A pedestrian walks previous a window show at Barneys New York division retailer in New York, U.S., on Thursday, Jan. 22, 2009.
Jin Lee | Bloomberg | Getty Photographs
Barneys New York, an icon of New York retail, filed for chapter early Tuesday morning, with a plan to considerably cut back its footprint, because it appears to be like for a purchaser to stave off liquidation.
The retailer stated it is going to concentrate on working solely 5 of its greater than 10 namesake shops: on New York’s Madison Avenue, in downtown Manhattan, Beverly Hills, San Francisco and Copley Place. It would additionally hold open its Barneys Warehouse shops in Woodbury Widespread and Livermore.
It plans to shut its shops in Chicago, Las Vegas and Seattle, in addition to 5 smaller idea shops and 7 Barneys Warehouse shops.
Barneys, which filed within the U.S. Chapter Court docket for the Southern District of New York, stated it has raised $75 million to assist a sale course of. CNBC beforehand reported that, with no purchaser, the corporate will possible liquidate.
The submitting makes the posh division retailer the most recent sufferer of the retail upheaval, as consumers purchase on-line and from manufacturers straight. Barneys’ woes have been additional exacerbated by sky-high lease at the same time as its gross sales have fallen. As money to pay its distributors has dwindled, it has been left with out-of-season merchandise, or in some instances, no product in any respect.
The submitting marks the second time that Barneys has landed in chapter court docket. Its first submitting got here in 1996, after a squabble with its Japanese proprietor, division retailer firm Isetan. The submitting was partially a transfer to renegotiate its take care of Isetan, in addition to deal with what it considered as extreme lease.
One other journey out of business was averted in 2012, when Perry Capital, a hedge fund run by New York financier Richard Perry, took management over the corporate by way of a $540 million debt-for-equity swap.
Perry closed his fund 4 years later, citing business and market headwinds. Whereas the fund has continued to personal Barneys, it has not injected extra money into it. The model owned by his spouse, New York designer Lisa Perry, continues to promote in its shops, with a lot of her merchandise unique to the retailer.
Like its first chapter, a dispute over lease is on the forefront of Barneys most up-to-date chapter submitting. Hire at its flagship on Madison Avenue jumped from roughly $16 million to about $30 million in January, almost wiping out its earnings earlier than curiosity, taxes, depreciation and amortization.
The Madison Avenue retailer has been each a beacon and a burden for Barneys. It’s its most vital retailer, the place it showcases its finest merchandise, reaches a few of its most loyal consumers and does almost half of its gross sales. However these gross sales have been declining at the same time as it has been pummeled by a lease hike.
The flagship is owned by actual property funding firm Ashkenazy Acquisition, which in 2001 purchased it, in addition to the retailer’s Beverly Hills, California, retailer from Isetan. As a part of the deal, Ashkenazy had the best to lift the lease in 2019, a transfer Barneys unsuccessfully protested
‘The mannequin is just not working’
Excessive lease is just not the one problem dealing with Barneys because it’s staring down new on-line competitors like Yoox’s Web-A-Porter and Moda Operandi, that are encroaching on the beforehand untouchable luxurious retail house. The posh manufacturers are additionally pushing to have extra consumers purchase straight from their very own shops. With these new retailers, manufacturers are much less depending on Barneys than in occasions previous. That is meant luxurious manufacturers have had much less persistence for sluggish funds amid Barneys’ money crunch.
Shipments from Balenciaga and Moncler are amongst these which were delayed, in line with the particular person acquainted.
Lately, bag maker Goyard, which sells $1,150 purses, has begun to lease house in Barneys Madison Avenue retailer, moderately than promote its merchandise on to the retailer. The transfer meant Barneys acquired cash from lease, however not commissions. It additionally restricted the retailer’s capability to promote the model in different shops past its Madison Avenue location.
The rising energy of manufacturers to wean themselves from a reliance on department shops is a matter that has weighed on the business, from Neiman Marcus to Macy’s, from Saks-owner Hudson’s Bay to Nordstrom.
“All the business is in survival mode,” Barneys CEO Daniella Vitale told employees earlier this year, according to a recording obtained by CNBC. “The mannequin is just not working, it is not working for Neiman [Marcus], it is not working for Saks, it is not working for us, it is not working for Nordstrom.”
Barneys, like others, has tried to react. It is grown its on-line enterprise from roughly $18 million in gross sales to $200 million throughout Vitale’s run on the firm, which incorporates roles as chief service provider and chief working officer. It has pushed to develop the variety of its Fred’s eating places and opened a luxurious hashish store. However the bills connected to working its greater than 10 namesake shops in New York, California, Illinois, Massachusetts, Nevada, Washington and Pennsylvania haven’t been sufficient to counteract no matter bump in gross sales it acquired from these endeavors.
Barneys dates to 1923, when Barney Pressman opened a males’s low cost clothes retailer at Seventh Avenue and 17th Road. Within the 1960s, Pressman’s son Fred helped transition from a reduction retailer to a luxurious retailer. Barneys quickly made its imprint on New York luxurious trend, constructing on its foothold in menswear and introducing designers like Giorgio Armani.