Title: What Saks’ Bankruptcy Says About NYC Business Right Now

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Janae Pierre: From WNYC, this is NYC NOW. I'm Janae Pierre. If you've been out in New York this week, you know the snow is not melting. We'll be getting into what the city is doing about that in this episode. First, let's talk about Saks, baby.

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Janae Pierre: A couple weeks ago, I was sitting in the newsroom looking around at what's been going on in New York City, and one headline jumped out at me. Saks Fifth Avenue had filed for Chapter 11 bankruptcy. Now, I do buy some of my clothes from Saks OFF 5TH, that's the outlet store, but still, Fifth Avenue is in the name. When I think about Saks, I think about New York City. This is a tough moment for New York's businesses.

The city keeps track of this kind of stuff, and the latest numbers show that last spring, about 3,500 new businesses opened across New York City, but roughly 8,400 shut down. If you do the math, that's the weakest stretch for business growth the city's seen in 5 years. When an iconic store like Saks files for bankruptcy, it's not just about one store. It raises a bigger question. What does it mean when even legacy, luxury brands are under financial pressure in New York? Is this an outlier or not? To see what this looks like on the ground, I went down to Fifth Avenue with my producer, Iru.

Oh, it's cold out here, y'all. My phone doesn't even recognize my face. Feels like 8 degrees. It was the middle of the day, on a Tuesday in January, and y'all, it was cold, but people still shopping. See a Louis Vuitton bag? That's an Aritzia bag, and that's the wind. Lots of bags. While I was standing in front of Saks, I didn't see any bags from that store, so I asked some shoppers what they'd been hearing. Hey, ma'am. Did you know that Saks filed for bankruptcy?

Kiran Chopra: Yes.

Janae Pierre: Yes? Were you surprised by it?

Kiran Chopra: No.

Janae Pierre: Why not?

Kiran Chopra: How many people are really talking about going to Saks? Who's excited about going to Saks and shopping, and who can afford it?

Janae Pierre: That's Kiran Chopra. She said she was out admiring the window displays, but prefers to shop at smaller indie brands.

Kiran Chopra: Nobody's going to department stores. When was the last time you went to a department store to shop?

Janae Pierre: The Saks OFF 5TH outlet? I can't say that. Maybe a couple months ago, but I was out of town.

Kiran Chopra: Fair.

Janae Pierre: Jodi Kaufman, who also stopped to chat, says she remembers coming to Saks as a young girl. Nice to meet you, Mrs. Kaufman.

Jodi Kaufman: I'm a born New Yorker, and I remember the big treat of going to Saks when I was a little girl, and my mom got me a camel hair coat. It was such a big thing because we were not rich. I'm sorry to see it go.

Janae Pierre: Do you remember any other department stores that used to be on Fifth Avenue?

Jodi Kaufman: Oh, yes. Lord & Taylor. I think my mom even got haircuts here.

Janae Pierre: Oh, wow.

Jodi Kaufman: Maybe she had very curly hair.

Janae Pierre: For a lot of New Yorkers, Saks isn't just a store. It's tied up in memories like this one. To be clear, Saks isn't closing its doors. Not yet, at least. The company has filed for bankruptcy as it tries to reorganize its debt. That's where WNYC reporter Ryan Kailath comes in. Ryan was at the Fifth Avenue flagship the day they filed for bankruptcy because he had to see for himself. Ryan, I understand that you were there before the news even dropped, right?

Ryan: Yes. I'm the arts and culture reporter here, but I spent most of my career as a business and economics reporter, so I still read a lot of that stuff. If you read the business press, this has been rumored for a month longer that this might be coming. I was looking ahead of the news to be like, "Oh, let's go see what it's like." I'd seen some comments on social media. Oh, maybe people were getting good sales, et cetera. I went to check it out. It was a Tuesday afternoon, and it was freezing out, so it was not that many people, but I think a normal amount, given that. There were sales signs everywhere.

Janae Pierre: Wow.

Ryan: I saw it all. I was in the women's lingerie department and the men's streetwear department, the whole way down. I was like, "Great. My hunch was correct. My story is perfect. These discounts, it's a bankruptcy fire sale." Then everybody I talked to, I talked to like three different sales clerks, they were like, "No, that's just the normal after Christmas-

Janae Pierre: Oh, yes. That makes sense.

Ryan: -clearance sale." Then that night, they filed for bankruptcy, so this has got nothing to do with the bankruptcy, which makes sense. I did run into a woman who was doing the same thing as me. Tanya Perkins was her name. She was like, "Yes, I work nearby, so I come on my lunch break a lot, and I just do all my favorite sections really quick to see what's going on." I asked her if she was even aware of this, and she was like, "Oh, no, I didn't really know that was happening." Tanya might be back in the store now that it's announced.

Janae Pierre: Let's talk about the type of bankruptcy in which they filed.

