Will Barneys’ Liquidation Sales Impact Rival Retailers This Holiday Season?

As Barneys New York ushers in a new chapter with Authentic Brands Group’s acquisition of its intellectual property, the chain’s department stores have already begun the process of offloading its luxury goods at a discount.

On Friday, a bankruptcy judge oversaw the closing of Barneys’ sale to ABG, which outlined plans to shutter the retailer’s seven existing stores, including the Manhattan outpost on 660 Madison Avenue. The brand management company has also joined forces with Saks Fifth Avenue, where Barneys will live on the fifth floor of Saks’ newly renovated flagship in New York City as well as launch shop-in-shops in key Saks markets.

“Barneys is running a sale with B. Riley [Financial, the investment banking firm,] until the end of February,” ABG chairman and CEO Jamie Salter told FN late last week. “The Madison Avenue location will shut down at the end of the sale for a couple of weeks. We will retrofit it and [launch] a new concept of shop-in-shops that is more experiential and has a smaller footprint.”

The liquidation — or what Salter calls a “transition sale” — comes ahead of the critical holiday shopping period, when retailers are banking on end-of-year sales to boost their bottom lines. According to Deloitte’s annual holiday forecast, retail sales are expected to increase 4.5% to 5% this year, while e-commerce sales are projected to grow 14% to 18%.

As Barneys’ flagship stores undergo a closeout sale, luxury rivals and fellow department store chains might find themselves in the throes of heavier competition amid a potential shopper rush to the storied retailer before it shutters its doors for good. The sale, reported B. Riley’s Great American Group, kicked off on Monday.

“The luxury category will likely see a slight boost because discounts on goods that typically don’t get discounted will draw in new consumers who probably wouldn’t have bought at regular price,” said Beth Goldstein, fashion footwear and accessories analyst at The NPD Group. “[However,] there will likely be a concentrated short-term impact on some of those other retailers, particularly in the Barneys markets.”

Saks, Bloomingdale’s and Neiman Marcus are among some of the luxury players that Goldstein and Hali anticipate could feel some impact as Barneys’ discounts on designer labels lure early holiday shoppers into stores. However, as the season picks up and greater markdowns become the norm, customers who expect bargains on high-end wares might opt against shopping at one of Barneys’ five stores, where discounts are only 5% to 10% off regular prices, in favor of larger department store chains. Think Nordstrom with 119 full-line stores and Bloomingdale’s with 35 locations.

In addition, pre-bankruptcy Barneys had already been losing share to luxury resale, a sector growing at an average rate of 12% a year. Take early adopter Neiman Marcus, for instance, which became the first major luxury department store to dip its toes into resale when it bought a stake in online consignment store Fashionphile in April. The market could gain even more shoppers during the upcoming holiday season; analysts see potential growth, in particular, at Revolve, Net-a-Porter and Farfetch.

“Barneys was not a major share contributor in the luxury space to begin with,” said Jane Hali, CEO of retail investment research firm Jane Hali and Associates. “Barneys is small, and it was rather an institution similar to Bergdorf Goodman but with a few more branches.”

The luxury retailer has so far kept liquidation discounts relatively modest, perhaps due in part to its high-end assortment. But select merchandise of some luxury brands it carries could eventually be hit with steeper markdowns during the liquidation sales. According to Gabriella Santaniello, founder of retail consultancy A Line Partners, some of these labels may even seek to buy back merchandise to avoid discounts that could dilute their brand.

“It’s important [that they] maintain their integrity by controlling how the brand is portrayed and priced,” she added.

According to Barneys’ website, purchases made after Nov. 15 will be considered final sale.

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