Saks Warns Suppliers Of Payment Delays Amid Luxury Retail Challenges

With its repayment plan in motion and a commitment to suppliers, Saks aims to restore trust and stabilize operations amid a challenging landscape for luxury retail.

Luxury retailer Saks cautioning suppliers about payment delays in a memo obtained by The Wall Street Journal.

The Feb. 14 memo promised suppliers that new orders would be paid within 80 days of receipt while outstanding balances would be covered in 12 monthly installments beginning in July.

“Our expectation is that this provides the clarity and certainty you have been seeking,” Marc Metrick, CEO of Saks Global, wrote in the memo. “To that end, we are looking forward to seeing the flow of merchandise return to normal levels.”

The memo follows reports last summer that Saks had missed hundreds of payments to vendors, with smaller suppliers filing lawsuits to recoup overdue balances. The retailer attributed the delays to its efforts to navigate a challenging macroeconomic environment and emphasized its commitment to meeting financial obligations.

Saks’ financial struggles come as the luxury retail market faces broader challenges, particularly a slowdown in spending in key markets such as China. The hesitation among high-income consumers, driven by economic uncertainty and shifting values, has pressured brands to adapt.

“High-income consumers remain a critical source of demand, but they are becoming more price-conscious, seeking greater value and quality in their luxury purchases,” PYMNTS noted earlier this month.

While leading brands like LVMH continue to grow in segments such as fashion and cosmetics, others, including Burberry, are performing worse. Analysts argue that the industry is experiencing an “existential crisis” as younger shoppers prioritize sustainability and inclusivity, prompting brands to rethink their strategies.

Saks’ recent financial hurdles follow its $2.7 billion acquisition of Neiman Marcus, which brought together the marquee brands Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue, and Saks Off 5th under the Saks Global umbrella.

The combined flagship properties of Saks Fifth Avenue and Neiman Marcus boast an asset value of $7 billion. According to PYMNTS, the deal also included Amazon taking a stake in the newly formed company with an eye on streamlining logistics and inventory operations.

Despite its aspirations to revitalize luxury department stores, Saks now faces the dual challenge of resolving supplier payment issues and navigating a rapidly evolving luxury market.