The beauty floor at Saks Fifth Avenue’s New York flagship was heralded as “the future of beauty” when it opened in 2018, measuring over 30,000 square feet and 40 percent bigger than its prior home on street level.
But that future was not what the tony retailer expected and has morphed into a present that has the beauty business in major flux and looking to make a comeback that is not yet apparent on the sales floor.
On a recent springtime afternoon in New York, the floor was marked with unmanned cash registers, empty branded build-outs and scattered testers. At the Bobbi Brown counter, lipsticks were worn down to the nub. Of Charlotte Tilbury’s 27 Matte Revolution lipstick shades at the retailer, only four had testers at all, while the Air Brush Flawless Foundation counter was just a bunch of empty holes with zero testers displayed.
It’s a sign of the times — at least the times that were — at Saks Global, where the delayed vendor payments led to delayed product shipments, putting the retail giant into bankruptcy in January. “I think it’s almost criminal,” said one executive of how it’s impacted beauty brands of varied size at the time. “The damage that’s been done is massive.”
Now, industry watchers are looking to see what Saks Global’s latest round of in-bankruptcy funding will mean for its beauty partners and if those relationships are on the mend.
Last week, Saks Global, which owns Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, unlocked access to an additional $300 million of the $1.75 billion in committed capital it secured in January when filing for a Chapter 11 restructuring. To get at those funds, the company received approval of its five-year business plan from a group of senior secured bondholders and hit other milestones. The court still has to sign off on the funding.
The new money comes on top of the $825 million the company has already received. Saks Global will get access to additional funding after it emerges from bankruptcy, which is expected to happen later this year.
Across categories, the company is said to be making progress among key vendors, with 600 brands releasing $1.4 billion in retail receipts to Saks Global, increasing merchandise receipts by nearly 60 percent so far this month, compared with a year earlier.
“Through constructive, ongoing engagement with our brand partners, we have made meaningful progress in strengthening our relationships with key beauty brands, resulting in the resumption of shipments,” a Saks Global spokesperson said. “Inventory is actively being processed, and product availability is increasing on a weekly basis. At the same time, we are taking a disciplined approach to curating a beauty assortment that will best serve our luxury customers.”
A handful of L’Oréal-owned luxe brands — including Kiehl’s, Lancôme, YSL Beauté and Armani Beauty — are reportedly exiting the retailer. L’Oréal, as well as other companies WWD contacted for comment (Puig and the Estée Lauder Cos. among them), either declined to comment on their retailer relationships or did not respond.
“There’s a rationalization of a lot of brands being carried in Saks [Global] to begin with. The two things Saks is known for are luxury fragrances and luxury skin care. They’ve never been particularly good at makeup,” said one executive. “I think they’ve been very deliberate on who they paid and who they’ve not paid.”
In the 90 days leading up to the bankruptcy, Chanel was paid $50.5 million due to the size of its business with Saks Global. Still, it wasn’t enough and the brand ranked as the company’s largest unsecured creditor, owed $136 million, at the time of the filing.
But the list of brands that got caught up in the bankruptcy is long.
Among the hardest hit were: Gucci-parent Kering, owed $60 million at the time of filing; La Prairie owner Beiersdorf, owed north of $22 million; Lauder, $15 million, and Puig, $12 million.
In the case of Lauder, headwinds in the luxury department store channel are independent from the company’s aim to normalize its channel strategy. When asked during a post-earnings interview about the importance of department stores following the Saks Global bankruptcy, chief executive officer Stéphane de La Faverie responded that it remains an important channel in the U.S., especially for luxury brands like La Mer and Tom Ford.
“We have had a very strong historical partnership with Saks, and we are helping them in this transition to make sure that we have the highest return on opportunity for the future and the best in class,” he said. “But I want to be very clear that Beauty Reimagined was clearly highlighting that it was not the story of just one channel here in the U.S. and around the world. We are diversifying our consumer coverage and where we are putting our brand. We have 12 brands in 10 different markets with Amazon; we are accelerating TikTok Shop, where we have 12 brands in seven markets. We are accelerating our deployment of our brands in specialty-multi.”
For Saks Global and the brands it carries, though, the traffic-driving brands are said to have resumed shipping as payments trickle in.
“[Saks] can’t exist without LVMH, Chanel and, to a lesser extent, Kering,” said a source, which would leave the smaller, discovery-driving brands in the crosshairs. “Somebody’s going to win, and somebody’s going to lose.”
