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Saks CEO Marc Metrick Reassures Bondholders, Says Company Has $350M to $400M of Liquidity
Evan Clark
7 min read
Updated April 28 3:21 p.m. ET
Marc Metrick, chief executive officer of Saks Global, spent much of the year calming vendors, easing them into a new payment schedule and reassuring them that the combination of Saks Fifth Avenue and Neiman Marcus Group would be better for the industry overall.
On Monday, he moved on to bondholders, who have been getting antsy themselves. To buy Neiman’s last year and transform the business, Saks sold $2.2 billion of junk bonds — upsizing from an initial $2 billion given interest in the market. But bond investors are now taking a more cautious tack and were trading that debt at just 64 cents on the dollar last week as they gauged Saks and its prospects in a suddenly much more chaotic and tariff-infused market.
Metrick told WWD that his message to bondholders was similar to his message to the market, that Saks Global is playing out as envisioned and was still on solid footing, even as it looked to adjust its financing in light of changes in the market.
“We told the world this morning, we’ve got between $350 million and $400 million of liquidity today,” Metrick said in an interview on Monday.
The company is exploring what’s known as a FILO facility, which Metrick said was similar to a term loan and would be structured within the company’s $1.8 billion asset-backed lending facility.
While there are certain covenants restricting the use of the ABL facility, having part of that in a FILO facility would give Saks more immediate access to the cash.
“We’re not adding incremental debt capacity to the business,” the CEO said.
Marc Metrick
Saks will need to have some cash on hand. In addition to payments to vendors for new goods, paid on a 90-day schedule, the retailer has past due payments to brands it’s going to start making. It also has its first, roughly $120 million interest payments on the bonds, which is due June 30.
“This is what you’d want me to do,” Metrick said. “I’m sitting here as a CEO in a world where I’ve got a big plan for transformation. I’ve got to invest in that transformation. I’ve got to be a strong counterparty to my brand partners and we’re seeing a turbulent market. There’s a lot of unknowns with what could happen, and I’m further fortifying my balance sheet. That’s what I’m doing.”
It’s been a long road for Saks, which has seen its business decline as money ran short and many payments to vendors were deferred, causing shipments to the retailer to slow last year.
Despite that, Saks Global executive chairman Richard Baker managed to realize his long-held dream and closed on the Neiman’s deal in December, recapitalizing the business, but also bringing some of Saks’ problems to Neiman’s.
While the retail rationale is clear, many financial experts and dealmakers were skeptical of the combination.
Debt watchdog Standard & Poor’s took a cautious stance when the deal was struck, rating the $2.2 billion in bonds at “CCC-plus” and warning that the company’s capital structure “is highly dependent on favorable business, economic and financial conditions.”
But U.S. President Donald Trump’s trade war more or less dashed any hopes of “favorable” conditions in the short term, leading the company to now adjust.
“We believe right now that we have ample liquidity to execute on the plan that we’ve put in place,” Metrick said. “We believe that the avenues of incremental capital that we’re currently pursuing would further fortify the balance sheet. And we’re not looking to do anything further. My commitment to our brand partners is to continue to be as transparent as I can and we want to be good partners and we want to grow the business with them and we want to work towards the positive going forward.”
It’s a lot of moving parts, but Metrick is used to operating under pressure and has remained upbeat despite the increasingly complicated picture.
“Everything that’s going on is exactly as planned,” Metrick said. “Obviously you have a macro situation with tariffs and trade and the market, but…go back a couple months to December of ‘24, I said to people, ‘I’m going to reset the market and I’m going to change how working capital model works between the brands and the department stores.’
“I said that we were going to go after synergies and redundancies in the business and start to build a much better, much more fortified balance sheet. And I said we were going to utilize both our existing capabilities through our data and through our selling force, but utilize that with our new partners at Amazon, Salesforce and Authentic to help drive growth.”
And all of that is done or underway, he said.
“We’ve executed the change in the working capital,” Metrick said. “It is beginning to take, the seeds are beginning to take hold, goods are beginning to flow. We’re starting to see the pulse return back to the business. The narrative and the overall sort of conversations with our brand partners are much less about payments and much more about, ‘How do we grow? Let’s build a strategy. Let’s build a plan.’ So that that’s sort of taking hold.”
The company is also realizing the synergized promised with the deal and more, cutting costs as Saks and Neiman’s are brought under one umbrella.
“We said this year we were going to realize $100 million in synergy,” Metrick said. “We are now forecasting to realize $150 million. We’re getting close with [a deal with] Amazon and that’s coming and that’s going to be something. So it is check, check, check on what we said we were going to do.”
But the luxury world — already in a tough spot last year — is continuing to see stress.
As part of his trade war, Trump added 10 percent tariffs to goods from Europe, where many of the luxury brands have factories.
Metrick said that would add 5 percent to 12 percent on designer goods from Europe, about in line with inflation over the past five years.
Tricker to manage will be the other outcomes of Trump’s dramatic turn in trade policy.
Metrick pointed to the product Saks sells that is made in China, which has been hit with an additional 145 percent tariff.
More important, he said is “the overall volatility of the financial markets.”
“That’s going to be the bigger impact for the luxury business,” Metrick said. “The luxury customer is mood based, sentiment based and volatility — when the market’s up 1,000 one day and down 1,000 the next, no one likes the jittery. They want to just have things calm down.
“Turbulence in the market isn’t good for the business and that’s why we’re doing what we’re doing and we’re building off ramps, whether it’s the FILO [financing], whether it’s accelerating our synergy capture, which we’ve done,” the CEO said. “This is why we did the deal. So we can have more levers to pull, have more control, and it’s all going to help us be a much better counterparty and be a much more stable business.”
Stability is what everybody is looking for here — from investors to suppliers to Metrick, who no doubt would like to get back to worrying less about the company’s finances and more about the future of luxury retailing that he’s trying to build.
