Barneys New York Inc. has filed for bankruptcy protection after skyrocketing rents and changing consumer demands weighed heavily on its margins.
A Manhattan institution for nearly a century, the storied retailer has struggled in the face of an annual rent bill that reportedly rose dramatically early this year to upwards of $44 million, particularly at its flagship store on 660 Madison Ave., which faces significant property taxes.
“Like many in our industry, Barneys New York’s financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand,” said President and CEO Daniella Vitale.
The filing is expected to help the company “conduct a sale process, review our current leases and optimize our operations” as it works to streamline the business. Barneys has also secured $75 million in new capital to help support its financial commitments.
Jenel Management, owner of Barneys’ flagship building, is the luxury department store’s top creditor, with a nearly $6 million unsecured claim. Thor Equities, which holds the retailer’s property on 1-15 E. Oak St. in Chicago, has a claim of $2.2 million.
Barneys also listed high-end brands The Row, Celine, Yves Saint Laurent, Balenciaga, Givenchy, Gucci and Prada among its largest creditors, with debts ranging from $1.6 million to $3.7 million. Moreover, the company owes upwards of $1.2 million to Christian Louboutin and roughly $832,000 to Manolo Blahnik. Other notable names include Google and affiliate marketing service provider Rakuten.
As part of the move, Barneys plans to close 15 stores across Chicago, Las Vegas and Seattle; five additional concept stores; and seven Barneys Warehouse locations. It will continue to operate the Madison Avenue and downtown New York outposts, as well as units in Beverly Hills, Calif., Boston and San Francisco. A new store is still scheduled to open in the fall at the American Dream mall in East Rutherford, N.J., while online operations will remain intact.
Bankruptcies have hit the industry hard this year. New York, America’s fashion capital, has been marred by back-to-back store closures as rent hikes and the rise of e-commerce increasingly complicate business for brick-and-mortar veterans like Barneys. Tommy Hilfiger, Calvin Klein, Saks Fifth Avenue and Lord & Taylor are among other recent retail casualties in Manhattan.
However, this is not the first time Barneys has filed for bankruptcy. In 1996, the retailer attributed its downfall to overexpansion in the first half of the decade.
“Luxury is actually doing well; the issue is luxury department stores,” said Farla Efros, president of consulting firm HRC Retail Advisory. “Because all luxury players have standalone stores, there is little need for consumers to go to a Barneys [store] unless they have a relationship with a salesperson who can provide the same level or better service experience.”
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