A couple of weeks back, we wondered if Barneys New York was on the brink of bankruptcy. Now reports indicate that the department store chain is indeed in the process of raising financing for a bankruptcy filing.
That doesn’t mean it’s a done deal. The company has stated that bankruptcy isn’t the only option it’s pursuing—and its spokespeople are still delivering that caveat to reporters. “Our Board and management are actively evaluating opportunities to strengthen our balance sheet and ensure the sustainable, long-term growth and success of our business,” a spokesperson for Barneys said in an emailed statement to media members last week.
But it’s clear that the retailer’s options are dwindling.
Bloomberg, among other established media outlets, reports that the retailer is in talks with its lenders, including Wells Fargo & Co., to negotiate terms of a debtor-in-possession loan that would keep Barneys afloat as it hammers out a deal to appease its landlords and lenders. A bankruptcy filing could come as soon as this week.
The company has been open about its financial struggles due to a rent hike at its NYC flagship store on Madison Avenue, which is owned by Ashkenazy Acquisition. The annual rent at the location went from $16 million to around $30 million in January. A few months later, in April 2019, Barneys extended the term of its credit line by $50 million to increase liquidity. But it seemingly wasn’t enough to buoy the business for long.
The rise of online shopping has been particularly hard on department stores. J.C. Penney is bleeding money, Macy’s sales are down by almost 40% this year, and last week Nordstrom was called a “no-growth retailer” in a report by UBS analysts.
Luxury fashion and high-end jewelry shoppers came slowly to online shopping, providing a temporary buffer for retailers of off-the-runway fashion and accessories.
But the ascension of digital-first luxury fashion retailers—including Net-a-Porter, Moda Operandi, and even second-hand luxury seller The RealReal—has given affluent shoppers increased opportunity to purchase their favorite brands and collections online.
Couple that reality with the proliferation of consumer-friendly perks (think same-day delivery and free returns) and competing with digital-first retailers gets even more challenging.
Photo courtesy of Barneys New York
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