Deal or No Deal: Christmas Outcome Crucial to Neiman’s/Saks Tie-up
Holiday selling is always crucial to all retailers, but for Saks Fifth Avenue and Neiman Marcus Group, this year’s season could not be more momentous.
Sources told WWD that Saks Fifth Avenue, which is owned by HBC, continues to negotiate hard to buy the Neiman Marcus Group, but that the owners of NMG are in no rush to sell and can sit back and wait for their price.
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“The negotiations for Saks to buy Neiman Marcus are ongoing and fulsome, but a deal will not get done till after Christmas,” said one source close to the situation. “Look, you’ve got lots of lawyers, bankers and consultants working on it.”
Another source concurred, saying, “There’s a lot of back-and-forth with deals but it’s the holidays. No deal is going to get done during the holidays. That’s the big focus. It would be an unusual time for a deal.”
Terms of any deal proposed by Saks or asked by NMG would be heavily framed by how their businesses perform during the holiday season. So if NMG has a strong season, they’re in a stronger bargaining position. A weak season reduces their bargaining position.
Currently, while Black Friday and Cyber Week were said to be strong online and just OK in the stores, industy-wide, the outlook for holiday 2023 remains soft, for small if any gains. Also, price promoting has been picking up, raising concerns about margins and profits for the fourth quarter.
On Friday, the Wall Street Journal reported that NMG had rejected a $3 billion offer from Saks and that the two parties couldn’t agree on terms. But one source said a deal is being negotiated in the $2.5 billion to $3 billion range. “If Christmas [is bad] there’s great potential. If it’s good, someone would want more money.”
Both HBC and the Neiman Marcus Group declined to comment on the $3 billion report. Talks between the retailers have been on and off for years but lately have intensified.
“There is slowdown compared to last year but we continue to have a very profitable business, with a double-digit EBITDA [earnings before interest, taxes, depreciation and amortization] rate,” Geoffroy van Raemdonck, chief executive officer of the Neiman Marcus Group, recently told WWD.
Speaking at the WWD Apparel and Retail CEO Summit last October, van Raemdonck said the owners of NMG — Pimco, Davidson Kempner Capital Management and Sixth Street — eventually will look to monetize their investment through an initial public offering or through a sale.
“That is a fact, and that’s why we are always going to be prone to rumors and speculation,” van Raemdonck said. “What is important to know is that we have $1 billion of available liquidity. We are profitable to the tune of hundreds of millions of dollars, and our strategy is working. So there is no need for them, no urgency for them to make a deal,” van Raemdonck said, referring to the owners.
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