Saks Aims to Raise Capital, Make Good on Late Payments, CEO Says
Saks.com, dealing with a challenging macro environment for selling fashion, says it’s getting close to finalizing a deal for additional capital and will make good on past due payments to vendors.
But mounting reports of unpaid bills have fueled industry concerns about the state of the Saks luxury website as well as the Saks Fifth Avenue stores, which is a separate company. Saks.com and its majority owner HBC have been maneuvering to increase liquidity to mitigate the situation. HBC also wholly owns the Saks Fifth Avenue stores business.
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Addressing the state of affairs at Saks.com and the delayed vendor payments, chief executive officer Marc Metrick told Sourcing Journal sister publication WWD, “This is just us managing our business very aggressively. We don’t love it. But we want to be very communicative with people. We are actually very close to finalizing a capital raise for Saks.com this quarter. That should give people more comfort if they need it.”
“We’re managing our business through a very difficult top line,” Metrick said, during an interview. “The environment isn’t going to get worse but we don’t necessarily see it changing for the next couple of months. You have retailers that approach different times in different ways. We’re being very deliberate about how we’re managing payments to our vendors. Remember, we have very little debt. We don’t have some looming interest payment, just a small term loan.”
Metrick declined to elaborate on how late payments are, and to which vendors. Payment schedules to vendors vary. The standard is 30 or 60 days after receiving an invoice. Some big players with leased concessions are automatically paid, sometimes on a weekly basis.
“We understand we have obligations to these people,” Metrick said. “They’re our partners. We don’t plan on not meeting these responsibilities to them. Obviously, we want to make sure we get inventory. So it’s really sort of a combination of different factors that go into it. But our intent is to pay everybody.”
He did not specify a timeframe. Recently, a handful of brands, who asked not to be named, have mentioned to WWD they stopped shipping Saks or haven’t been paid. The management of Saks.com oversees the merchandising and marketing of Saks.com as well as the Saks Fifth Avenue stores, though various agreements.
In his quarterly letter to vendors distributed Friday, Metrick wrote: “On behalf of Saks, the e-commerce business, I want to acknowledge some recent payment delays to our vendors, which we are diligently working to resolve as we navigate the challenging macro environment. Additionally, we are actively raising capital while maintaining low debt levels and expect to close incremental financing in the first quarter. With that, we remain committed to working with you collaboratively and transparently during this time, and appreciate your ongoing partnership.”
Saks, a privately held company, also released some results of its fourth quarter, ended Feb. 3 and for 2023 overall. Dollar figures were not provided.
For Q4, on a comparable basis, Saks’ gross merchandising value (GMV) fell 8 percent compared to Q4 2022. On a two-year stack, Q4 GMV rose 3 percent, and doubled versus Q4 2019. The top performing categories on Saks.com in Q4 were women’s apparel, particularly eveningwear and handbags.
Traffic to Saks.com was flat last quarter and conversions were down slightly compared to Q4 2022. However, average order volume increased by 15 percent compared to the year-ago quarter. The jump in AOV was driven by managing inventory better, being less promotional and optimizing the assortment, a Saks spokeswoman said.
Metrick said inventories were down and EBITDA (earnings before interest, taxes, depreciation and amortization) was up last quarter, though specifics were not provided.
For 2023 on a comparable basis, Saks’ GMV fell 11 percent compared to a 28 percent increase in 2022. On a two-year stack, 2023 GMV rose 17 percent and increased by 96 percent versus 2019.
Metrick wrote that last year, “We welcomed over 1 million new customers to Saks; existing customers represented another bright spot—up 6 percent compared to 2022.”
At the SFA Stores, comp GMV was down 10 percent in Q4 2023 compared to Q4 2022, and was down 8 percent on a two-year stack. Compared to Q4 2019, GMV rose 1 percent. Top performing categories were women’s and men’s contemporary fashion, beauty, jewelry and women’s shoes; top performing stores were New York, Boston and locations in Florida.
For all of 2023, GMV at the stores fell 12 percent compared to 2022 and rose 6 percent versus 2019.
GMV for Saks.com and SFA Stores combined for Q4 2023, on a comparable basis, fell 9 percent compared to Q4 2022, and rose 25 percent compared to Q4 2019. For 2023 overall, GMV fell 12 percent from 2022 and rose 26 percent versus 2019.
