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Barneys files for Chapter 11 as rising rents, fewer shoppers hit business
BARNEYS New York Inc filed for bankruptcy protection from its creditors after getting squeezed by rising rents and fewer visitors to its luxury fashion boutiques.
The chain listed assets of US$100 million to US$500 million and estimated liabilities of between US$100 million and US$500 million, according to federal court papers filed in US Bankruptcy Court for the Southern District of New York. The move had been telegraphed for several weeks as the chain sought to avert bankruptcy by finding a partner or buyer.
"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," chief executive officer Daniella Vitale said in a statement on Tuesday.
The Chapter 11 filing allows Barneys to stay open while it works out a plan to turn around the business and pay its debts. The company said it has secured US$75 million in new capital from affiliates of Hilco Global and Gordon Brothers Group to help meet its financial commitments. Barneys said it will review store leases and consider its best options.
Barneys said its stores on Madison Avenue and downtown New York City will remain open, as well as flagship locations in Beverly Hills, San Francisco and Boston. Two Barneys Warehouse locations will also stay open, and online operations will continue to operate.
Among locations slated for closure include stores in Chicago, Las Vegas and Seattle, in addition to five smaller concept stores and seven Barneys Warehouse locations.
"Aside from the high price tags on goods, this department store faces the same challenges as any department store," George Angelich, partner at restructuring law firm Arent Fox, said in an interview before the filing.
As rents increase and consumers shift to buying online, "it becomes very challenging to maintain profitability", said Mr Angelich, who isn't involved in the case.
Founded as a men's retailer in 1923 in Manhattan, Barneys became an icon of high fashion and innovation for women and men in the 1970s. It went bankrupt once before in 1996, after a falling out with a Japanese partner.
Today, Barneys New York is owned by investor Richard Perry.
Barneys sought to downsize the Madison Avenue store to reduce the annual rent, which tripled this year, Bloomberg previously reported. The retailer was working on a restructuring plan with advisers at MIII Partners and lawyers at Kirkland & Ellis. BLOOMBERG