NEW YORK — Spurred by a post-election boost in high-end spending, Barneys New York Inc. delivered strong bottom-line results on robust sales for the third quarter, and chief executive officer Howard Socol has signed on for another three years.
The luxury specialty retailer’s net income jumped 4.7 percent on a 13.5 percent sales gain. The chain reported $4.3 million in income, or 28 cents a diluted share, for the three months ended Oct. 30, compared with $4.1 million, or 29 cents, in the same year-ago quarter.
Operating income rose 25.1 percent to $10.3 million compared with $8.2 million last year. Sales jumped to $126.9 million from $111.9 million, while same-store sales increased 12.5 percent. The comps gain came on top of an almost 8 percent increase in the same year-ago quarter.
The two investment firms that bailed Barneys from bankruptcy — Whippoorwill Associates and Bay Harbour Management — signed a deal on Nov. 12 to sell the luxury goods retailer to Jones Apparel Group for $400 million. The merger is to close at the end of the year.
“Based on our data here, people reported that sales were consistent in October, but we’ve also noted an increase in sales after the election,’’ Socol said. “Shoppers are definitely more buoyant now.”
Socol said, “November continues to be good. We’re on a nice roll. It’s going to be an exciting accessories year, with jewelry and handbags both very important,”
He said jewelry and handbags also will be key items for holiday purchases along with “all the fun stuff like mufflers and hats.” Socol expects strong sales of ponchos for gift giving, but acknowledged the trend might be winding down. In apparel, anything cashmere continues to be a strong “must-have” item.
The ceo said Barneys is on course to open three new Co-op stores around February or March in Atlanta, South Coast Plaza in California and in Lincoln Park in Chicago. He said another Co-op location may be added next fall. However, there aren’t any plans to open flagships next year.
“Flagships take a long time because the stores are that much bigger. If we open any, it won’t be until 2006 or 2007, as we also continue with our Co-ops rollout,” Socol said.
This story first appeared in the November 23, 2004 issue of WWD. Subscribe Today.
Socol, Barneys’ chairman, president and ceo, who is leading the continued turnaround at the once-bankrupt retailer, signed a new contract at a base salary of $1.2 million a year, according to a Nov. 19 regulatory filing with the Securities and Exchange Commission in connection with the Jones acquisition.
The agreement with Jones is set to expire on Jan. 31, 2008. Socol will serve as chairman of Barneys’ board and as ceo. If a successor is appointed before the expiration of his contract, Socol will be executive adviser to Jones. If he takes on that position, his salary will be halved. Under the terms of the agreement, Socol may also receive an annual performance bonus based on Barneys meeting certain financial targets.
For each year he receives a bonus, Socol also will be given a number of shares of restricted common stock of Jones. The shares will be equal to a multiple of the bonus payable for the fiscal year divided by the closing price of Jones’ common stock on the date the bonus for that year is paid, according to the SEC filing. The restricted shares become vested on Jan. 31, 2008, provided Socol is still employed by Jones on that date.
The SEC filing also said Jones entered into employment agreements with Judith Collinson, executive vice president of women’s merchandising, and Tom Kalenderian, executive vice president of men’s merchandising. These are also three-year agreements.
According to a research note from Todd Slater, analyst at Lazard Frères & Co., after the announced purchase by Jones, Barneys is expected to post income of $8.6 million in 2004 on revenues of $475.1 million. For 2005, Slater has the retailer pegged to earn $15.4 million on revenues of $546.3 million. In comparison, Barneys lost $3.1 million on sales of $409.5 million in 2003.
For the nine-month period ended Oct. 30, income came in at $8.8 million, or 59 cents a share, compared with $829,000, or 6 cents, in the same period last year. Sales rose 17 percent to $341.8 million from $292 million, while comps increased 15.9 percent.