How Barneys went bankrupt, and what's next

admin October 25, 2019

8 11 minutes read

How Barneys went bankrupt, and what's next

The rotating doors still circle, the greetings still greet, but the mood at Barneys is glum. The department store – where Andy Warhol and Carrie Bradshaw both traded – is in bankruptcy, the future is uncertain. It has been actively searching for buyers, and on Thursday night, after a week of speculation about competing bids, a potential winner emerged: Authentic Brands Group, a licensing firm that controls, among others, Juicy Couture and Nautica, which announced that they will purchase intellectual property rights for Barney's New York, pending approval by a US bankruptcy court, and will license it to Saks Fifth Avenue, once Barney's # 39 competitor. But this may not be the final word. Bidders, including a group of investors led by trade show owner Sam Ben-Avraham, wanted to attend the hearing on October 31 to try again.

How did we get here? Once upon a time, Barneys was short on a kind of refinement that didn't take itself too seriously, a place where New Yorkers would go for decades to seek solace or celebration in spending, to buy Alaïa or Dries (even if you need to more than a simple name for both, you were probably in the wrong place). At the moment there is a cautionary tale, a New York treasure that was managed and exaggerated, flattened and floated on hedge fund dollars. Days before bids were posted to determine the company's ownership, the Madison Avenue location was not empty, but shoppers were milling, tourists and artists and vacant rooms – see, it's Met-bound countertenor Anthony Roth Costanzo surfing sunglasses with his mother ! – tempted under a cloud. What will happen? Some were heard to say. And, a little more cleverly, If Barneys goes down, is something on sale?

"My favorite stores were Bendel's, Barneys and Bergdorf's," said Helen Sant's Andrea (67), looking at her daughter, Ellis, 31. Bendel's is gone (the closed earlier this year, after 123 years), and Barneys as we know it may well come next time. “This is now another great store that goes along the road. I said to my Millennial daughter here: 'You have to stop shopping online! You have to go to the shops and look at the goods! Shopping used to be something to do, a experience . "

" I kind of understand why retailers are closing, "Ellis said. "It's like $ 700 shorts just in a bunch here. Everything is a little messy. It doesn't feel special. It's not that different from being in Zara."

Not so different from Zara is a shot in the heart of Barneys, whose eccentricity was once impenetrable and widely imitated.Barneys was founded as a men's discount clothing in 1923 by Barney Pressman, "Cut-Rate King", in the hands of Barney's son, Fred, and grandson Gene, and let finally women's clothing and home goods and scaled up to a temple of just-in-New York esoterica, often before it went both mainstream and worldwide: Giorgio Armani suits before they were anywhere else in America, Comme des Garçons long before Rei Kawakubo and "It was the place to be," said Cathy Paul, who worked for Pressmans in the early 1980s, when Barneys was a single store on 17th Street and Seventh Avenue. "People wanted to be there – the designers and the creative people. ”Ku The ducks also did, "You appreciated your stuff from Barneys," Paul said.

Photo: Devin Yalkin

Throughout the 1980s and 1990s, Barneys set the tone, tongue and cheek never far apart. Simon Doonan, the store's creative director, made windows of so twisty subtleties that they were almost performance art: a costume Sigmund Freud who performed analysis, a mannequin Madonna – Material Girl, not a Virgin mother. (The real Madonna once appeared in a fashion show live auction held to celebrate the opening of Barney's women's store in 1986, the unique denim jacket of her back sold in favor of the nearby St. Vincent's AIDS clinic.) The act there was to declare yourself a Barneys person, off-kilter as it may be. (The late style master Glenn O & # 39; Brien, who spent many years writing the store's small ads, nailed the social anthropology: "Ruth had several personalities. They all had credit cards."

Barneys was a pleasure palace of cosmopolitanism at its center – winding Andrée Putman staircase and everything – a world away from the uptown shine of Fifth Avenue, even when it finally added to a Madison Avenue store in 1993. When I was little, my mom marched me right past the Rock Center tree to The Barneys windows at Christmas time. This week I asked her why. "I didn't always understand the windows, but knew I would," she said, "to be part of the exciting and forbidden inside club."

It's not Neiman Marcus & # 39; s sales have increased and fallen over the past few years, and it is in conflict with nearly $ 5 billion in debt Nordstrom, which opened its huge new women's store in downtown Manhattan this week with a lot as large as e n rave, has also reported subsequent income declines year over year. But the situation has felt particularly bleak for Barneys, who are more of an acquired taste than their competitors. Not that this is the first time it has been eradicated. Barneys applied for Chapter 11 bankruptcy protection in 1996, and made news on the front then. In 1999, Pressmans was mostly out, and ownership has changed hands several times since; Previous owners include Jones Apparel Group and Istithmar, the superb Dubai wealth fund, which still has a small stake. The current majority stakeholder is Perry Capital, the then-shuttered hedge fund run by financier Richard Perry, now chairman of Barneys New York, Inc. (Perry's wife, Lisa, makes Pop Art – splashy, vintage-inspired fashion that is Perry Capital took over control of Barneys in 2012 when the company, as its largest bond owner, exchanged debt for equity so Barneys could avoid bankruptcy.

