Private Equity Saks Another Retail Outlet [View all]

[Celerity]

It’s the old story: Load up companies with debt, pull out all the value, and leave them as a dead shell.

https://prospect.org/2026/01/20/private-equity-saks-another-retail-outlet/


People walk past Saks Fifth Avenue in New York, January 14, 2026. Credit: Anthony Behar/Sipa USA via AP Images

Saks Fifth Avenue, the iconic luxury retailer, went into bankruptcy last Thursday. To read most of the press coverage, you’d think that it was just the latest casualty in a long line of failed department stores that have gone out of fashion, squeezed by online sales on one side and direct marketing by luxury brands on the other. But think again. The real killer was private equity. In fact, private equity’s prints are all over that long line of failed department stores. Its extraction model helped kill Sears, Toys ‘R’ Us, Kmart, Sports Authority, Red Lobster, RadioShack, RJR Nabisco, Barneys, and numerous others.

To hear The New York Times tell it, Saks’s owner, a real estate operator named Richard Baker, tried to stave off the inevitable bankruptcy by going big, combining Saks with Neiman Marcus after already swallowing Bergdorf Goodman and the Barneys brand name. “By combining Saks and Neiman, Mr. Baker aimed to realize his grand vision of creating the ultimate luxury department store group, one that would be unrivaled in reach and power,” the Times credulously writes. But that wasn’t Baker’s real game.

As The Wall Street Journal explained, Baker created a private equity company in 2005, NRDC Equity Partners, “to snap up retailers with valuable real estate. A memo he wrote that year listed his targets: Lord & Taylor, Canadian chain Hudson’s Bay, Saks, Germany’s Galeria Kaufhof, and Neiman Marcus. He would go on to buy them all. Each eventually filed for bankruptcy—though not all on his watch. Even though the companies failed, Baker often made money on the real estate.”



The last deal, which combined Saks with Neiman Marcus in 2024, was financed by $2.2 billion in high-interest junk bonds. This mountain of debt became completely unsustainable, preventing the retailer from continuing as a going concern. (The deal also spun out Hudson’s Bay, which would eventually liquidate.) Retailers are a particularly attractive target for private equity because their stores are often valuable real estate. Part of the extraction strategy is to sell off the real estate, pocket the money, and then burden the retailer with rent. In a typical display of the Journal being at war with itself, the editorial page blames “competition” as the reason for upscale department store failures. But that editorial fails to even mention Baker’s name, or his strategy to capture stores with valuable real estate that he could profit from by eventually selling off. The villain wasn’t “competition.” It was extraction.

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