Barneys considers bankruptcy or sale as 'luxury is in the tank'
A Bloomberg report Tuesday says the fashion-forward department store is considering a reorganization, and its options could include a bankruptcy filing, as well as a takeover by a joint venture between an investment group and the Canadian department store chain Holt & Renfrew.
A spokeswoman said the Toronto-based chain would not comment on the report, which claimed that Holt & Renfrew had approached the hedge fund Perry Capital LLC about a deal. Perry Capital put together the $942 million deal in which Barneys was sold in 2007. Holt & Refrew, an upscale chain akin to Bloomingdale's, could be a good fit for Barneys, which has struggled in the recession, like other high-priced stores with large apparel inventories.
"The bottom line is, luxury is in the tank," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment banking firm.
"We're in the biggest trade-down effect in the history of retailing," he said. The results posted this year by retailers including Neiman Marcus, Saks Fifth Avenue and others all point to a steep fall in luxury retail due to the recession. "Barneys is in a state of collapse, along with all the luxury retailers," he said.
But Barneys is put in higher risk by its fashionista bent, which contrasts with the traditional look in most luxury apparel, said Davidowitz.
"Their fashion is cutting-edge," he said. "I think they're more at risk because of that."
If a deal with Holt & Renfrew does not go through, it could mean a second trip into bankruptcy for Barneys, which emerged in 1999 after a three-year slog through the courts that included accusations of mismanagement. The 86-year-old chain has changed hands several times until it was acquired in 2007 by Istithmar World Capital, an investment arm of the Government of Dubai, for $950 million.
In April, Istithmar injected an unspecified amount of cash into Barneys, which the parent company said would let the store meet its schedule of shipments for the year. Istithmar's office in New York referred calls to a spokesman in Dubai who could not be reached.
Any buyer of Barneys will have to face a harsh economic reality in which luxury retail has taken a beating, as well as clean up a large debt amount of debt the company has piled on and close down stores, said Davidowitz.