When Perry took over, Barneys was far from a cozy family business, expanding broadly with a network of locations across the country: less Mark Lee, a veteran of Yves Saint Laurent and Gucci, was appointed CEO in 2010. Under Lee, several long-time executives were replaced. from his creative leadership role to a more amorphous ambassador, and Dennis Freedman, the former creative director of the magazine W led a new design for do Barneys more slender, Chic and a bit cooler. A former sales company described the customer reaction as "visceral." "It used to be a beautiful, beautiful wall of fish," said a current sales person, referring to the famous fish tanks in the sales floor. “They tore it down. That was the beginning of the end. When it became a black and white, strict store, the humor went out. It was Barneys that luxury, wit … The wit in it has gone out. “A seller who has since left regrettable acres of marble that seemed to swallow up all that product was meant to show. "Suddenly it got flat and dull," the person said. (Freedman has since left the store and declined to be interviewed for this article. None of Barney's current employees, and few of the former, would speak to the Post in fear of retaliation.)

Lee brought in his former lieutenants from Gucci , including Daniella Vitale, who took over as Chief Merchant and Executive Vice President in 2010. Barney's new look was less unique than it once was, and the sharpness of the Barneys acquisition, its early calling card, has softened. The distinctive point of view seemed to slip away. “So many bad decisions were made. No advice was ever asked, ”said a longtime colleague. "They really didn't want to come up with their own ideas; they wanted to follow what Bergdorf or Saks did. This is outrageous! We are Barneys ."

Barney's imprimatur could still make a designer a star ; LA designer Mike Amiri credited Barneys with catapulting him to the major leagues when the store bought his collection and linked it to those of his larger counterparts, the European luxury brands. "Barneys relied on Amiri from day one," he said over coffee recently. "They understood my vision of creating a luxurious power plant." In short, Amiri was one of the retailer's top-performing men's brands. But Barney's aggressiveness when it came to claiming the exclusivity it prided itself on, and interacting with designers it could also alienate those who couldn't afford to put all their eggs in Barney's basket. Fallon jeweler Dana Lorenz posted on Instagram this week that she "stopped selling to Barneys because of there It's the practice of shackling someone less than Prada into exclusivity … They haven't paid people for many years and backed them into a corner anytime other major dealers show interest rates. Let me tell you, you won't expand your business if you sell your soul to Barneys. "

Vitale was taken over by Lee, her mentor, as CEO in 2017. Vitale had her supporters, and was fiercely loyal to those she considered her own team – as Chief of Trade Jennifer Jennifer, who characterized Vital's" bad cop " ”- but both women could be very tough on the staff. Former employees talked about a management culture that favored falling in line, even when position after position was reversed. A former salesman described buyers, who fetched products for specific sections and categories, as afraid of their bosses. (Reviews from former Glassdoor employees are not known for leniency, but on the site, only 35 percent of reviewers approved of Vitale. A particularly pungent executioner called her "an extraordinary charismatic wolf in sheep's clothing" and said she worked in Barneys was a (Dystopian horror display of fashion employment.)) At Gucci, Vitale had to deal with Donald Trump when Gucci's store was in Trump Tower. Vitale liked to tell a story about how Trump liked her so much that when Ivanka had a baby, he invited her to be a judge on The Apprentice because, as a former executive says she told it, Trump quotes , the show "needed another bitchy judge."

Tomm Miller, executive vice president of marketing and communications at Barneys, disputed the characterizations of Vitale and Sunwoo. "Both women are highly regarded leaders who have long been known for being collaborative, thoughtful, strong and supportive," she said. "It's unfortunate that women in leadership positions like Daniella and Jennifer are still often subject to stereotyping that undermines strong leadership and success results."

Investments were made online, and digital business has grown significantly in recent years, but even in an e-commerce age, the focus remained on expensive-to-run flagships – including a much-publicized return center with a new Seventh Avenue store next door of the original Barneys. And unlike the competitors in Saks and Bergdorf Goodman, Barneys does not own real estate, which left it in a precarious position. In August, after a lengthy dispute and arbitration with a landlord over a rental promenade on flagship Madison Avenue, eventually bringing the monthly bill close to $ 30 million, Barney's Chapter 11 filed and declared more than $ 100 million in estimated debt ( as well as more than $ 100 million in estimated assets). The creditors include the row, Celine, Yves Saint Laurent and Balenciaga. Hamneys of underperforming stores, Barneys had closed locations for many years – Dallas in 2013 and Scottsdale in 2016 – but it now announced it would close 15 of the 22 remaining locations and receive funding to keep stores open while seeking a buyer for the company .

Photo: Devin Yalkin

The race began to bail Barneys. Rumors circulated, some that had previously been above belief (could Steve Madden really intend to buy Barneys, who reported "Page Six"?), But by the deadline of Wednesday, October 23, two potential buyers had emerged. One was Authentic Brands Group, along with investment bank B. Riley, which offered $ 271.4 million for Barney's intellectual property, which ABG would control, and its other assets, which B. Riley wanted. Their plan was allegedly to close some or most of Barney's stores and license the IP to Saks Fifth Avenue, which would allow Barney's name and brand to live on in some form in Saks stores.