Why This Retail Expert Is Calling Authentic Brands’ $270 Million Barneys Bid a ‘Significant Discount’

Nautica and Vince Camuto parent company Authentic Brands Group, emboldened perhaps by BlackRock’s $875 million August investment, is inching closer to finalizing a $270 million offer to snatch bankrupt Barneys New York from the maw of liquidation.

Though the brand management firm’s bid could finally write the next chapter in Barneys’ financial melodrama, OC&C Strategy Consultants partner Coye Nokes, who heads the firm’s consumer and retail practice, sounded a word of caution, noting that the offer amount “appears to be for about one-third of revenues [estimated at $900 million], which is a significant discount from what you might see for a healthy, profitable business.”

As of midday Tuesday, Authentic Brands Group was facing a 5 p.m. deadline to hammer out terms with B. Riley Financial Inc., one of the debtor-in-possession lenders embroiled in the bankruptcy case, but that timeline could be extended if needed to firm up an agreement.

A source familiar with ongoing talks with Ashkenazy Acquisition described the landlord of Barneys’ flagships on Madison Avenue and in Beverly Hills as “awesome” and “accommodating,” indicating a willingness to renegotiate the onerous lease terms for the two high-rent locations.

Late Monday night, Authentic Brands submitted a document, not yet made public, signaling its intent to acquire Barneys. And while the parent company of brands like Frye and Taryn Rose would become the stalking-horse bidder heading into a bankruptcy auction scheduled for Oct. 24, there’s still the possibility that competitive suitors could step forward to propose more attractive offers.

Barneys, an iconic name in luxury fashion, has stirred up acquisitive interest from disparate corners of the high style and retail worlds.

As of a few days ago, Sam Ben-Avraham, the co-founding Kith backer and leader of a fashion trade show empire, was said to be assembling a consortium of retail heavyweights to buy Barneys in a bid valued at $220 million, but Ben-Avraham reportedly failed to secure financing in line with a court-mandated bid-submission deadline. Though there’s a chance he could resurrect his chances with a new offer unveiled at the auction, ABG’s $270 million bid could prove tough to beat.

Barneys needs an offer of at least $220 million to cover administrative claims and debt in its bankruptcy case.

Nokes, the retail consultant, explained why the $270 million bid could be classified as a discount. It reflects low-quality revenues driven by high levels of promotions, thin margins that can’t cover a cost structure and has led to the company operating at negative profit margins, and exhausted cash flow due to high levels of debt owed to vendors and lenders, she said.

Word surfaced from sources on Monday that the brand management firm was seeking to license the Barneys name to Hudson’s Bay Co.’s Saks Fifth Avenue luxury department store chain, which would host branded shop-in-shops inside select stores — a move that could revive footfall from young, moneyed shoppers.

Editor’s Note: This story was reported by FN sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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