New York City — Luxury department store retailer Barneys New York has voluntarily filed for bankruptcy protection and has disclosed plans to close 15 of its 22 brick-and-mortar stores.
The Chapter 11 filing in the U.S. Bankruptcy Court of the Southern District of New York indicated that Barneys had more than $100 million in assets and more than $100 million in debts, according to The Wall Street Journal.
Barneys plans to keep five of its flagship locations open, including its famous Madison Avenue store. The retailer will also continue operating its downtown Manhattan, Beverly Hills, San Francisco and Boston stores. The company will also keep two Barneys Warehouse locations open in Woodbury, N.Y., and Livermore, Calif., as well as the Barneys.com and BarneysWarehouse.com websites.
Barneys will close all other locations, including flagship stores in Chicago, Seattle, Las Vegas, Brooklyn, Philadelphia, Los Angeles and Santa Monica, Calif.
This is the second high-end retail concept to file for bankruptcy this week, the other being luxury movie theater company IPIC Entertainment. Veteran retail consultant Jeff Green says that American shoppers are shying away from uber-luxury retailers like Barneys and IPIC, which saw its same-store sales drop 21.7% in first-quarter 2019 compared to first-quarter 2018.
“Barneys is the highest of the high-end department stores, and IPIC is also the highest of the movie theater concepts,” says Green, partner at Hoffman Strategy Group. “They take prime locations, with costly build-outs. Other eat-in movie theater concepts are less expensive and therefore more accessible to the consumer. IPIC positioned themselves a little too high-end in the marketplace.”
The New York Times reports that Barneys does not own its own stores like many department stores do, which had exposed the retailer to rental rate increases in some of the most expensive markets in the country.
“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,” says Daniella Vitale, CEO and president of Barneys New York.
According to The Times, Barneys is moving forward with a new 55,714-square-foot store that will anchor Bal Habour Shops in Miami Beach. Owner Whitman Family Development recently secured a $550 million from MetLife Investment Management to expand the upscale mall by 300,000 square feet. Barneys will also move forward with its new stores coming to the American Dream project in New Jersey and a smaller Las Vegas location.
Green expects Barneys to perform well in the new locations and those that will remain open because of their ability to bring in international shoppers.
“The Barneys stores that will remain open have a very strong customer base from tourists,” says Green. “San Francisco, New York, Beverly Hills and perhaps less so Boston are very strong tourists markets.”
In connection with the reorganization, Barneys has secured a $75 million loan from affiliates of Hilco Global and the Gordon Brothers Group to help the retailer meet its financial commitments. The debtors-in-possession will work to maintain Barneys’ value and goodwill while also working to maximize the retailer’s value while pursuing a sale.
Barneys has filed motions with the bankruptcy court for authorizing payments to its employees, which the company expects the court to approve. Barneys also anticipates paying its trade vendors, manufacturing partners and suppliers in full for goods and services provided.
Kirkland & Ellis LLP is serving as Barneys’ legal advisor, Houlihan Lokey is serving as financial advisor and M-III Partners LP is serving as the company’s restructuring advisor.
— John Nelson