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Good morning. The current difficulties of Saks Global, the holding company of Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, are a timely reminder that the key to business success is often quite simple: focus on your core business, not financial engineering.

In late 2024, Richard Baker, executive chairman and majority shareholder of real estate scion Saks Global, landed his dream trophy at Neiman Marcus (which also owned Bergdorf), realizing his long-held ambition to consolidate America’s chicest luxury department stores into one company. To achieve this, Saks Global borrowed $2.7 billion, an unsustainable debt load that put the company on the brink of bankruptcy proceedings, or at least a major refinancing. (No one thinks Saks Global is going bankrupt, but that can only hurt its prospects as a retailer.)

The Saks-Neiman tie-up was the culmination of a plan Baker hatched in 2005 to acquire retailers with valuable real estate. Over the years, different iterations of the company, known for years as HBC, have included Lord & Taylor (its first major acquisition) and Hudson’s Bay in Canada.

His bet was that the value of iconic properties like flagship Saks and Lord & Taylor in Manhattan or The Bay in Toronto could be monetized as long as the underlying retail business remained stable.

But nothing in retail, especially department stores, has remained stable. Lord & Taylor closed all of its stores in 2019 after HBC sold the weakened retailer, and Canada’s Hudson’s Bay liquidated last year, ending its 355-year history.

To be fair, Baker has done some good business in the retail world. (He sold Target the locations of its ill-fated Canadian expansion in 2011.) And the department stores have been in shambles for decades.

But a constant whirlwind of financial maneuvers (spinning off Saks’ e-commerce business, creating coworking spaces in underutilized stores while heavily in debt) brought some benefits but never obviated the need for more investment in core products. Saks Global said it has invested considerable sums in its retailers, but it has not been enough. Its lack of liquidity has led some sellers to stop delivering to Saks: it is very difficult to sell goods you don’t have, hence a 13% drop in sales last quarter.

A few months ago, I chronicled the returns at Macy’s, Bloomingdale’s, Nordstrom (all benefiting from Saks’ problems) alongside the consistent performance of Belk and Dillard’s. These retailers have improved their customer service, renovated their stores and stocked lots of new merchandise. A strong business increases the value of their underlying real estate.

All of this will be key for Baker to consider as he has just become the new CEO of Saks Global, giving him a direct role in running the company, not just pulling its financial levers. You can read my full story on the Saks saga here.

Contact the CEO daily via Diane Brady at diane.brady@fortune.com

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