“They borrowed a lot more money than they should have for a company that isn’t growing — it’s a slow-melting ice cube,” said Tim Hynes, the global head of credit research at Debtwire. “If you have declining sales, you have to have a lot of cushion, and if you don’t … that’s how you wind up getting in trouble.”
The Saks-Neiman Marcus merger was meant to buoy both retailers as department stores continue to lose relevance and consumers are increasingly reticent to spend on nonessentials. During the holiday shopping season, transactions at high-end department stores from Black Friday to Cyber Monday fell 10 percent compared with the same four-day stretch a year earlier, according to Consumer Edge, which tracks transaction data on U.S. credit and debit cards. They also lagged those of their off-price peers.
But Saks, in particular, struggles to draw in customers, said Shawn Grain Carter, a professor at the Fashion Institute of Technology. Saks Global posted second-quarter revenue of $1.6 billion in October, a more than 13 percent decline year-over-year.
It has also fallen behind on paying its vendors, leaving its stores with a limited assortment of products, according to Debtwire and other news reports. Several vendors have sued the company over the past two years, alleging it did not pay its bills for hundreds of thousands of dollars worth of women’s apparel, winter accessories and jewelry.