When the news broke this week of a venerable American department store filing for bankruptcy, many might have assumed it was Macy’s.

For quite some time, Macy’s has been struggling with outdated, cluttered stores and has seen a decline in foot traffic as more shoppers turn to online platforms. Industry analysts have long debated the viability of Macy’s continuing as a physical retail entity.

Surprisingly, it was Saks Global—parent company of Saks Fifth Avenue, Saks Off Fifth, and Neiman Marcus—that filed for Chapter 11 bankruptcy on Tuesday. This move highlighted the contrasting strategies the two retailers employed in facing similar challenges.

The downfall of Saks isn’t due to a decline in luxury goods sales or a mass exodus from department stores. The growth figures from Macy’s and its upscale counterpart, Bloomingdale’s, attest to that.

Industry experts point to strategic missteps originating from Saks’ plush downtown Manhattan headquarters. Specifically, the decision to burden the company with debt, hoping that acquiring a competitor would solve more profound issues, is seen as a critical factor in its collapse.

‘The bankruptcy doesn’t say much about department stores or luxury,’ retail analyst Neil Saunders of Global Data told Daily Mail. ‘The failure of Saks was self-inflicted and caused by having far too much debt. It’s a tale of poor decision-making and not focusing on business basics.’

That debt came largely from a $2.7 billion deal to buy rival Neiman Marcus — a move meant to create a luxury powerhouse but one that left Saks struggling to pay suppliers when sales slowed. 

As bills went unpaid, brands stopped shipping goods, leaving stores short of Chanel handbags and Gucci dresses to sell, and making it even harder to generate cash.

For years, Macy’s was living on borrowed time – saddled with aging, messy stores and losing shoppers who preferred to buy online

When a storied, more than century-old American department store filed for bankruptcy this week, many might have thought it was Macy’s (pictured: shoppers at Macy’s)

Christmas lights glow outside the flagship Saks Fifth Avenue store in New York, a holiday tradition that has drawn crowds for decades. 

Neil Saunders of Global Data

While Saks unraveled, Macy’s was quietly staging an unlikely turnaround — returning to profit and posting sales growth. It is heading toward what analysts expect will be a strong set of earnings for 2025 when it reports in early March.

Instead of trying to grow its way out of trouble, Macy’s shrank. It announced plans in early 2024 to shutter 150 underperforming stores that were draining cash and damaging the brand. Just under 100 have gone so far.

It resisted private-equity buyers who wanted the real estate but not the retail business. And it stopped pretending every location could be saved. 

Just as important, Macy’s refocused on the basics of shopping, overhauling stores that had come to resemble disorganized clearance halls rather than the department store Americans remembered. 

‘Macy’s has concentrated on things that drive sales by satisfying customers — improving stores and making the assortment more interesting,’ he said. 

‘The now-departed management of Saks chose corporate deals and financial maneuvering instead of investing in the customer proposition.’ 

That reset was formalized in early 2024, when Macy’s appointed Tony Spring, a long-time Bloomingdale’s executive, to lead the turnaround. 

His mandate was not to reinvent the department store, but to make Macy’s feel America’s favorite shop again.

Luxury department store conglomerate Saks Global filed for bankruptcy protection late Tuesday, marking one of the largest retail failures since the pandemic (pictured: models pose in holiday dresses from Saks Fifth Avenue)

Macy’s refocused on the basics of shopping, overhauling stores that had come to resemble disorganized clearance halls rather than the department store Americans remembered (pictured: shoppers at Macy’s)

Retail strategist Carol Spieckerman

While Macy’s was fixing stores, Saks was falling behind on bills. 

As luxury spending slowed, Saks stretched out payments to suppliers, moving from 60-day terms to 90 days — then stopped paying many brands altogether. 

Unpaid balances ballooned into the hundreds of millions of dollars, including $136 million owed to Chanel, nearly $60 million to Kering, behind Gucci and Bottega Veneta, and $26 million to Louis Vuitton-owner LVMH. 

Retail strategist Carol Spieckerman said the move was disastrous, especially for smaller designers.

‘The wholesale model has been weakening for years as brands sell directly to consumers,’ she said. ‘Saks already had less leverage with brands. Asking them to wait months to get paid — or not paying them at all — was unrealistic.’

Large luxury houses can absorb delayed payments. Smaller brands cannot. Many cut shipments or stopped supplying Saks entirely. With less merchandise arriving, stores became visibly thinner, making it harder to attract shoppers and generate cash.

The $2.7 billion acquisition of Neiman Marcus was pitched as ‘safety in numbers’ — a way to gain scale, reduce costs and strengthen bargaining power. But it left the combined company heavily indebted just as the luxury market cooled.

‘Buying a struggling competitor doesn’t make you stronger,’ Spieckerman said. ‘It makes you twice as vulnerable when the market turns.’

Macy’s has been renewing its stores, shutting down underperforming locations, and launching early holiday shopping to bring  in more customers

Shoppers are eager to know whether the bankruptcy filing will translate into deep discounts on luxury goods at Saks

Marc Metrick, the retailer’s former CEO, is reportedly plotting his exit from the cash-strained chain

By the time Saks filed for Chapter 11 this week, the damage was already visible on the shop floor. Shoppers described empty counters and disengaged staff at the Fifth Avenue flagship. 

For Saks, Chapter 11 offers a chance to restructure rather than shut immediately. It will go down the route Macy’s took and shut its worst performing stores.

Saks operates roughly 100 Saks Off Fifth locations, 41 full-line Saks Fifth Avenue stores, and 36 Neiman Marcus stores. 

In November, the company said it would close nine Saks Off Fifth stores in January, but restructuring experts now expect around half of the off-price chain to shut, along with multiple Saks Fifth Avenue and some Neiman Marcus locations.

In a typical Chapter 11 process, those closures usually begin about 30 days after the filing.

Saks will also negotiate with Chanel, Kering and LVMH to see if they will give it a discount on the millions of dollars it owes.

Macy’s was founded in 1858 and opened its famous Herald Square flagship in 1902, while Saks traces its roots to 1867 and moved into its iconic Fifth Avenue home in 1924 — making both pillars of American retail for more than a century. 

The question now is which one has built a business fit for the next hundred years. Macy’s has bet on fixing stores and winning back customers. Saks is just hoping it can survive bankruptcy.