Ryan: The two big kinds, this was Chapter 11. This is the kind where you owe a bunch of money, but you want to stay in business. Just like if your friend owes you a lot of money and they can't pay you back, you might say, "What can you do for me? Even if you can't pay back the whole amount," that's what Saks is doing with all of its creditors. The biggest one, if I remember right, is Chanel who they owe over $100 million to.

Janae Pierre: Yikes.

Ryan: Chanel just stopped shipping inventory to Saks because they were not getting paid for the stuff they had shipped before. A lot of their suppliers had been cutting them off. There were signs that this was going to spiral. If you don't have inventory, then you can't make money, vicious cycle. People have seen this coming for a while.

Janae Pierre: All right. No liquidation sale, and Saks isn't looking like a company in trouble when you're in the building. What's going on?

Ryan: Like I said, it's been coming for a while, and the big signal was last year. Saks was in debt, like a lot of these big department stores, which, for obvious reasons, are not doing so well. E-commerce, the future has happened. A lot of them have taken on a lot of debt. Saks is no exception. Then December 24, so a little over a year ago, they spent, I think, about $2.2 billion in debt by Neiman Marcus. That's the point where a lot of financial watchers were like, "Oh, we might be seeing something in about a year, because that's a lot of debt to take on."

Janae Pierre: That's what I was going to ask. Saks isn't going out of business right now, but is this a sign that they may be going out of business soon?

Ryan: Probably not because they're so iconic, but we will probably see some changes. I'm guessing that that's going to look like store closures. They're not going to close flagship Fifth Avenue tourists across from Rock Center. That's the whole brand.

Janae Pierre: But they're going to close my outlet store,-

Ryan: [laughs]

Janae Pierre: -Saks OFF 5TH.

Ryan: They might close the Saks OFF 5TH. They have stores, obviously, all over the country. They own Neiman Marcus, they own Bergdorf. I bet middle of the country, other places, we're going to see probably some store closures. Who knows, maybe even in desperate straits, they might close one of the brands completely. I was just looking it up. What they do have is a huge real estate portfolio, and that's an asset that they can borrow against and is helping subsidize other parts of the business that are losing. If they start to sell some of that real estate, that might help, and that's where we might see some of those store closures come from.

Janae Pierre: One could only hope that the Saks right here on Fifth Avenue in Manhattan will be the absolute last one. Please, please, please.

Ryan: Yes, that'll be like the Macy's flagship on 34th. If that one goes, then they're gone.

Janae Pierre: Bankruptcy aside, after Christmas sale, what did you get?

Ryan: Oh, I got nothing.

Janae Pierre: What?

Ryan: Yes, I was working.

Janae Pierre: You went to Saks, and you didn't get anything?

Ryan: I went to the Barneys closeout sale because they did have that kind of fire sale situation, and I do miss that, but no, I'm not a department store guy. I'm a boutiques man.

Janae Pierre: Okay, that tracks.

Ryan: [laughs]

Janae Pierre: Saks is such an iconic department store, like you mentioned. I want to talk about the state of New York City businesses, because even though Saks is still here, at least for now, other Fifth Avenue flagship stores like Barneys, Henri Bendel, they have closed their doors. I'm wondering if people are shopping less in general, or is rent just going up?

Ryan: There's been this explosion of thrift, and by that, I mean New York City fancy, vintage, consignment thrift. There's been an explosion of them in my neighborhood on the Lower East Side, almost like a new little vintage district popping up. I think you see, again, a lot more of that boutique, we're going to call it thrift, but everything's $100 type stuff, that is actually doing pretty well because they're taking the Depop or the Grailed model and putting it in a store.

As we know, the Gen Zs and Gen Alphas, they're starved for authentic experiences. They've lived their whole lives online. They like going to store and seeing things and meeting people and being out in the world. That, again, boutique thing is doing well, but the broad for the rest of the economy, the rest of consumers, the department stores, the way we've thought of people shopping for clothes across the country for decades now, that's the one that's struggling.

Janae Pierre: Ryan, as we wrap up our conversation, just one final question for you. As consumers, what should we be looking out for, not just with sex, but with some of our other favorite department stores across the city?

Ryan: It's tough because every business is so different, but thinking about those big, iconic New York City-style businesses, we had another signal just this week when Nathan's Famous Hot Dogs just sold to Smithfield, which is a huge agricultural corporation, actually owned by a Chinese conglomerate. Now, that's probably a happy outcome for Nathan's business owners, for the shareholders. They were having a tough time, a lot of beef inflation hitting their costs. We'll see how happy that is for the hot dog eaters of the city, like myself. Every business is so different. It's tough to say. Saks, they might like it if they could have an exit, but right now, their plan is very different. It's just to see what we can pay back and keep the business going.

Janae Pierre: Maybe they can get a hot dog stand in the store. Who knows?

Ryan: [laughs]

Janae Pierre: That's WNYC's Ryan Kailath. Ryan, thanks so much for joining us.

Ryan: Thank you.

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Janae Pierre: Stick around after the break for today's New York City news, and also what the city is doing about all this snow. Welcome back to NYC Now. I'm Janae Pierre. I hope you're staying warm this week. As you know, most parts of the tri-state area, including much of New York City, picked up around a foot of snow and sleet this past weekend. I've got to be honest, I did go out for a bit in it, and it was kind of fun. I made a snow angel, had a snowball fight, the usual. It was the most amount of snow, though, New York City has received in just about four years. New York City public schools are back open for in-person learning, and the snow is done falling, but it's just sitting all over the city.

Deputy Commissioner Goodman: There's a lot of snow out there. 12 to 15 inches across the city produces those huge ridges.

Janae Pierre: That's Joshua Goodman. He's the deputy commissioner of the city's sanitation department, and they've been out there cleaning the snow and ice.

Deputy Commissioner Goodman: There's 6,000 miles of street and highway, there's 100,000 crosswalks, there's 10,000 bus stops, all of that is public responsibility.

Janae Pierre: To tackle all that public responsibility, the city has about 2,600 sanitation workers on 12-hour shifts repeatedly, that's 2,600 working overnight and another 2,600 working during the day. On top of that, DSNY has 500 to 600 hourly workers coming in to help every day. Goodman says these workers are first breaking up the big snow ridges along the curb and taking all of that snow out to what they call approved melting locations. After the snow gets there--

Deputy Commissioner Goodman: We'll be putting the snow piles into, I guess you'd call them giant jacuzzis or snow melters, that melt about 120 tons an hour.

Janae Pierre: All that melt heads into New York City's sewers. Now, Deputy Commissioner Goodman says that the streets and highways, they're getting cleared, but bike lanes, they need some extra help.

Deputy Commissioner Goodman: If you are someone who uses a bicycle to go to work or who, in the case of delivery personnel, uses the bike lanes to do their work, we know that there is still some work to do. In a car lane, the cars actually do some of the work for us. The big, heavy car tires and truck tires push snow out of the way. Bikes don't do that.

Janae Pierre: Temperatures are forecast to stay bitterly cold all the way through next Wednesday, which means the snow and ice, it won't be melting on its own.

Deputy Commissioner Goodman: Because of this bitter cold that has followed the snow, we are going to need to continue to readdress the bike lanes because everything that lays in them is staying.

Janae Pierre: Plus, there are some early forecasts that are calling for more snow this coming weekend. This is going to add some strain on sanitation workers, who often work overtime for snowstorms.

Deputy Commissioner Goodman: That threat of snow this weekend is exactly why we are doing the hauling and melting operation this year. We really haven't done that in several years, setting up those snow jacuzzis, but with more snow coming on top of what's already out there, we've got to get those streets clear.

Janae Pierre: He says New York's strongest are well prepared.

Deputy Commissioner Goodman: We say that the snow is our Super Bowl. Sometimes we like to joke that this is a snow-clearing agency that picks up the garbage to keep busy in the summertime. We prepare for winter all year long.

Janae Pierre: Dear listener, if you want to help out with shoveling snow and make a little extra dough, the city is hiring. Commissioner Goodman says DSNY wants people in good enough shape to do some manual labor, but what you do on your own time, that's your business.

Deputy Commissioner Goodman: Starts at just over $19 an hour. You can sign up at nyc.gov/snow.

Janae Pierre: That's Joshua Goodman, deputy commissioner of the city's sanitation department.

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Janae Pierre: Before we go, here's what else is happening in New York City. Mayor Zohran Mamdani and Council Speaker Julie Menin have parted ways on one affordable housing measure. Mamdani campaigned in support of the council-backed Community Opportunity to Purchase Act or COPA. It would allow non-profits an early opportunity to buy when certain affordable housing properties go on the market. Former Mayor Eric Adams vetoed the measure in one of his last acts in office. Now, barring some change, his veto will stand. Speaker Menin's office says the council is only willing to attempt to override vetoes where there's a super majority of support. The deadline for attempting an override is Thursday.

Construction on the $16 billion Gateway tunnel project under the Hudson River could come to a halt next Friday. That's when the project is expected to run out of money. The Trump administration paused all federal funding for the work back in October. New York City Ferry service was still suspended Wednesday morning because of ice in the Hudson and East Rivers. The boat operators say they're continuing to monitor conditions, and they're preparing the fleet to resume service when things improve.

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Janae Pierre: Thanks for listening to NYC NOW from WNYC. I'm Janae Pierre. We'll be back in your feeds on Friday. In the meantime, let us know what's on your mind. Hit us up at NYC NOW at wnyc.org.

 

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