By Andy Serwer

Some 32 years after Netscape introduced the internet browser and Jeff Bezos founded Amazon.com, old-world bricks-and-mortar retailing is still sorting itself out. It has long been a truism that retailing increasingly will become digital and that for a physical store to survive it must be special (or "experiential") and probably have a digital presence.

Alas, this process is none too easy. It has attracted all manner of dealmakers as interested in lining their pockets as they are in creating sustainable enterprises. To wit, the Saks Fifth Avenue imbroglio, a complex stew of myriad brands and deals that was driven by one such individual.

To get you up to speed -- this is one of those "fast moving" situations -- Saks Global Enterprises, the holding company that operates Saks (as well as Bergdorf Goodman and Neiman Marcus), is strapped for cash, having skipped a $100 million payment to bondholders on Dec. 30 (Happy New Year to you!). Last Friday, CEO Marc Metrick stepped down after a decade running the company. He was succeeded by its executive chairman, Richard Baker.

The New York Post broke the news that Saks is looking for a $1 billion infusion to pay back bondholders as well as vendors who've been stiffed for months, and to stave off bankruptcy.

How did it come to this? Gradually, and then suddenly, as Hemingway famously wrote, though other lessons apply here, as well, such as an overabundance of hubris and leverage, that aforementioned pocket-lining, and, to be fair, perhaps an underestimated decline in consumers' appetite for buying things in department stores.

The man behind Saks is Baker, a retailing/real estate wheeler-dealer out of Greenwich, Conn., who, along with his father, Robert, began by operating strip malls and leasing stores to Walmart. In 2005, the Bakers co-founded NRDC Equity Partners to do private-equity retailing deals, focusing on the Opco/Propco model in which a retailer would be split into two parts, the operating business and the real estate, the latter of which would finance the buyer's purchase of the business.

And so the Bakers began a significant -- but what could be generously characterized as a mixed-bag -- march through North America's retailing ecosystem. (Robert died in 2020, but Richard was driving the business well before that.) With Apollo Global Management, Richard bought Linens 'n Things, which went bankrupt in 2008. Two years earlier, he bought the venerable Lord & Taylor for $1.2 billion, mostly by borrowing against the store's real estate holdings, including its New York flagship at Fifth Avenue at 38th Street (which he would later sell to WeWork). In 2008, Baker's eye strayed north of the border, where he bought Canada's real-estate-rich Hudson's Bay Company, founded in 1670 and the oldest corporation in North America, for just over $1.1 billion, again bought with leverage. Lord & Taylor was folded into Hudson's Bay.

Later, both Lord & Taylor and Hudson's Bay went splat, with Lord & Taylor filing for bankruptcy in 2020 and HBC filing for creditor protection, a Canadian law that allows large insolvent corporations to restructure their debt and continue operations under court protection, last year.

In 2013, Hudson's Bay bought Saks, and then, in 2024, Baker bought Neiman Marcus (which owns Bergdorf Goodman) for $2.65 billion, and folded them all into a new company called Saks Global.

The dealmaker was also able to entice Amazon (which has "walled garden" experience for Saks) and software vendor Salesforce to invest in Saks Global, along with Authentic Brands, a holding company run by Canadian billionaire Jamie Salter, that licenses over 50 brands (including Reebok, Brooks Brothers, and Juicy Couture) and likeness rights of celebrities (including Elvis Presley, Marilyn Monroe, and Shaquille O'Neal).

A joint venture between Authentic and Saks, "Authentic Luxury Group," was created, which "unites luxury and accessible luxury brands to redefine the modern luxury experience through innovative licensing, distribution and lifestyle offerings." What that means beyond having to do with luxury is a bit unclear, though Salter and Baker suggest that the Saks brands could be extended into other categories such as Barneys New York Residences in Tulum, Mexico (Barneys being one of Authentic's brands).

Even all of this greatly shortchanges the massive amount of machinations that have accompanied the narrative. Baker took HBC public in 2012, and then took it private in 2020. Hudson's Bay bought and sold online-shopping site Gilt Groupe. In 2021, it spun out Saks' website to a separate entity funded in part by venture-capital firm Insight Partners, which put up $500 million. It looked to sell 49% of Bergdorf's. It sold the Neiman Marcus store site in Beverly Hills, Calif., and got into a fight over Neiman's iconic Dallas building (not the Fort Worth store featured in the latest season of the hit TV show Landman).

The additional debt used to buy Neiman's has proved to be an onerous load for the company. Contentious negotiations among hosts of bondholders, bankers, and lawyers resulted in a restructuring this past summer, in which $600 million was secured to pay bondholders. S&P Global apparently wasn't impressed, writing, "We view the transaction as tantamount to a default...therefore, we lowered our issuer credit rating on Saks Global to 'SD' (selective default)."

"Ever since Richard Baker took control of this company, it has been going down," says a 20-year Saks employee who declined to give their name for fear of losing their job. Saks stores are increasingly being turned over to a collection of high-end boutiques like Armani, Hermès, and Chanel, this employee says, in which these brands essentially rent space from Saks and own their inventory. Meanwhile, other lower-tier brands are pausing shipments or taking legal action over nonpayment of inventory. "The boutiques are fine," says the employee. "As for the other stuff, there is less inventory." (Baker's company didn't reply to Barron's requests for comment.)

So yes, the race to save Saks is a minute-by-minute proposition. One of its bond issues recently traded below seven cents on the dollar. Even if Saks manages to escape bankruptcy, the trail of tears that follows Richard Baker is reminiscent of Eddie Lampert's dismantling and dismembering of Sears and Kmart, only at the high end. The playbook is oh so familiar: Buy companies with leverage and move shell companies (if not actual walnut shells) around to optimize the value of their real estate holdings, never mind the fact that the operating businesses go bankrupt and thousands of employees lose their jobs.

A 2011 New York Times article about Baker describes him as seeming to "revel" in his wealth, and said that he "alludes" to his Gulfstream and art collection. Over the years, he has paid himself handsomely. According to a Financial Post story in 2018, the Ontario Teachers' Pension Plan and the California Public Employees' Retirement System, or Calpers, voted against a $54.8 million pay package for Baker.

Yes, physical retailing, particularly department stores, is an incredibly challenging business, but bankruptcy and/or liquidation isn't inevitable. Customer-focused stores as varied as Costco Wholesale, Hermès International, Nordstrom, and Uniqlo are all on solid ground or thriving. Companies that have focused on moving the pieces around? Not so much.

Write to Andy Serwer at andy.serwer@barrons.com

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January 08, 2026 02:30 ET (07:30 GMT)

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