Saks Fifth Avenue still hasn’t paid some beauty brands almost a year after reports began circulating that it was late with vendor payments, and it’s whittling down its assortment of emerging beauty brands as it’s cutting costs.
Once stocked on Saks’ e-commerce platform, skincare brands OY-L and Kari Gran claim the retailer owes them thousands of dollars. They were eliminated from its website in the past year. The brands’ departures from Saks are the outgrowth of a strategy shift that’s seen 20-plus beauty brands delisted from Saks as it sheds masstige beauty products to focus on luxury beauty.
In a statement, a Saks spokesperson says, “Saks is committed to fulfilling its obligations to its vendor partners. Any delayed payments are due to navigating our business through the current challenging macroeconomic environment. For beauty, we’ve made strategic decisions to improve the performance of our assortment and as such, we’ve exited certain brands.”
For jilted brands, Saks Fifth Avenue’s recent $2.65 billion purchase of Neiman Marcus Group announced two weeks ago adds insult to injury. “Saks was my ‘street cred,’” says Andrea Pierce-Naymon, founder of beauty store Orange Rose Apothecary and OY-L. “Everyone I met was so impressed that a small indie could be on their website. It was eight years, and I am thankful for that, but I just want to be paid. I have considered having my lawyer write them a letter. You can imagine how I felt when I heard they bought Neiman Marcus.”
Reports of liquidity issues at Saks Fifth Avenue surfaced in November in a post by Instagram watchdog account Estée Laundry revealing Estée Lauder had put the retailer on credit hold and suspended shipments as a result of nonpayment. Around the same time, the retailer’s parent company, HBC, announced that it had raised $340 million through a series of real estate transactions to fund retail operations. Saks CEO Marc Metrick told vendors in a letter that the infusion “significantly enhances HBC’s liquidity position.”
In the letter, Metrick continues, “Saks, which is managed separately from the SFA Stores and under its own credit group, has sufficient liquidity and a sound balance sheet. As we carefully manage our business against the industrywide softness in the U.S. luxury market, we are confident in our ability to continue meeting our financial obligations.”
HBC raised $500 million in 2021 to spin off Saks Fifth Avenue’s e-commerce business. Saks was created as part of the transition and operates Saks.com separately from the retailer’s brick-and-mortar business run by SFA.
Chasing profitability, Saks pivoted in 2021 from scaling top-line sales to bolstering its bottom line. “As we moved into the ‘second horizon’ in the summer of 2022, we started enhancing our cash flow and profitability profile, and did work around costs, efficiencies, inventory management, while not giving back the scale, but getting that free cash flow level and profitability level vastly improved, even with the top line down,” Metrick told the publication Women’s Wear Daily.
In the third quarter of 2023, sales at Saks dropped 19% from same period the year before, although they were 75% above sales in the third quarter of 2019. Sales at Saks Fifth Avenue’s stores decreased 13% in the third quarter of last year, but surpassed sales for the like period in 2019.
To boost liquidity further, Saks nabbed an additional $60 million from a lender syndicate in April this year. That cash hasn’t led to emerging beauty brands’ recovering what they’re owed.
OY-L started working with Saks in September 2016 on a consignment basis, with the brand shipping orders to customers 48 hours following a sale made on the retailer’s website. Saks covered shipping costs and agreed to pay within 30 days. Between 25 and 30 products from the brand were listed on Saks.com. Prior to April, payments were habitually late from the retailer, but Pierce-Naymon says a former buyer at it assigned to OY-L’s account was always quick to respond and straighten the situation out.
Things changed this April when Saks discounted OY-L’s product line 30%. “I was getting as many as 50 orders a day,” says Pierce-Naymon. “I don’t usually get that many, but I noticed all my products were on sale, and I was never warned or communicated that this was going to happen. I emailed, and no one answered me. I have never put my products at that discount level.”
OY-L received its last order from Saks on May 15, the same day Pierce-Naymon met with a buyer from the retailer over Zoom. In the meeting, the buyer told her that OY-L’s products were priced too low for the retailer, and it was moving to concentrate on selling beauty products priced at $150 and higher. The average price of OY-L products is between $25 and $50.
Pierce-Naymon says, “During the Zoom, I mentioned to the buyer that I needed to be paid immediately, and she told me she had no control over that.”
OY-L products disappeared from Saks.com the day after the brand’s Zoom meeting. The last payment it received from the retailer was two checks reissued in late June for money due in December and February. Pierce-Nayman says Saks owes OY-L just over $9,200 in unpaid invoices. The invoices will be overdue by 90 days at the end of July.
Lisa Strain, co-founder and CEO of Kari Gran, isn’t hopeful that Saks will settle its accounts now that it’s joined forces with Neiman Marcus. She says, “They just don’t care.”
Based on a traditional wholesale agreement, Kari Gran received its first purchase order from Saks in 2019. The retailer carried the majority of the brand’s assortment of tinted lip balms called Lip Whips priced from $21 and $25. Terms of the agreement changed from net 30 payment to net 90, which Strain says the retailer largely followed until the summer of 2023. Saks’ final purchase order to Kari Gran was placed last November. Strain says Kari Gran was never formally notified that it was delisted from the retailer.
Saks owes the brand approximately $1,400 in unpaid invoices stretching back as far as March 2023. In an email to the brand on March 25 this year, the retailer’s accounts payable department stated, “We are working on the payment of the past-due invoices and will get back with an update as soon as possible.” No update or payment has come since then.
Carried at Grove Collaborative, The Detox Market, Amazon and a network of independent spas and boutiques, Kari Gran’s experience with Saks has made the brand more cautious about partnering with large retailers in the future. “I am thankful that the quantities of inventory shipped and payments not received have been limited and not a major hit to our business,” says Strain. “But why should the small indie brands bear the brunt of their fiscal stupidity?”
Creditsafe, a business intelligence platform analyzing companies’ financial, legal and compliance risks, classified Saks as being at a “high risk” for failure earlier this year as its percentage of overdue bills to vendors increased precipitously between October 2023 and February 2024. Bills that were overdue by 90-plus days jumped from 1.6% in January to over 40% the next month. Creditsafe also found that the average number of days that bills went past due peaked in January at over 40 days.
“The Saks partnership has been typical of what we have seen with all fashion retailers in the U.S.: a long and onerous listing and compliance processes, one-sided and unfavorable business terms and a lack of real support in store to the brand unless the brand pays relatively large sums out of pocket,” says Namrata Kamdar, founder of British skincare brand Plenaire. “This sets up an impossible environment for a small brand, which has to compete with either really well-capitalized brands with huge sales teams and promotional budgets or well-established brands that have been going for over 20 years and have already achieved mass awareness. It’s basically a non-viable situation.”
Plenaire started a Saks partnership in June 2022 and received two orders worth $6,000 and $7,500 before communication with the retailer broke off earlier this year. Similar to Kari Gran, the brand was never explicitly told it was delisted from Saks.com. Its wholesale agreement with Saks specified that the retailer would pay the brand 45 days after receiving inventory.
Although Kamdar says it took Saks “a very long time” to pay, the retailer eventually settled its bill with the brand. However, similar to Gran, she’s wary of striking large-scale retail partnerships moving forward. Currently, Plenaire is carried online at Credo, Thirteen Lune, SpaceNK and Niche Beauty. Kamdar says, “At this point, I’d say wholesale for niche and indie brands is a risky bet.”
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