Standard & Poor’s slapped Barneys New York with a debt downgrade Monday, noting the luxe retailer has a deteriorating liquidity position but no financial covenants that cause near-term concern.
S&P cut the firm’s debt to “CCC” from “B-minus,” skipping over the “CCC-plus” rating on the debt watchdog’s scale. The rating indicates the retailer, acquired by Dubai-based Istithmar for over $900 million in 2007, is vulnerable to default. The current rating is eight notches below the line separating investment from speculative or junk status, versus the prior mark’s level at six ticks below it. The outlook remained negative, having moved there from stable last month.
“The downgrade reflects the deteriorating liquidity position of the company as demonstrated by the need for a cash infusion by Istithmar World,” said David Kuntz, S&P credit analyst. Istithmar is said to be ready to provide about $10 million in cash to the troubled specialty store.
The debt squeeze comes at a tough time for Barneys and luxury retailers in general. Even larger competitors such as Neiman Marcus Inc. and Saks Inc. are finding it difficult to get the well-heeled to spend. Retailers often depend on a combination of money flowing through their cash registers and publicly held debt or loans from banks to keep their financial engines running. Since the financial crisis began last fall, all three of these funding sources have slowed to a trickle.
“We expect revenues to decline over the next few quarters due to negative same-store sales, and we anticipate that increased promotional activity and negative operating leverage are likely to pressure margins,” S&P said of Barneys.
Istithmar will likely have to put money into the business to cover holes in its finances, said the ratings agency, which also noted it is “becoming increasingly concerned that vendors may tighten terms or limit shipments to the company.”
Last month, Hilldun Corp., a key factoring firm, advised vendors and designers to hold shipments to the retailer pending disclosures about Barneys’ finances.
Istithmar chief executive officer David Jackson told WWD at the time: “We are continuing to work alongside Barneys’ management to resolve the concerns of the factoring community.We hope to have a resolution in short order.”
Barneys has been without a ceo of its own since the resignation last July of Howard Socol.
Despite the news on the privately held Barneys, shares of publicly held retailers were relatively flat Monday after two straight trading sessions with increases of at least 4.5 percent.
The S&P Retail Index dipped 0.3 percent, or 0.88 points, to 327.91, in lockstep with the Dow Jones Industrial Average, which also fell 0.3 percent, or 25.57 points, to 8,057.81.
However, some retailers continued to move upward. Among them was The Talbots Inc., which shot up 16.9 percent to $4.57. After the market closed, the retailer posted fourth-quarter losses of $366.5 million, $136.3 million of which were attributed to continuing operations.
Among the other gainers were Hot Topic Inc., up 11.4 percent to $12.83; Macy’s Inc., 8.8 percent to $12.93; Charlotte Russe Holding Inc., 7.8 percent to $11.21; American Apparel Inc., 7.3 percent to $4.27; Nordstrom Inc., 1.6 percent to $22.26, and Saks Inc., 1.4 percent to $2.86.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over-the-top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty