Saks Learned the Hard Way: Cash Flow Always Wins

Written By Kristen Hillman

Situation

If you have ever walked through Saks Fifth Avenue, you know the feeling they sell: beauty, calm, and elite. The lighting is perfect, the brands are iconic, and the whole experience says, You are important.

Behind the scenes, though, Saks had been trying to solve a very modern problem.  Department stores no longer “own” the luxury customer the way they used to. First, the divide between those who can afford luxury and those who cannot is becoming wider. This means fewer luxury shoppers. Second, shoppers can buy directly from brands, discover products online, and follow influencers instead of highly trained sales associates.

Changes in our culture prompted Saks to make a big move. In 2024, the company completed an acquisition of Neiman Marcus, valued at approximately $2.6 to $2.7 billion, aiming to create a luxury department store powerhouse that could compete in a more fragmented market.

But the deal added heavy debt at exactly the wrong time. Luxury demand softened, and Saks began showing stress in the most sensitive place any retailer can. CASH FLOW. Reports described overdue payments and strained vendor relationships, with some brands holding back inventory.

Last week (January 2026), Saks Global filed for Chapter 11 bankruptcy protection in the Southern District of Texas. The company said stores would remain open and that it had secured about $1.75 billion in financing to operate through restructuring.

Insight

When people hear “bankruptcy,” they often assume the core problem is sales. With Saks, the more useful lesson is about cash flow under pressure and how debt turns cash flow from a finance task into a survival test.

Saks did not just make one aggressive bet. It layered several high-risk decisions on top of each other until there was no room left for normal operations, newly acquired debt payments, and normal turbulence. And the thing about turbulence is that it shows up first in your cash calendar, not your brand story.

First, it used debt to buy scale. The Neiman Marcus acquisition was designed to create a stronger platform, but debt does not simply add pressure. It changes the rhythm of your business. It creates a new steady “must go out” that does not care if your “comes in” arrives late, arrives smaller, or arrives in a different season than planned. The quiet trap of unmanaged cash flow is that you can be profitable on paper and still run out of cash in real life.

Second, it tried to manage the cash gap through the supply chain. Meaning, when and how they pay the providers of all the luxury items available for sale. Recent articles described Saks stretching vendor payments and adjusting vendor terms. That is a cash flow move, not a merchandising move. And in luxury, your suppliers are not interchangeable. Luxury customers are often buyers for specific brands. If a brand loses confidence in your ability to pay predictably, they protect themselves. They ship less, ship later, or demand different terms. Then your inventory weakens, sales soften further, and the cash gap widens. It is a destructive loop, and it accelerates fast.

Third, the company sent distress signals that tend to appear when cash becomes the daily conversation. Leadership churn and asset moves can be strategic, but when they cluster around a restructuring, they often reflect a business trying to buy time. And time, in these moments, is another word for cash runway.

This is the part I want entrepreneurs to sit with: Saks still looked like Saks to the customer. The risk was not visible on the selling floor because it was living in the cash flow statement.

Application

Here is how to translate the Saks debacle into decisions you might face in a growing business, whether you run a product brand, a studio, a service firm, or an e-commerce shop.

Start making scale decisions with a cash flow lens first, not an ambition lens.

  • It is not enough to know what revenue you expect. You need to know when it hits and what must be paid before it arrives. Debt payments, payroll, rent, and taxes are not flexible the way forecasts are. Before you take on debt or a major investment, map the timing. If your plan requires the next two quarters to be perfect just to stay current, the risk is already too high.

Treat debt like a business partner who is obsessed with timing.

  • Debt is not “bad.” But it is opinionated. It demands consistency and predictability. The founder version of this is simple: you can negotiate almost anything except an empty bank account. If your growth plan increases fixed monthly outflows faster than it increases reliable inflows, you are borrowing stress.

Protect supplier trust as part of your cash strategy.

  • Many founders think vendor terms are a finance detail. In retail, they are your product availability. In services, they are your delivery capacity. Stretching payables might feel like a temporary solution, but the long term cost is usually higher than the short term relief. When you lose supplier confidence, you lose optionality. And optionality is what keeps you alive when cash gets tight.

Build a “what must go out” dashboard and look at it weekly.

  • This is the practical habit that prevents the Saks-type spiral in a smaller business. A 13-week Cash Flow forecast should be standard practice for businesses that have tight cash inflows and outflows.  Track the non-negotiables for your business, for example, payroll, debt service, rent, taxes, and critical vendors. Then compare them to the cash you can reasonably count on, not the cash you hope will arrive. Scaling becomes much safer when you can see the gap before it becomes an emergency.

A note especially for female entrepreneurs

  • Many women leaders are asked to prove seriousness through scale. Bigger contracts, bigger headcount, bigger footprint. The hidden cost is often cash strain. Real confidence is not how big your next move is, but rather how well your cash flow can carry it. The most strategic move is often the one that looks boring, such as building liquidity, keeping optionality, and scaling in a way that your cash can defend.

Takeaway

The Saks bankruptcy is not just a retail story. It is a reminder that cash flow is the truth serum of every strategy. 

Saks tried to buy a stronger future through acquisition and scale. But when the debt clock started ticking and vendor trust started slipping, the business ran into a timing problem: cash that needed to go out did not wait for cash that was supposed to come in. Chapter 11 may give the company room to restructure, but the lesson for the rest of us is immediate.

If your growth plan increases fixed outflows faster than predictable inflows, you are not scaling. You are gambling with your runway.

Where We Are Now

As of mid January 2026, Saks Global is in Chapter 11 bankruptcy proceedings in the Southern District of Texas, with about $1.75 billion in financing lined up to keep operating during restructuring. The company has said stores will remain open while it works through its next steps.

 

Sources & References

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