Saks Global, the parent of luxury department store chain Saks Fifth Avenue, is the latest to make headlines by filing for bankruptcy protection. Interestingly, luxury goods has been one of the top performers in retail, with JLL estimating that these brands would exceed 2024 levels of expansion last year.
However, Saks, even in a retail component that was showing resilience — couldn't overcome its debt troubles tied to the acquisitions of Neiman Marcus and Bergdorf Goodman last year.
Balance Brick and Mortar with E-Commerce or Die
Peter Braus, president of Lee & Associates NYC, thinks this will send a message to local department stores operating in New York City, an area where Saks Fifth has a major presence.
"It tells them like we should be less dependent than ever on the department store for revenue," he told GlobeSt., while applying the same warning to those even involved in luxury goods.
"We don't know that they've got the ability to continue as an ongoing concern," Braus added.
But this is nothing new with department stores. This exodus of this type of retail has been going on for decades as e-commerce takes up a bigger share of spending. Americans have seen iconic brands like JCPenney, Sears, Party City, among others, file for bankruptcy protection and close a dramatic number of their stores.
The message is overall clear for brick-and-mortar operators: find a way to embrace and balance online sales or die.
"I think [anyone] that is not properly managing that integration between bricks and mortar and online presence is going to be in big trouble," Braus warned.
Of course, this is something that Saks tried to do. Last spring, the luxury retailer announced a partnership with Amazon tolaunch an online-only store. But again, the debt troubles might have been just too much to overcome, with Braus even noting that the luxury market has cooled off recently.
"When you have interest rates that have doubled over the last couple of years and are only now just starting to come down, you have the tariffs that were unanticipated and I think there has been a softening of the luxury market that's not as robust as it was before," he explained.
Some that are struggling won't be able to survive in the current retail landscape and will likely continue to close stores. However, some others might be able to be saved if they restructure, which includes shuttering the bottom-performing locations and refinancing debt.
Pharmacy Shows Potential in Affluent NYC Neighborhoods
However, there's something interesting to consider regarding pharmacy chains, including CVS and Walgreens, which have experienced a significant decline in store counts in recent years. While Braus generally fears "deep trouble" for them still, given the competition from big box stores like Walmart and online retailers, he did note that he's seeing a bit of a "resurgence" of pharmacies in more affluent neighborhoods in NYC and some that aren't as wealthy.
"We handle a building all the way up in Inwood in upper Manhattan, and we signed a lease for a small pharmacy there," Braus explained.
But if NYC retailers can learn anything, even in one of the largest local economies in the world, it is to find a balance between managing the brick-and-mortar business and e-commerce.
According to court filings, Saks has requested approval to shutter four non-operating "dark stores," for good. Now it remains to be seen if Saks will be able to restructure and find success in the modern retail environment and emerge from bankruptcy.
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