NEW YORK — When Barneys NY opened the elegant revolving doors of its 10-story French limestone flagship store at 660 Madison Ave. in 1993, it established a retail landmark that soon came to be synonymous with a certain kind of New York style.
Shoppers thronged as much to imbibe the atmosphere of insider luxury as to buy the newest, most cutting-edge brands. Designers felt that if they made it onto Barney’s racks, they had been given a stamp of creative credibility that telegraphed to the world they had arrived.
Now, that store is fighting for its future and reputation in a fraught retail environment ravaged by skyrocketing rents and the growth of e-commerce, where former shopping thoroughfares are spotted with empty storefronts and the very premise of the department store is being questioned.
Barneys has hired financial and legal advisers, including the law firm Kirkland & Ellis, the consultancy MII Partners and the investment bank Houlihan Lokey, to help it consider its options, according to two people briefed on the matter who spoke on condition of anonymity because no decision had been made.
The possibilities for Barneys include filing for Chapter 11 bankruptcy protection, renegotiating leases — not just of its Madison Avenue flagship, but potentially of other branches in its 22-store network — and taking on a strategic investor who can inject new capital.
“Our board and management are actively evaluating opportunities to strengthen our balance sheet and ensure the sustainable, long-term growth and success of our business,” Barneys said in a statement.
Amid the uncertainty, which has unsettled the New York fashion world, some of the brands that have sold their products to Barneys have stopped fulfilling new orders.
“They are worried,” said Gary Wassner, chief executive of Hilldun Corp, a factoring firm that caters to the fashion world and has more than 50 clients that sell to Barneys. “We talk to Barneys every other day, and they are still communicating with us and paying us, but clearly something is happening. What it is has been the subject of nonstop conversation, and because of that designers have become very confused and stressed.”
As a result, Hilldun has stopped approving orders in the past two weeks. “We are waiting for them to present us with a plan so we can move forward,” he said.
The trigger for Barneys ills was an arbiter’s decision last August that the annual rent on the Madison Avenue store — the largest new specialty shop to be built in New York since the Depression and the source of approximately one-third of Barneys revenue — could be raised to $30 million from $16 million, creating untenable pressure on the retailer’s balance sheet.
This is not the first bankruptcy threat for Barneys, which began life in 1923 as a small menswear store founded by Barney Pressman and was built by his family into a symbol of international chic and Manhattan aspiration.
In 1996, after a dispute with the Japanese department store company Isetan, its partner at the time, the company filed for Chapter 11.
Isetan had entered into a joint venture agreement with Barneys in 1989 to finance the company’s expansion; in the next 5 years, the deal made it possible to open 17 stores, including the Madison Avenue location, at a cost of about $600 million. However, Barneys, which was having cash-flow issues, began to balk at what it saw as onerous rent payments on its most glamorous stores. Isetan claimed mismanagement, Barneys filed and the two partners sued each other.
Isetan eventually emerged with the title to the Barneys stores in New York, Chicago and Beverly Hills, California, as well as a small equity stake in the company. The Pressmans were largely out, and two majority investors, Whippoorwill Associates and Bay Harbour Management, were in charge. The company has since changed hands three times. The private equity group Perry Capital is now the majority stake holder.
In 2001, Isetan cut its ties with Barneys by selling the buildings in Beverly Hills, Chicago and New York to Ashkenazy Acquisition Corp. for $180 million. At that time, a 20-year lease was negotiated for the Madison Avenue building that set the annual rent at $16 million, with a clause stating that when it came up for renewal, it could be raised to a fair market value. Ashkenazy had asked for $60 million.
It is not clear what the landlord, which also leases space at Union Station in Washington and Faneuil Hall Marketplace in Boston, plans to do with the space if Barneys vacates. Ben Ashkenazy, the firm’s chief executive, did not return requests for comment; Michael Alpert, its vice chairman, declined to comment.
“It’s crazy to double the rent; half of Madison Avenue is empty,” said Peter Marino, the architect who designed the Madison Avenue store, suggesting that if Barneys left, it was unlikely to be replaced as a tenant by another store.
Barneys is not the only brick-and-mortar store having trouble. In the last year, Lord & Taylor has closed its historic New York location; so has Henri Bendel. Saks Fifth Avenue opened a woman’s outpost near the World Trade Center, then closed it fairly quickly. In April, Coresight Research revealed that retailers had already announced plans to close 5,994 stores this year — more than in all of 2018. And Calvin Klein, which since 1995 has occupied the corner on Madison and East 60th Street, just down the street from Barneys, said it would be vacating the building this spring.
Amid the doom, however, specialty stores with singular points of view have proved a bright spot. Shops such as 10 Corso Como from Milan and FortyFive Ten from Dallas have established much-heralded beachheads in New York. This may bode well for Barneys, which has always acted more like a very large boutique than a department store chain, whether it was breaking the rules of retail architecture by opting to let daylight into the Madison store, or haughtily insisting on the primacy of its exclusives.
Meanwhile, the retailer is moving ahead with plans already set in motion. It is preparing for fall fashions as well as its famous holiday windows. It is going ahead with a new store in the American Dream mall expected to open in New Jersey in October, as well as for an outpost in the Bal Harbour shops in Miami Beach, Florida, in 2023. In 2016, it reopened a Chelsea branch as another foothold in New York.
“Barneys has always been a showcase for the new and exciting and creative,” Wassner said. “If they chose you, it was something to be proud of. I know they will have options that are positive options. We would love to hear them.”
2019 New York Times News Service
source: news.abs-cbn.com
