Numerous fashion labels and jewelry retailers intertwined with the Saks Global bankruptcy are hesitant to send new products to their stores, worried they might not be compensated amid the luxury brand’s ongoing legal troubles with Amazon, as reported by the Post.
Amazon, which holds a $475 million claim making it the primary creditor to the bankrupt Saks Fifth Avenue parent companies Neiman Marcus and Bergdorf Goodman, is contesting the retailer’s proposal for a $1.75 billion debtor-in-possession loan meant to stabilize operations.
According to court filings, the Seattle-based online retail giant asserts that the DIP financing is secured by shares it acquired in Saks Fifth Avenue’s flagship store in New York and is compelling the retailer to liquidate the luxury midtown Manhattan property to settle debts.
Amazon is also embroiled in a major lawsuit related to its failed e-commerce alliance with Saks, insisting it will pursue “all available legal remedies” to recover the funds, as mentioned in court documents.
“We rely on hundreds of brands that contribute significantly to our annual sales and are vital for our anticipated sales this upcoming quarter,” Saks Global stated.
However, many suppliers observing the situation are worried this dispute could limit the financial resources available to them. The top 30 unsecured claims against Saks sum up to nearly $700 million.
“The bankruptcy isn’t finalized yet,” remarked John Starlin, CFO of Elizabeth Locke Jewelry, a veteran vendor for Neiman Marcus. “What Amazon is contesting is merely a preliminary agreement, so who really knows what the outcome will be?”
Insiders have expressed that the looming bankruptcy could slip into liquidation, worrying sources. The past few years have seen numerous retailers collapse, with big names like Toys R Us and Big Lots disappearing entirely.
“We’ve watched far too many bankruptcies plunge directly into liquidation, leaving distributors in a lurch,” asserted David Tawil, a bankruptcy lawyer and partner at an insurance brokerage firm.
“Saks filed for bankruptcy rather hastily without a clear restructuring plan, and it was simultaneously met with a management shake-up,” Tawil continued.
New CEO Geoffroy van Raemdonck acknowledged on CNBC that product shortages have contributed to a “downward spiral” at Saks. “Rebuilding trust with our brand is the first priority. We’re working tirelessly to regain that trust,” he stated.
Van Raemdonck, who previously guided Neiman Marcus through bankruptcy in 2020, noted that a judge approved the $500 million DIP financing, which “will start reaching our stores soon.”
That said, insiders hint that Amazon is requesting an extra $700 million, causing some suppliers to hesitate about sending perishable products.
A longtime Neiman Marcus employee, wishing to remain unnamed, commented, “Customer traffic has dipped because the store isn’t marketing its products effectively.”
Another employee from Bergdorf Goodman told the Post that “there were no new shipments during the entire fourth quarter,” which affected sales significantly.
Many suppliers have started rerouting their products even before Saks filed for bankruptcy on January 14th.
“Several of my clients are sending larger quantities to Bloomingdale’s nowadays,” shared attorney Anthony Lupo, who chairs a fashion and retail group. “Bloomingdale’s reported a 9% increase in like-for-like sales in the last quarter, the best result in 13 quarters, with new designers like Christian Louboutin joining their roster.”
Some vendors still haven’t been compensated for items shipped to Saks Global over a year ago and are now seeking “key vendor” status, which would secure repayment of some pre-bankruptcy debts.
“Several vendors are withholding shipments for now, and some are requesting cash on delivery,” Lupo explained.
Jewelry businesses in Manhattan’s Diamond District are similarly impacted by the bankruptcy, said Jim Shenwick, who represents several companies that sent jewelry valued between $50,000 and $200,000 to Saks Fifth Avenue’s flagship.
“There are plenty of businesses feeling stranded on 47th Street,” he stated. “Those who have contacted me are in disbelief.”
Nonetheless, some jewelers continue to ship to Saks to maintain cash flow and vendor relationships.
New York jeweler Mimi Soh, who has designed for the likes of Sex and the City and crafted wedding rings for David Bowie and Iman, withdrew her pieces from Neiman Marcus stores early in January after not receiving payment for a year, according to a source.
Elizabeth Locke Jewelry, known for vintage gold pieces, retracted many of its consignments from Neiman Marcus in July due to repeated failures to settle accounts following sales, as detailed by the company’s CFO.
The Virginia designer associated with the Madison Avenue store attempted to retrieve what was left of his stock in late December, amidst rumors of an upcoming bankruptcy filing. “I think the company set this issue in motion because our counterpart insisted we apply for a permit to package and return our goods,” he remarked.
The designer did not disclose how much debt his company holds but expressed frustration over the lack of payment. “Everyone’s understandably upset about not receiving payment,” he emphasized. “Every vendor feels their trust has been eroded, and rebuilding that will take some time.”
