Barneys, New York's iconic retailer, is bankrupt
A pedestrian walks past a window in Barneys New York Department Store in New York, USA, Thursday, January 22, 2009.
Jin Lee | Bloomberg | Getty Images
Barneys New York, an icon of New York's retail business, filed for bankruptcy early Tuesday morning, with a plan to significantly reduce the footprint as it looks for a buyer to avert settlement.
The retailer said it will focus on operating just five of the more than 1[ads1]0 name stores: on New York's Madison Avenue, downtown Manhattan, Beverly Hills, San Francisco and Copley Place. It will also keep Barneys Warehouse stores open in Woodbury Common and Livermore.
It plans to close its Chicago, Las Vegas and Seattle stores, as well as five smaller concept stores and seven Barneys Warehouse stores.
Barneys, which filed in the U.S. Bankruptcy Court for the Southern District of New York, said it has raised $ 75 million to support a sales process. CNBC previously reported that the company without a buyer is likely to wind up.
The filing makes the luxury department the last victim of the upheaval in the store, as buyers buy online and from brands directly. Barney's suffering has been further aggravated by sky-high rents even though sales have fallen. As cash to pay the suppliers has weakened, there is left out of season products, or in some cases no product at all.
The filing marks the second time Barneys has gone into bankruptcy court. The first filing came in 1996, after a quarrel with its Japanese owner, the Isetan department store. The filing was partly a move to renegotiate the agreement with Isetan, as well as tackle what it viewed as excessive rents.
Another trip to bankruptcy was avoided in 2012, when Perry Capital, a hedge fund run by New York financier Richard Perry, took control of the company through a $ 540 million debt swap.
Perry closed the fund four years later, citing headwinds in industry and the market. While the fund has continued to own Barneys, it has not put any more money into it. The brand owned by his wife, New York designer Lisa Perry, continues to sell in stores, with many of her products exclusively for the retailer.
The whole industry is in survival mode … the model does not work, it does not work for Neiman [Marcus] it does not work for Saks, it does not work for us, it does not work for Nordstrøm. "
Daniella Vitale
CEO of Barneys
As her first bankruptcy, a rent dispute is ahead of Barney's last bankruptcy filing. Rental on the flagship of Madison Avenue jumped from about $ 16 million to about $ 30 million in January, almost wiping out earnings before interest, taxes, depreciation and amortization.
The Madison Avenue store has been both a beacon and a burden for Barneys, the most important store where it showcases the best products – some of its most loyal buyers and make almost half of the sale, but sales have gone down, even though it has been pummeled by a rent increase. As part of the agreement, Ashkenazy was entitled to raise the rent in 2019, a move Barneys protested unsuccessfully
& # 39; The model does not work & # 39; [19659020] High rents are not the only challenge Barneys faces because it stares down at online competition such as Yoox Net-A-Porter and Moda Operandi, which intervenes in the previously untouched luxury retail space. The luxury brands are also pushing to have more buyers to buy directly from their own stores. With these new outlets, brands are less dependent on Barneys than before. This meant luxury brands had less patience for slow payments in the midst of Barney's cash crisis.
Shipments from Balenciaga and Moncler are among those who have been delayed, according to the person known.
In recent years, bag manufacturer Goyard, which sells $ 1150 handbags, has begun renting space in Barney's Madison Avenue store, rather than selling its products directly to the retailer. The move meant that Barneys received money from rent, but not commissions. It also limited the retailer's ability to sell the brand in other stores off Madison Avenue.
The growing power of brands to wean themselves from store addiction is a question that has burdened the industry, from Neiman Marcus to Macy's, from Saks owner Hudsons Bay to Nordstrøm.
"The entire industry is in survival mode," Barney's CEO Daniella Vitale told employees earlier this year, according to a recording obtained by CNBC. "The model does not work, it does not work for Neiman [Marcus] it does not work for Saks, it does not work for us, it does not work for Nordstrom."
Barneys, like others, has tried to respond. It has expanded its online business from about $ 18 million in sales to $ 200 million under Vital's operations in the company, which includes roles as chief merchant and chief operating officer. It has pushed to expand the number of Fred's restaurants and opened a luxurious cannabis shop. But the expense associated with running its more than 10 namesake stores in New York, California, Illinois, Massachusetts, Nevada, Washington and Pennsylvania has not been enough to offset the unevenness in sales it received from those efforts.
Barneys dates to 1923, when Barney Pressman opened a men's discount clothing store on Seventh Avenue and 17th Street. In the 1960s, Pressman's son Fred helped transfer from a discount store to a luxury retailer. Barneys soon impressed on luxurious fashion in New York, building a foothold in menswear and introducing designers such as Giorgio Armani.
