CLEARANCE SALE
A bidding war may be on tap for Barneys New York, the luxury department store chain that declared bankruptcy in August.
NEW YORK: A bidding war may be about to begin for Barneys New York, the beleaguered luxury department store chain that declared bankruptcy in August and became a cautionary tale of retail hubris and the death of shopping as we once knew it.
One buyer could mean the liquidation of all the retailer’s stores, while another could preserve at least some of the Barneys shoppers know today.
On Tuesday, Authentic Brands Group (ABG), the owner of over 50 brands including Nine West, Nautica and Hickey Freeman, made a formal $264 million offer for Barneys that was accepted by the store’s lenders.
That began an auction process that will take place over the next week. At least one other bidder has declared intent: a consortium of New York investors led by Sam Ben-Avraham, the cofounder of the streetwear brand Kith and owner of a group of trade shows.
The two represent starkly different visions for Barneys’ future, and reflect the shift in fashion that has taken place over the last decade.
The rise of contemporary and then streetwear brands reshaped consumer wardrobes and shopping patterns, as elitism was trounced by accessibility, and brick-and-mortar emporia went from being magnetic landmarks to millstones weighing down the bottom line.
The bankruptcy judge, Cecelia G. Morris, will issue her ruling on the bids on Oct 24.
ABG, which has annual revenues of $10 billion, has a deal with Hudson’s Bay Co, the owner of Saks Fifth Avenue, to license the Barneys name if it acquires the retailer.
According to documents reviewed by The New York Times, ABG plans to continue running the Barneys digital operation, while Saks would potentially use the Barneys name for private label collections or shop-in shops.
Saks’ involvement would add a gloss of cutting-edge luxury to the Fifth Avenue retailer, allowing it to further consolidate power over the luxury department store market.
While ABG has said it would try to keep Barneys stores open, especially the Madison Avenue flagship, it is prepared to close all seven of them if better rental agreements cannot be reached.
It has already lined up the Great American Group to run liquidation sales. No mention was made in its offer of what would happen to employees.
ABG is essentially betting that the future of retail lies with the abstract values of brand names rather than inperson shopping experiences.
Ben-Avraham and his group, which includes his brother, Uzi Ben-Abraham (owner of the real estate company Premier Equities); Ron Roman (Bergen Logistics); Khajak Keledjian (founder and former chief executive of Intermix); Ron Burkle (Yucaipa Cos, the private equity firm that is already an investor in Barneys); and Andrew Rosen, plans to keep at least two of the remaining seven Barneys stores open, including the Madison Avenue flagship with its nine-floor footprint. It would retain at least some of the current management.
In an interview, Ben-Avraham said a team was in negotiations with all of the Barneys landlords, though no agreements have been reached.
He said his group had raised $70 million in equity, with plans to raise up to $150 million, and had secured commitments for at least $200 million in debt financing.
His bet is that combining his brand of downtown cool with Barneys’ uptown chic will create a new kind of community destination. “Our specialty is creating environments people want to be part of.”
Originally rumoured to be the first, or so-called stalking-horse, bidder, BenAvraham said that he had decided to wait until he had all his financing in place.
He said he was committed to trying to save the brand, which he called one of his “inspirations.”
Lawyers for Barneys were still working to finalise an agreement with its first formal bidder on Tuesday, according to a 10-minute hearing at the bankruptcy court in Poughkeepsie, New York.
The lawyers said that they were working with buyers to “keep open the option” of a bid that would avoid liquidation and preserve jobs. They also said that it was possible that certain stores would keep operating under the terms of the initial bid.
Neither ABG, which is run by its founder, Jamie Salter, nor Ben-Avraham has experience operating large department stores.