Amazon warns of 'drastic action' after Saks bankruptcy; $475M investment deemed worthless

• Amazon invested $475 million in Saks's $2.7 billion Neiman Marcus acquisition in exchange for technology partnership and presence on Amazon's platform, which it now considers worthless
• Amazon argues the bankruptcy financing plan harms creditors by adding new debt and pushing Amazon lower in the repayment hierarchy
• Amazon threatens 'more drastic remedies' including appointment of an examiner or trustee if concerns aren't addressed; judge approved Saks tapping $1.75 billion in bankruptcy financing

Summary

Key Development:

Amazon filed a court objection to Saks Global's bankruptcy financing plan after the luxury retailer filed for Chapter 11 protection, declaring its $475 million investment "worthless." Amazon is threatening "drastic action" including requesting appointment of an examiner or trustee if concerns aren't addressed.

Investment Details:

• Amazon invested $475 million when Saks acquired Neiman Marcus for $2.7 billion in December 2024
• The deal included launching a "Saks at Amazon" storefront featuring luxury fashion and beauty items
• Saks agreed to guarantee at least $900 million in payments to Amazon over eight years through referral fees

Amazon's Complaints:

• Saks "burned through hundreds of millions of dollars in less than a year"
• Failed to meet budgets and accumulated hundreds of millions in unpaid invoices to retail partners
• Bankruptcy financing plan pushes Amazon lower in the creditor repayment hierarchy
• New debt structure could harm Amazon and other creditors

Court Proceedings:

Judge Alfredo Perez allowed Saks to access $1.75 billion in bankruptcy financing on Wednesday, citing imminent liquidation risk without it. No ruling yet on Amazon's objection.

Strategic Context:

The Saks deal was part of Amazon's broader strategy to expand its luxury retail presence and deepen its physical retail footprint. Amazon has previously made similar strategic investments, including a 2022 stake in GrubHub (increased to 18% by 2024).

Market Implications:

The bankruptcy raises questions about Amazon's retail investment strategy and the viability of luxury department store models in the current market environment.