By Keerthi Ramesh
E-commerce giant Amazon said on Thursday that its nearly $475 million equity stake in Saks Global Enterprises has become “presumptively worthless” following the luxury retailer’s Chapter 11 bankruptcy filing, a stark turn for one of its most high-profile investments in the retail sector.
In court filings, Amazon urged a federal bankruptcy judge to block Saks’ proposed financing plan, arguing that the collapse of the luxury department store operator threatens to wipe out its investment and undermines the commercial partnership that brought Saks brands onto Amazon’s platform.
“Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year and ran up additional hundreds of millions in unpaid invoices owed to its retail partners,” Amazon’s attorneys said in filings Wednesday in U.S. Bankruptcy Court in Houston. They added that the financing plan would burden the retailer with new debt and endanger unsecured creditors, including Amazon itself.
READ: Amazon, Meta, FedEx, 100+ companies file WARN notices as January layoffs begin (January 8, 2025)
Amazon’s investment, made in late 2024, was tied to a commercial agreement that included a dedicated “Saks at Amazon” storefront and a guarantee of at least $900 million in payments to the e-commerce giant over eight years. At the time, the deal was seen as a strategic move by Amazon to deepen its foothold in the luxury market.
But Saks, the parent company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, failed to stabilize its finances, leading to an inability to maintain inventories and pay suppliers, according to court documents and restructuring officers. With roughly $3.4 billion in secured debt, the company said it had no choice but to seek Chapter 11 protection to restructure its obligations.
Late Wednesday, U.S. Bankruptcy Judge Alfredo Perez approved an initial $400 million tranche of Saks’ proposed $1.75 billion debtor-in-possession financing, which is intended to keep stores running, suppliers paid and employees on the payroll during the restructuring process. The decision came over Amazon’s objections.
READ: Luxury retailer Saks Global files for chapter 11 bankruptcy (January 15, 2025)
Saks’ chief restructuring officer, Mark Weinstein, told the court that the initial funding is critical to the company’s survival and that all stores remain open. He said the company’s struggle stemmed from cash shortages that hindered inventory replenishment, not from lack of customer demand.
Amazon’s lawyers countered that Saks’ financing plan inappropriately uses the value of its flagship Manhattan store as collateral despite prior commitments to Amazon under the partnership agreement. They also warned they could seek more aggressive court action, including the appointment of a trustee or examiner, if their concerns are not addressed.
Saks’ bankruptcy marks a high-profile setback for traditional luxury retail and highlights the risks of complex strategic investments amid broader shifts in consumer buying habits and mounting operational costs.