J.Crew Prepares to File for Bankruptcy

Consumer spending fell 7.5% in March, prompting further concerns about the impact of the coronavirus pandemic on the economy. Here’s why consumer spending is so important and how it can signal if the country is heading toward a recession. 

 

Like many companies right now, J.Crew is facing a difficult financial situation.
The beloved New York-based label — which has become a wardrobe staple for celebrities including Michelle Obama, Kate Middleton and Meghan Markle — is preparing to file for bankruptcy as early as this weekend, CNBC reports, citing “people familiar with the matter.”

Though the source says plans are not finalized, the privately held company is currently “working to secure $400 million in financing to fund operations in bankruptcy,” according to CNBC.

The news comes after reports that the retailer (which operates the denim-driven label Madewell, in addition to its namesake brand) has been struggling with a heavy debt load for years. According to CNBC, the economic downfall caused by the novel coronavirus (COVID-19) “exacerbated” the problem.

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Unlike the younger and trendier Madewell, J.Crew has also faced a decline in sales, with many criticizing the label for maintaining a high price point and an idealized aesthetic that feels out of touch, prompting loyal customers to walk away.
In recent years, J.Crew has lost both retail executive Mickey Drexler and longtime creative director, Jenna Lyons.
Lyons became somewhat of a fashion icon during her 26 years at J.Crew, thanks to her signature thick-rimmed glasses and affinity for colorful prints. She is also largely responsible for revamping the brand using neon, sequins and statement accessories— and shaping the way American men and women dressed in the 2010s.

The company has been grappling with competition from online firms such as Amazon.com Inc (AMZN.O) that have been eating into traditional retailers’ market share.

Inside the world of reselling clothes on Shopping apps

It’s never been more chic to wear someone else’s clothing—that is, clothes that once belonged to someone else. Kate Moss herself is a great advocate of vintage. “I love the idea that the clothes have a history and have been worn previously,” she said recently in a press interview for her new book. “Who knows what they have experienced?” While we can’t all be the poster child for the super glamorous supermodels, there’s no doubt that the secondhand fashion market is thriving. According to a study by ThredUp earlier this year, the total secondhand apparel market is set to double in the next five years—with resale and shopping apps driving a lot of that growth. In fact, resale has grown a whopping 21 times faster than retail over the past three years.

These are numbers to be happy about, especially when we are coming to terms with the impact that consumerism and fashion can have on the planet. 

Shopping apps like Depop, Carousell, and Poshmark have made names for themselves by offering users the opportunity to gain a little cash from clothes they probably just had lying around anyway. Closer to home, Toronto-grown trading app Bunz, extended this philosophy past just your closet to your entire household.
There’s money to be made off of your own closet, it seems—and with strangers you’ve never met on the internet.

The sustainability bonus is a significant benefit. 

Ethical blogger Nannan Wan has been a proponent for secondhand fashion for a while, noting that consumer trends are shifting quickly away from fast fashion to more sustainable options.

“Secondhand clothing has started a movement where it’s now cool to purchase luxury vintage at the thrift store,” she says. “These apps open the space for people to explore secondhand buying and selling, maybe for the first time.”
What makes these apps so attractive, aside from diverting has-been clothing from landfills, is knowing that you’re in it together with thousands of others with similar goals. These apps have gained traction not only for their ease of use, but also the platforms and communities that they have created.
Poshmark, for example, made its hotly-anticipated expansion to Canada just this year (after being founded 8 years ago in California. The app now boasts over 500,000 users in Canada alone.

“Our app allows people to create a revolving closet, giving a second, third, or even fourth life to clothing while also making room for new pieces,” says Maria Morales, Poshmark’s Director of International Expansion.
“But most importantly, Poshmark is a social platform above all else. We’ve seen the community grow so quickly because buyers and sellers have the ability to like, share, comment, and build connections with each other.”

Community is the core driving force of these apps and consequently, it’s become the core driving force of secondhand fashion in general.

These apps would be unfeasible if not for the thousands of users scrolling, posting, and engaging everyday. The apps offer a new digitized version of thrift shopping and conscious consumerism, and they do it in a way that is mimics social media.

London-born Depop gained traction due to its uncanny resemblance to Instagram, (founded a year earlier in 2010). Users have similar profile pages with likes and comments, and the home feed looks nearly identical.

Even Bunz originated from a secret Facebook group.

Since 2016, the company has grown to a user base of over 400,000 and averaging 5,000 posts a day—with clothing and accessories as its largest category, about three times as much posted daily as furniture or beauty.
For Toronto-based illustrator Wandy Cheng, Bunz is a welcoming place, where you can get rid of things for something useful to satisfy both parties’ needs.

“The app had just launched when I joined, so it was a whole new exciting space for everyone,” she says. Cheng has quite an extensive history with reselling clothes, from Kijiji and eBay to Salvation Army, but stuck with Bunz because of the people she found there.

“Compared to other sites, Bunz was the only space where I felt a strong sense of community, which was a surprising bonus when I had initially joined with the sole purpose to declutter.”

Since joining three years ago, Bunz and thrift-shop finds to make up the bulk of her closet—however, she continues: “I’ve also been making a conscious effort [not only] to buy less, but also to bring less clothes into my life. Although I am still excited to trade for cool items, I ponder on the article of clothing for a lot longer than I used to.”

Whether you’re just dipping your toe into the world of reselling or if you’ve been a secondhand apparel wearer for years, there’s no question that apps have become an integral part of the process.

Poshmark, Bunz, and Depop apps act like closet extensions, mini thrift-shops and social platforms all in one—all from your phone, meaning you don’t even have to leave your house. It’s like online shopping, except better for the planet. Only in this case, there’s no telling what—or who— you’ll find.  oa here

It’s Official: Barneys New York's New Owner Is Authentic Brands Group

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.”