that we can grow our businesses together over the long term,” Marc Metrick, chief executive officer of Saks Global, wrote in a letter to vendors on Friday, when the payment plan was disclosed. “With the closing of the NMG acquisition, our financial position is strong and our leverage is reduced, which will allow us to make investments to be better partners with brands.
After the letter went out, Metrick told WWD, “We have to reset to make sure that we’re setting up the right expectations, that we’re doing everything that we’re supposed to be doing, that we give everyone consistency and certainty, and they can feel good about doing business with us. Growing with the brands is also very important, but I really want to make sure people understand that [with] our brand partners, no one lost money with Saks because they are going to get paid. Did they get paid when other companies filed for bankruptcy? No.”
Under Saks’ new payment plan, which is effective March 1, vendors will be paid 90 days from receipt of inventory and all past due balances will be paid in 12 installments beginning July 2025. All payments for new merchandise will be made through wire/ACH at the earliest date commercially possible, Saks indicated, thereby “taking significant friction out of our processes.” For designers and brands, knowing when to expect payments is crucial to planning and managing their businesses efficiently and profitably, and for maintaining their relationships with retailers.
Vendors have complained since the pandemic that Saks has not paid, or has been slow to pay, its bills. The retailer is understood to owe hundreds of millions of dollars to vendors for past orders.
This week, vendors seemed most concerned that Saks keeps its promises, and that they’ll be pressured to sell more doors than they care to, or to sell both Saks and Neiman’s if they’ve been selling one or the other. Saks Global has far greater leverage over vendors since its acquisition of the Neiman Marcus Group, which was finalized in December.
Questions are being raised whether the 12 installments will be made monthly, so vendors are paid back in full for past shipments in a year’s time, or if the installments will be spread over a longer period. Sources close to Saks indicated that the installments will be made in consecutive monthly payments — and in equal payments.
“My question is will Saks Fifth Avenue pay interest on past due invoices?” said a former Neiman Marcus employee. Sources say that’s not going to happen.
Part of Saks’ big reveal last week was that it plans to reduce its vendor count by 25 percent, which means roughly 750 vendors will be gone, considering the retailer operates with 3,000 vendors. What’s unclear is whether those vendors getting dropped will be paid for past shipments. The 25 percent will include those being dropped and others who decide on their own not to ship Saks Global.
“Saks is entitled to do what they did, but you have to wonder whether people believe Saks will stick to the terms they laid out,” said one sportswear vendor who, like others contacted by WWD, requested anonymity.
“Ninety days is about as far out as vendors are willing to go. It’s pushing the limit. Some vendors (particularly smaller independent designers) won’t be able to handle that. Sixty days would be more in keeping with standard payment terms, but these terms definitely can vary from brand to brand. They are already out of pocket for a lot. The balances are massive. The other question is whether there will be a willingness to factor Saks’ receivables,” the vendor said.
Many vendors have continued shipping to Saks even though they haven’t been paid for several seasons.
“What choice do they have? There’s Bloomingdale’s and Nordstrom and some independents. But now Saks Global has all the leverage,” said one veteran retail executive. “They don’t want to lose that relationship with Saks or Neiman’s. They’re willing to take some near-term pain and they see with the creation of a $10 billion company, that’s an important long-term source of revenue.
“It’s really about Saks Global trying to do the best they can for vendors and balancing that with what they can afford to do in the near term. I’m sure the company doesn’t feel good about it, but they feel they did what they had to do,” said the source. “Saks had to buy time. It’s clear the company was very stretched. Had they not done the deal, they probably would have gone bankrupt.”
“The upside in all of this is that now there is a commitment to paying the vendors and clearly an effort to maintain relationships and get back to normal business,” said one retail expert. “To get to where they cut out half-a-billion dollars in costs will take a lot of different kinds of actions. But they believe generating half-a-billion of synergies will provide the financial latitude to continue to grow and invest in the business. I think this can work.”
Gary Wassner, CEO of Hilldun Corp., the New York-based factoring company, said, “I’ve been telling [clients] that paying in 90 days is not that different than what has been happening for the past two years. That they’ll need to adjust their own cash flows if they want to continue to sell to Saks/Neiman’s/Bergdorf’s.
“This will ripple down the supply chain, but it is the reality of the situation today. If we want Saks Global to come out of this as a healthy viable entity, and one that everyone can safely and profitably do business with 12 months from now, then we unfortunately have to bite the bullet on this,” Wassner added. “Hard decisions. It’s far better than a bankruptcy.”
One vendor told WWD they were a bit shocked when Saks asked for net 90, though it’s better than net-never, but “people are not OK with this.”
The vendor said with Neiman’s, the company always got net 30, with a trade discount. The company has a big payment coming, and wonders when it will arrive. If Saks can get net 90, other retailers will want the same.
The eveningwear designer Cyril Verdavainne, who sells to Saks solely through trunk shows, was paid last week. He said there are “very understandable reasons why Saks has been delayed in paying vendors, namely the Saks-Neiman Marcus merger.”
The designer said he can afford “to continue taking risks with delayed payments” and decided early on “to prioritize our direct-to-consumer approach.”
He added, “We turned our studio into a boutique where clients can shop and customize their orders, creating our own retail operation.” Verdavainne said with Saks, “Our payment terms were 30 days, and then they became 90 days.…It’s frustrating, but it’s the cost of doing business with department stores. Could it be fairer? Sure. Do I want to abandon my Saks Fifth Avenue clients, who can’t fly to New York for a custom dress? Of course not. So what do you do? Well, you open a line of credit, hire a factor, and hope for the best.”
One designer, who requested anonymity, said she now has to pre-pay invoices to the mills that she works with “because they don’t trust us to pay on time. It sets up this whole cash crunch situation to happen.”
Before the merger, Neiman Marcus was paying net 30 to the day but Neiman’s payments were placed on hold as soon as the deal went through, the designer said.
The designer said that her team has been “stamping their feet, begging and pleading to get paid and spending hours of our time continually chasing them down for money.” Payment takes at least 120 days “at the fastest,” she said. “As an independent company, it’s not as though we have cash reserves on hand. Nor should a business of our size be expected to do that to float Saks Global’s problems.”
Well aware that “the LVMHs of the world have a louder voice with Saks,” she suggested that the retailer should be more concerned about the untenable financial situation they are putting smaller businesses in, and the diversification those small brands provide on the (sales) floor. “Brands cannot survive this. I think their attitude is, ‘You need us more than we need you, so go screw yourself. You’ll be fine.’ No, we will not be fine.”
One New York-based designer, who requested anonymity, had to stop selling to Saks last spring even though it was his biggest wholesale account. “Hilldun would no longer accept their account, since they were not only not paying, but [they were] also taking unauthorized discounts. It was the reason I quickly had to find a retail location in New York City and opened my boutique last May,” he said.
The designer said he is not planning on showing Saks the collection again “till the mess is completely sorted.”
— With contributions with Lisa Lockwood and Rosemary Feitelberg
