Global vendor issues signal potential financial weakness at Saks
In a recent turn of events, luxury retailer Saks Global is grappling with a series of challenges, including vendor payment disputes and potential store closures. Reports suggest that vendors supplying Saks have been left unpaid for several months, with some small brands struggling due to non-payment, owed tens of thousands of dollars. This issue has led some to question the retailer's financial stability on Yahoo Finance.
The situation seems particularly dire for Saks' Toronto store, which currently lacks spring merchandise. Speculations point towards the company potentially planning to close this store. However, Saks Global did not immediately respond to requests for comment regarding these plans or the reason for the merchandising issue.
The retailer's financial position has been a subject of concern for some time now. S&P Global Ratings describes Saks Global's capital structure as 'unsustainable' due to its dependency on favourable business, economic, and financial conditions. The company has a persistent free operating cash flow deficit, according to S&P Global Ratings.
To address the mounting vendor payment issues, Saks Global has announced that effective immediately, purchase orders will be paid 90 days from receipt of inventory, with payments sent by wire or electronically 'at the earliest date commercially possible.' The company also plans to delay past-due payments until July and dole them out in 12 installments.
However, this move may not appease all vendors. Mark Cohen, a retail expert, believes that larger luxury houses may not accept Saks Global's payment dictates under any circumstances. For smaller luxury players, dealing with Saks Global's payment issues is a 'take it or leave it' moment, according to Cohen.
Saks Global's financial position took a hit in late 2020 when it completed a $2.7 billion merger with Neiman Marcus. The company has since taken on new debt, including a $1.8 billion asset-based lending facility and $2.2 billion in senior secured notes.
Despite these challenges, Marc Metrick, CEO of Saks Global, maintains that the company's financial position is strong and its leverage is reduced after the merger with Neiman Marcus. S&P Global Ratings conferred a 'CCC+' issuer credit rating and stable outlook on Saks Global following the deal's closing.
However, Liza Amlani, co-founder of Retail Strategy Group, cautions that without product, Saks may fail. This sentiment is echoed by Marc Metrick himself, who acknowledged an 18-month backlog of unpaid vendor bills in a Valentine's Day memo.
As Saks Global navigates these turbulent waters, it remains to be seen how the company will address these issues and whether it can maintain its position as a leading luxury retailer on Yahoo Finance.
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