The story below first appeared last year when the rumors of this deal first surfaced. Well, those rumblings are back…and the lunacy of this whole thing is back too. This deal is all about investors getting their money, Richard Baker having another big acquisition to disguise the fact that he doesn’t know how to run a retail business and ultimately, two more great American retail nameplates suffering in the aftermath. I thought given the return of this speculation it only made sense to repost my original story. It’s not that I was so original in my thinking or all that brilliant. It’s more about how unbrilliant this deal would be. — WS
Saks Fifth Avenue and its parent company Hudson’s Bay Co. are at it again, trying to buy Neiman Marcus, according to a report in the New York Post.
This one has disaster written all over it: two wrongs do not make a right…much less a successful retailer.
Neither company is commenting, much less confirming, any of this and the Post, while having much better business coverage than its over-the-top political news or its gonzo sports section, does not always get everything right. They do say this is the third time HBC has tried to buy Neiman’s but as a private company we really don’t have much insight into what’s truly going on at Hudson’s Bay, Saks or its namesake banner in Canada.
We do know that before it went private it was struggling, having sunk major bucks into a redo of its New York City flagship and that at the same time it was dividing up its in-store and digital businesses running counter to what virtually every other retailer in the world was doing to combine those two parts into a cohesive omnichannel strategy. Saks made some money on this spin-off for the benefit of HBC and its leader Richard Baker who has had pretty much had a dismal track record running this company through all its various iterations.
Full disclosure: if you haven’t figured it out yet, I’m not a big fan of Baker who seems to come from the Bob Campeau/Eddie Lampert school of business which is that running a retailer is only an ends to a mean…that means being making money for its owners, the business itself be damned. Guess you didn’t need the spoiler alert after all, did you.
Neiman’s has been in its own retail hell. It’s had more owners – private and public – than anyone could possibly remember and at various times has been saddled with enough debt to sink a good-sized third world nation while those owners have pulled cash out of it for their benefit, bordering on the incomprehensible. The most recent was huge bonuses for executives while the company was laying off employees and crying poverty.
Neiman’s – which also owns the simply elegant Bergdorf Goodman store in New York – is now owned by three private equity players who The Post says have differed on what to do with this thing. Apparently the falling retail sales numbers have finally convinced all of them it’s time to give it up.
This deal may or may not happen. Retailing is full of rumors, speculation and downright subterfuge about potential acquisitions. Then again, some of them do actually happen.
If this one does, you can be sure there will be store closings, back-end consolidation and even common buying and merchandising operations. But what works in more mid-market mergers isn’t usually the best choice when you’re talking luxury. When LVMH or Kering buy luxury brands the last thing they do is squash them together and suck the individuality out of them.
HBC will of course take on more debt – we really have no idea what their balance sheet looks like – to do this deal so watch for all of these cost savings measures plus maybe the same e-commerce spin-off gimmick they did with Saks to get some cash out of this. Again, short-term gains, long-term stupidity.
Both Neiman’s and Saks have had assorted stablemates over the years, most ill-fitting. This one at least puts together two like brands and might make sense on a spreadsheet. In a mall or downtown shopping district it’s an entirely other story.
WarrensReport 
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