Saks Global, the parent company of Saks Fifth Avenue and Neiman Marcus, filed for Chapter 11 bankruptcy on January 14, 2026. Disruption in the retail sector, the demise of brick-and-mortar stores and general industry carnage have been predicted for more than a decade. Yet long-running department stores like Mitchell’s, Dillard’s and Von Maurer — all family-led businesses — continue to significantly outperform peers. A Wall Street highflier collapses, predictably and publicly, while multigenerational, family-founded and -led versions of the same model remain viable. Why?
It all comes down to alignment.
The ‘Cycle of Death’
The “cycle of death” is fundamental in retail. If a brand loses the ability to make payables — the Saks bankruptcy, for example, was driven by debt from its $2.7 billion acquisition of Neiman Marcus — inventory amount and composition deteriorates, investment in the physical and digital experience declines, sales fall and the cycle accelerates towards bankruptcy. There are ways to stop this cycle, but knowing which levers to pull requires experience. One must be able to recognize when it’s necessary to take dramatic action like store closures, liability restructurings and operational resets. Inexperienced retail leaders tend to act cautiously, clouded by emotion, making only minor adjustments only until it’s too little, too late.
Wall Street — private, public and debt capital markets — can construct transactions that both help and harm retail businesses. Debt loads, sale leasebacks, sophisticated capital structures, preferred equity with artificial return thresholds and rights, real estate sales and even unnatural cost-cutting measures can all be valuable tools when aligned with strategy. But these tools should not be employed to satisfy a deal thesis rather than the business needs of customers, partners, managers and owners.
The Right Horse on the Right Track in the Right Race
Alignment is critical for any deal to work. Debt and equity investors, management teams, owners, customers and business partners must share end goals. Put simply: You need the right horse on the right track in the right race. If you’ve ever witnessed a deal go haywire (and I have), the reason why is typically clear: it often comes down to choosing the wrong partners.
History offers many examples of this: Toy “R” Us, KKR and Bain Capital; Hudson’s Bay and NRDC Equity Partners; Sears and ESL; Federated and Campeau Corporation; Barney’s and Perry Capital, to name a few. Many of these debt and equity investors are among the best in the world. But, where deals have failed, there has been a misalignment of end goals and the inclusion of parties who lack experience in the unique realm of retail.
Pioneers of the leveraged buyout industry likely agree with my view and deeply understand the importance of alignment. However, as private markets have matured and become more efficient, the discipline that once drove the buyout industry has been increasingly disregarded as investors face pressure to put money to work. For example, in transactions where the goal has been to capture real estate value rather than build brand value, lenders have focused on solid interest rates with effective collateral, while equity providers believed they were backing well-known brands and managers simply thought they could “make it work.” This strategy, however, has proven unsuccessful at Hudson’s Bay, Lord and Taylor, Saks, Neiman Marcus, Red Lobster, Sports Authority, The Limited, Wet Seal and many others. Retail rarely forgives a poorly constructed syndicate of players.
The Family Advantage
In retail, aligning the constituents needed for complex financial transactions to be successful is very difficult. Talk to a great manager and he or she rarely understands PE and the need to raise the next fund or lenders and their need for certain collateral. Talk with PE folks and they rarely understand customers, business partners and the constantly shifting landscape that characterizes the retail industry (in fact, they’ll often tell you it’s not their job to know).
Conversely, family- and founder-led retailers like Urban Outfitters, Dillards, Von Maurer and Mitchell’s continue to outperform their peers. In some cases, these brands also have publicly traded debt and equity, but, most importantly, they have a shared purpose that unites management, customers, partners and capital. Long-term orientation, customer obsession and aligned incentives matter. These businesses are not immune to mistakes, but they are structurally better suited to navigate financial complexity.
We have countless examples of business success by family-founded, -led or -influenced retailers. These include massive outperformers like Walmart and the Walton Family, LVMH and the Arnault Family, Uniqlo and the Yanai Family, Inditex and the Ortega Family, Loblaws and the Weston Family.
So, what is the formula for success? Family owners tend to care deeply about the name on the door — their brand — and are compelled by a unique combination of ego, drive and a desire to preserve their legacies. Family businesses work obsessively on all details and understand that remaining relevant in retail is a constant battle. It’s not magic, but this intense focus helps align all parties.
A Fatal Mistake and a Lasting Lesson
I grew up around a family-led, publicly-traded business that persevered through several generations of major change: the horse and buggy giving way to the automobile; two World Wars; the Great Depression; the Vietnam and Korean wars; the Cold War; oil shocks and on and on. History dictates that there will always be challenges to overcome and foreboding predictions about consumers, the U.S. market and the retail sector to reckon with.
I eventually struck out on my own and started a successful retail clothing chain in which our best year of comparable sales was 2008. Then, I made the fatal mistake of partnering with private equity before I had the necessary experience to navigate the combination of a complex business and a new capital structure. Ultimately, the saga ended in restructuring. As a close colleague never fails to wisely remind me: humans will not soon walk the earth naked. Consumption of apparel will remain constant, but how apparel is consumed will change and it’s a brand’s job to keep up. So, the choice to restructure with private equity was my fault — it was the wrong alignment of partners. I might not have made that mistake had I known the pattern. There is nothing inherently wrong with changing retail or store models but it’s imperative to have the right experience — in my case, a background leading a business within a complex capital structure — at the table.
As 18th-century banker and nobleman Baron Nathan Mayer Rothschild is often credited with saying, “The time to buy is when there’s blood in the streets.” The retail sector, with all its recent turmoil, has created a once-in-a-lifetime acquisition environment. Bringing together experienced stakeholders and aligning them with the values and vision of the brand will be key to capitalizing on this opportunity. That reality puts family- and founder-led businesses at a distinct advantage.