Saks Seeks Suppliers’ Patience on Payments as Luxury Brands Struggle

Luxury retailer Saks is reportedly warning its suppliers that it may take some time to get paid.

As The Wall Street Journal (WSJ) reported Friday (Feb. 14), Saks issued a memo to its suppliers on Valentine’s Day aiming to reassure them about their unpaid bills.

The retailer, which last year acquired Neiman Marcus in a $2.7 billion deal, said it would pay for new orders within 80 days of receipt, whole past-due payments would be covered in 12 installments beginning in July.

“I understand and am sympathetic to the last 18 months and the challenges regarding payments,” Saks Global CEO Marc Metrick wrote. “Our expectation is that this provides the clarity and certainty you have been seeking. To that end, we are looking forward to seeing the flow of merchandise return to normal levels.”

The news follows reports from last summer that Saks had missed hundreds of vendor payments. According to WSJ, some smaller suppliers have sued the retailer to recoup overdue payments. Saks has said it was committed to meeting its obligations and the delayed payments were the result of the company’s efforts to navigate the macroeconomic environment.

Spending on luxury items has slowed across the board, particularly in China, were consumers are showing more caution, the report noted. This has complicated plans to reinvigorate sales at America’s luxury department stores and brands.

“While some leading brands, like LVMH, continue to experience growth in certain segments such as fashion and cosmetics, others, like Burberry, are struggling with weaker performance in key markets,” PYMNTS wrote earlier this month.

“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.”

Some experts argue the industry is confronting an “existential crisis,” that report added, with changing values among younger shoppers leading luxury brands to rethink their “strategies and cultural positioning.”

The Saks-Neiman Marcus deal last year brought together the luxury retail brands Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue and Saks Off 5th, under the umbrella of Saks Global. The combined Saks Fifth Avenue and Neiman Marcus flagship properties have an asset value of $7 billion, the company said at the time.

Amazon played a role as well, taking a stake in the new company and potentially setting an an opportunity for the luxury retail department chains to “think and act more like Amazon by streamlining logistics, inventory and supply chain operations,” PYMNTS CEO Karen Webster wrote last summer.