Amazon said its 2024 investment in Saks was conditioned upon the latter entering into a commercial agreement with the e-commerce giant to sell Saks products on its website.
- Earlier this week, Saks filed for Chapter 11 bankruptcy after a long fight to stay afloat.
- Amazon and Salesforce took minority stakes in the combined company after Saks bought Neiman Marcus.
- The e-commerce giant said the equity investment is now presumptively worthless because Saks has repeatedly failed to meet its budgets.
Amazon.com Inc has added a twist to the bankruptcy of Saks Global. The e-commerce giant told a court that the Chapter 11 filing was unnecessary and formally objected to the upscale department store chain’s proposed financing plan.
Earlier this week, Saks filed for Chapter 11 bankruptcy after a prolonged struggle to stay afloat. Its 2024 acquisition of Neiman Marcus, intended to bolster scale and competitiveness, ultimately added to the company’s debt burden.
As part of the Neiman Marcus deal, Amazon and Salesforce took minority stakes in the combined company. In December 2024, Amazon invested $475 million in preferred equity in Saks.
“That equity investment is now presumptively worthless after Saks continuously failed to meet its budgets … and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners,” according to a court filing by Amazon on Wednesday. A judge, however, dismissed this objection.
Saks’ Financing Plan
As part of the bankruptcy, the company said it secured a financing commitment of nearly $1.75 billion, comprising $1.5 billion from an ad hoc group of its senior secured bondholders and about $240 million in incremental liquidity from its asset-based lenders.
Amazon said the new financing has “no legitimate business” objectives by Saks Global, and the company believes it has minimal cash expenses and positive cash flows. The e-commerce giant added that Saks is in “no need for a financing of this size (if at all), and possibly no need for chapter 11 relief in the first place.”
In the filing, the company said that Saks works on its concerns, and if not, Amazon may be forced to “seek more drastic remedies,” including the appointment of an examiner or a trustee.
Amazon’s Luxury Move
Back in 2024, Wall Street had noted that Saks was Amazon’s play to enter the luxury market and take share from higher-income consumers, who were spending endlessly on discretionary items. In recent years, Amazon has started offering high-end beauty products and apparel on its platform and storefronts in the United States to capitalize on upscale demand.
In its latest complaint, Amazon said the investment was conditioned on Saks entering into a commercial agreement with the e-commerce giant to sell Saks products on Amazon’s website. In return, Saks agreed to pay Amazon a referral fee for Saks-branded goods sold on Amazon’s website and to guarantee at least $900 million in payments to Amazon over eight years. Amazon said Saks eventually began selling goods on its website and also launched “Saks at Amazon,” which showcased a variety of luxury items.
What Is Retail Thinking?
Retail sentiment on Amazon dipped to ‘bearish’ from ‘bullish’ territory a week ago, with message volumes at ‘normal’ levels, according to data from Stocktwits.
Shares of Amazon have gained over 5% in the last 12 months.
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