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By Hugh Cameron
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Amazon, a major financial backer of Saks Global, has said it is prepared to take drastic action to secure its investments after the struggling luxury retailer filed for bankruptcy.
On Wednesday, hours after Saks Global's initial filing, Amazon filed an objection to the company's bankruptcy financing plan, saying its $475 million investment to support the 2024 acquisition of Neiman Marcus was now "presumptively worthless."
Amazon also said it retained the rights to "seek more drastic remedies," such as the appointment of an examiner or trustee, if Saks failed to address its "grave concerns" with the billion-dollar plan.
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A judge has denied Amazon's initial efforts to block the financing deal and has approved an initial $400 million lifeline for Saks, according to Reuters.
Newsweek has contacted Saks for comment regarding the recent warnings. Amazon declined to comment when approached.
Why It Matters
Saks Global's filing and leadership shake-up marks the first major retail bankruptcy of the year, and one of the largest in recent years. While attributed to financial mismanagement by the company, as well as declining sales and mounting debt struggles, the filing has been seen by some as indicative of wider pressures facing the luxury and retail sectors, such as the shift toward e-commerce and declining foot traffic at brick-and-mortar locations.
What To Know
In 2024, Amazon made a $475 million investment in Saks to assist with its $2.7 billion acquisition of Neiman Marcus, an investment it says is now worthless after Saks "continuously failed to meet its budgets" and "burned through hundreds of millions of dollars in less than a year."
The company also said Saks failed to abide by the conditions of the investment, which included the sale of its products on Amazon's website. This deal, it wrote, was expected to accrue about $900 million in revenues for Amazon over eight years.
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The luxury retailer filed for bankruptcy late on Tuesday with about $3.4 billion in debt after its Neiman Marcus merger led to cash shortages and inventory issues, which exacerbated a prolonged decline in sales.
According to insights that the business intelligence firm Creditsafe shared with Newsweek on Wednesday, Saks had a "persistent and troubling pattern of paying vendors late in 2025." Between January and December, the company's debt beyond terms (DBT)—how many days bills are paid after agreed-upon due dates—hovered between 30 and 41, over three times the industry average DBT of about nine.
"The recent bankruptcy filing is the culmination of a prolonged period of weak operating performance due to ongoing liquidity deterioration and significant inventory challenges in the last three years," said Frederico Carvalho, an associate director at S&P Global Corporate Ratings. "Overdue payments resulted in vendors withholding inventory, disrupting Saks Global's supply chain and leaving it with insufficient in-stock inventory to operate successfully."
This resulted in a 13 percent drop in projected revenues in the second quarter of the year, as well as "significant margin pressures from sales deleverage" and a cash deficit of $410 million, Carvalho said.
Saks has argued that failing to secure $1.75 billion in new financing commitments could force it into liquidation. During a hearing on Wednesday, its chief restructuring officer, Mark Weinsten, said Saks would be "dead in the water" without the funding, which is needed to pay vendors and its roughly 17,000 employees.
What People Are Saying
Frederico Carvalho, an associate director at S&P Global Corporate Ratings, told Newsweek: "In our view, the retail industry is characterized by intense fragmentation and competition. Despite targeting a high-income demographic, which typically exhibits greater resilience, Saks Global has consistently underperformed the broad industry, primarily due to persistent operational issues and unsustainable capital structure."
Amazon wrote in Wednesday’s filing: "In December 2024, Amazon invested $475 million of preferred equity in Saks. … That equity investment is now presumptively worthless after Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners."
What Happens Next
Despite securing about $400 million in short-term financing, Saks requires further court approval for the entire $1.75 billion package it says is needed to stay in business.
Saks Global told Newsweek earlier this week that it expects to emerge from the bankruptcy process "as a stronger company later this year," thanks to "widespread support from our key financial stakeholders."
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