Saks' rating has been lowered by S&P Global Ratings, with the agency warning that the company's recent financing agreement has a high risk of default.
Saks Global, the luxury retail conglomerate, is navigating a turbulent financial and operational landscape following its $2.7 billion acquisition of Neiman Marcus Group late last year. Key issues include deteriorating vendor relationships, liquidity constraints, and difficulties in inventory management, which have collectively undermined the company's operating performance and market position.
### Financial Status and Debt Challenges
S&P Global Ratings downgraded Saks Global’s credit rating from ‘B’ to ‘CC’, indicating a high risk of default despite the company stating it is not currently in default. The rating agency described the company’s latest financing deal as "tantamount to a default” and highlighted diminished borrowing capacity under its $1.8 billion asset-based lending (ABL) facility, which had shrunk to $415 million by February 2025.
Saks Global experienced a free operating cash flow deficit of $517 million last year, with negative free cash flow expected to continue over the next two years. Despite owning over $4 billion in net real estate assets, the company has struggled to monetize these assets quickly enough to meet financial obligations.
In July 2025, Saks Global secured $600 million in new financing commitments from bondholders, including $200 million in fresh funds. This deal aims to shore up liquidity, particularly ahead of the critical holiday shopping season, but uncertainty remains about its longer-term financial stability.
### Operational Status and Vendor Relations
Earlier this year, the company’s strategy to stretch vendor payments has led to friction with suppliers. CEO Marc Metrick outlined a controversial plan to pay past-due invoices in 12 monthly installments starting July 2025, which has unsettled vendors and raised concerns about supply chain disruptions.
Disruptions in inventory flow have hurt Saks Global’s operational efficiency and opened opportunities for better-capitalized competitors like Nordstrom to gain ground.
Despite these headwinds, Saks Global is progressing toward its five-year synergy target of $600 million in cost savings from the integration of its brands (Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman, and Saks Off 5th). By mid-2025, the company had achieved $285 million in run-rate synergies, exceeding original forecasts with no current plans to close stores.
### Strategic and Market Position Considerations
Experts suggest Saks Global must focus on cost reduction, innovation, and clearer brand positioning to regain profitability. The company’s associations with less premium partners (like Amazon and Costco) have diluted its luxury brand image, complicating its appeal to high-end consumers.
There is a strategic recommendation to leverage real estate sales to reduce debt and reinvest in brand innovation and experiential retail, following examples of successful luxury retailers.
In summary, Saks Global is navigating a challenging financial and operational landscape. Its ability to stabilize vendor partnerships, improve cash flows through asset monetization, and sharpen its luxury brand identity will be critical for its future stability and competitiveness in the luxury retail market.
- The deteriorating financial status of Saks Global, marked by a downgraded credit rating and liquidity constraints, has raised concerns about its ability to meet financial obligations, as the company has struggled to monetize its net real estate assets quickly enough.
- To shore up liquidity, Saks Global secured $600 million in new financing commitments from bondholders, including $200 million in fresh funds, but uncertainty remains about its longer-term financial stability.
- The company's strategy to stretch vendor payments has led to friction with suppliers, with CEO Marc Metrick outlining a plan to pay past-due invoices in 12 monthly installments starting July 2025, which has unsettled vendors and raised concerns about supply chain disruptions.
- Saks Global must focus on cost reduction, innovation, and clearer brand positioning to regain profitability, as associations with less premium partners have diluted its luxury brand image, complicating its appeal to high-end consumers.
- Experts suggest Saks Global should leverage real estate sales to reduce debt and reinvest in brand innovation and experiential retail, following examples of successful luxury retailers, in order to improve its market position and remain competitive in the industry.