Further commenting on the state of Saks.com, Metrick said inventories are down heading into 2024 compared to 2023. Also, Saks.com was less promotional last year compared to the year before, reduced costs significantly, and concluded 2023 with higher EBITDA than last year, he said.
Forty percent of the Saks.com business is generated by 2 percent of its customers, Metrick said, noting there were about 450 million visits to Saks.com in the last fiscal year, which had 53 weeks. “Our highest long-term value customers are the ones that we share with SFA stores,” the CEO said.
Asked about strategies to help reverse the negative sales trends, he said the Saks Media Network launched last year will build revenues. “We are first luxury player to have a media network. We are in the process of expanding our network with on-site display advertisements.”
He said the company will be building non-endemic relationships, such as the one recently established with electric vehicle company Lucid. “It brings brand awareness top of mind and solidifies Saks’ luxury positioning,” Metrick said. After lowering a Lucid Air Sapphire car down to the lower level jewelry floor at its Fifth Avenue flagship in December, Saks and Lucid launched a partnership providing demo drives at Saks Fifth Avenue Beverly Hills and other Saks stores, content on Saks’ digital channels, and a Lucid landing page on Saks.com.
During the interview, Metrick spoke optimistically about the second half of 2024, pointing to the financial markets “moving favorably” and potential rate cuts by the Fed. He also cited lapping a soft second half of 2023, so comparisons would improve.
He foresees “a rebound in the mindset of the consumer,” he said. Historically, in sluggish economic times, Metrick said luxury customers are the last to curtail spending, and the first to resume normal spending as conditions improve.
Metrick suggested the months preceding the presidential election will be good times for Saks, if not for the country. “Saks will serve as a distraction for this election. People are going to shop. People will want to get out, do something for themselves and get away from the TV and the news. So you have an escapism, and folks will be feeling a little bit better about the overall economy.”
“As we anticipated, the macroeconomic environment was challenging through Q4, resulting in softness in luxury consumer spending, particularly among emerging luxury shoppers,” Metrick wrote. “Luxury is a long game, and we remain confident in our ability to operate with agility as the environment evolves. Despite the macro challenges, we’re pleased with the number of successes we had throughout the year, including driving retention among high lifetime value (LTV) customers, advancing our Limitless top client strategy and executing a successful partnership with Dior during the holiday season.
Metrick noted that last year, the invite-only top client program, called Saks Limitless, grew. “Throughout the year, we invited over 2,500 customers into the program and introduced additional benefits, including early access to special merchandise and more dedicated stylists, as well as offering memorable experiences in Aspen and Dallas,” Metrick wrote.
In another development, Mike Hite became chief technology officer at Saks on a permanent basis after holding the title on an interim basis. Mike joined Saks.com as chief Information officer shortly after Saks was established as a luxury e-commerce pure-play in 2021. Metrick cited Hite’s efforts at improving the Saks.com customer experience, including stabilizing the site for significant traffic and demand, improving site speed and incorporating newly designed product detail pages.
Two weeks ago, Saks Fifth Avenue opened a new store in Beverly Hills on the site of a former Barneys New York.
As reported, HBC has been maneuvering for greater financial leeway to support its retail businesses. On Feb. 14, HBC said it extended the maturity date of its asset-based revolving credit facility to June 30, 2026, from October 2024. The credit limit for the facility is $1.1 billion. The ABL is used to finance working capital requirements and other general corporate purposes, the company has said.
HBC, along with Pathlight Capital, also announced that the retailer’s existing senior secured term loan has been increased by $50 million, to $443 million, providing the retailer with additional support for growth initiatives and working capital purposes. The upsized term loan also matures on Sept. 30, 2026.
In addition, HBC closed on a new term loan facility of up to $150 million secured by certain U.S. real estate assets, providing more liquidity for the company for working capital purposes.
Aside from the Saks stores, HBC also wholly owns the Hudson’s Bay’s brick-and-mortar stores in Canada and O5, which operates the Saks Off 5th stores.
Aside from Saks.com, HBC is the majority owner of The Bay e-commerce marketplace in Canada, and Saks Off 5th, the upscale off-price e-commerce company.
