The licensing firm’s $271.4 million acquisition of the bankrupt
luxury department store has closed, but there are plans to keep a
physical footprint.
After a contentious three-month auction process, Authentic Brands Group and B. Riley Financial Inc. are the new owners of
Barneys New York,
in a deal that will see most of the struggling luxury retailer’s
remaining stores close and its name licensed to rival Saks Fifth Avenue.
The
licensing company’s $271.4 million sale was approved in a bankruptcy
hearing Thursday morning, but the judge left room for a last-minute
bidder to offer a deal that allows some portion of the business to
remain in operation before the papers are signed.
The closing
Friday greenlights the liquidation process for Barneys, with sales
beginning soon, according to liquidator Great American Group. The
markdowns will take place online and at all five Barneys stores, as well
as its warehouse and outlet locations.
Barneys CEO
Daniella Vitale stepped down Friday morning, according to an internal letter obtained by BoF.
"Today
is my last day with this wonderful organization. As announced earlier
on the call Authentic Brands Group will take control of the company
today. Transition plans will be shared shortly," she wrote in the memo.
"I am deeply sorry for all you have been through in the past year.
Please understand that we tried very hard to keep this out of court and
to find a solution before filing. We were saddled with many issues long
before this began, ones that were unfortunately exacerbated by a
difficult macro environment and the loss of the Madison arbitration."
As
part of its plan to monetise Barneys’ intellectual property, ABG will
close remaining stores and sell off the inventory. In addition to
storewide sales, the retailer will offer private sales events to its
most loyal customers, according to Great American.
But after the
merchandise is gone and ABG wraps up its transition, a new iteration of
Barneys will emerge — one with a physical footprint, the company said in
its announcement of the sale closing Friday afternoon.
[ABG
will] grow Barneys New York’s global presence across retail, including
pop-ups, shop-in-shops, e-commerce, and a new freestanding store in a
key US market.
"ABG will leverage its international scale,
marketing expertise, and network of best-in-class partners to grow
Barneys New York’s global presence across retail, including pop-ups,
shop-in-shops, e-commerce, and a new freestanding store in a key US
market," ABG said in the announcement. "Its initial focus will be on
high-fashion collaborations, branded namesake products, and expanding
international retail in both brick and mortar and [e-commerce.] There is
also a strategy in development for Freds to export this beloved eatery
to luxury destinations around the world."
In addition, ABG said it
has tapped Saks Fifth Avenue to license the Barneys brand name in North
America. This will be in the form of shop-in-shops inside Saks
locations. ABG will also change Barneys' Madison Avenue location into a
"pop-up retail experience," it said, which will include art
installations, boutiques and entertainment.
“We see an incredible
opportunity to extend the [Barneys] brand’s equity in current and new
markets around the world,” ABG chief executive Jamie Salter said in a
statement last week announcing the court approval of the company’s bid.
The
bidding continued into Friday morning, 24 hours after ABG’s stalking
horse bid was pre-approved for closing in bankruptcy court in
Poughkeepsie, N.Y. on Thursday. Barneys’ vendors and employees held out
hope that a competing bidder could swoop in and offer a more enticing
future for the New York chain — one that entails keeping at least part
of the business in operation.
Sam Ben-Avraham, a trade show operator and investor behind Kith, created a
widely circulated “Save Barneys” campaign in his efforts to pool together capital from a consortium of retail veterans, including
Andrew Rosen,
Intermix
founder Khajak Keledjian and billionaire investor — and previous
Barneys’ stakeholder — Ron Burkle. But ultimately Ben-Avraham bowed out
of the process.
“After two months of working around the clock, my
team and I had to make the hardest decision we could have imagined: to
pull out of the race and not go to court this morning,” he said in an
Instagram post on Friday. “Unfortunately, we failed to convince enough
people in the business community that it made economic sense to keep
Barneys alive.”
David Jackson, the former chief executive of
Dubai-based Istithmar World, which controlled the department store from
2007 to 2012, was also in the running to buy Barneys on behalf of the
Saudi Arabia-based fragrance company Arabian Oud.
“Haven’t slept
since Tuesday,” Jackson said in a text message Thursday afternoon, amid
his continued efforts to put together a bid.
Both Jackson and
Ben-Avraham presented plans to keep some of the remaining Barneys stores
open, starkly contrasting ABG’s liquidation strategy.
“Every New
Yorker that likes fashion has a relationship with Barneys,” Ben-Avraham
told BoF last month. “There’s still a lot of loyalty from shoppers … We
have a very specific plan on how to take it and bring it to the future.”
Barneys
filed for Chapter 11 bankruptcy protection in August, after losing a
rent dispute with its Madison Avenue flagship landlord, Ben Ashkenazy.
The arbitration ruling resulted in a 72 percent hike in rent, from $16.2
million annually to $27.9 million, which went into effect in January.
Barneys
has always been very much a fashion-forward niche player that has a
good customer base, but the places and availability of product has
changed.
The store’s issues ran deeper than real estate.
Years of lagging sales thanks to stiff competition from e-commerce
upstarts helped push Barneys into the red. It’s not the only retailer to
suffer due to shifting consumer behaviour: Lord & Taylor closed a
number of stores earlier this year, including its Fifth Avenue flagship,
and L Brands shuttered Henri Bendel in September 2018. Some industry
voices point to the
inevitability of Barneys’ demise based on the challenges facing the traditional multi-brand retail business model.
“Barneys
has always been very much a fashion-forward niche player that has a
good customer base, but the places and availability of product has
changed,” said Steve Sadove, the former CEO and chairman of Saks Fifth
Avenue. “You have so many more brands themselves competing against
Barneys, and consumers also have access to digital shops like
Net-a-Porter.”
