By  on January 31, 2011

One of the most-watched acts in fashion is beginning to play out:Mark Lee's reinvention of Barneys New York.

The highly regardedLee has been Barneys New York's chief executive officer for only fourmonths yet already has made sweeping changes in the retailer's seniorfashion ranks and overhauled its creative leadership. On Friday, theretailer tapped a new vice president and fashion director, AmandaBrooks, former creative director of Tuleh and a Vogue contributor. Andmore changes are said to be on the horizon.

The dawn of the newLee Era at Barneys is under way — an iconic retailer that over-expanded,lost its way and is bleeding red ink — now headed by a young, seasoned,methodical executive whose track record includes successful stints asceo of Gucci and Yves Saint Laurent, as well as senior positions atGiorgio Armani and Jil Sander. Sources believe every aspect of thecompany's operations are being closely examined, with the goal ofreturning the company — whose losses reportedly approached $60 millionlast year — to profitability for an eventual sale. Its volume reportedlyhovers between $675 million and $700 million.

Industry observersbelieve Lee's main priorities should be:

• Close unproductiveunits such as those in Dallas and Las Vegas.

• Place moreemphasis on "commercial" merchandise and better execution overall.

• Put a greater investment in the store's e-commerce strategy andsocial-networking initiatives.

• Create a new image campaigntouting Barneys' distinctiveness and sophistication.

• Bringmore in-store excitement and create more compelling visual displays.

• Freshen the merchandise mix and add more femininity and color,as well as a much-needed paint job at the Madison Avenue flagship.

A major signal the retailer is headed in a new direction occurred whenLee tapped Dennis Freedman as the store's creative director. Mostrecently creative director of W magazine, Freedman is known for pushingaesthetic boundaries and for his close ties to prominent photographers.He succeeds Simon Doonan, who was named creative ambassador at large.For the past 25 years, Doonan, the quip-a-minute, flamboyant Brit, hasbeen the public face of the store as well as the man behind Barneys'showstopping windows, serving up a blend of kitsch and pop culture thathave ranged from Prince Charles and the Duchess of Cornwall to Madonnaand Tammy Faye Bakker. Doonan is believed to be on board with thechange.

The tectonic shift in Doonan's role occurred two monthsafter Lee replaced the store's top women's merchant, Judy Collinson,and installed his former Gucci colleague Daniella Vitale as chiefmerchant and executive vice president overseeing all of women's Julie Gilhart, the store's longtime fashion director whonurtured many up-and-coming designers, also exited and was succeeded byBrooks, who most recently was director of fashion at William MorrisEndeavor Entertainment and is also the author of a book, "I Love YourStyle: How to Define and Refine Your Personal Style."

"He [Lee]is the first person who's taken over that store who isn't afraid to loseeverybody," said one industry source.

Vitale's arrival hasstirred some angst in the fashion world, as designers worry Barneys willcut back on its support of young talent in favor of more established,commercial collections. But numerous vendors, analysts and industryobservers believe Barneys needs to do just that in order to broaden itsappeal — especially in markets outside New York and Los Angeles. As onesource joked, "They're too New York- and L.A.-centric, even for New Yorkand L.A."

Shifting its fashion focus may prove a trickyproposition, though, since the store built its reputation on itsdesigner discoveries and quirky, edgy and artisanal merchandise. Goingmore mainstream would put it in head-to-head competition with Saks FifthAvenue, Bergdorf Goodman and Neiman Marcus.

"Mark [Lee] willkeep the DNA of Barneys and will change the methodology of how the storeis run. It's a different era and a different time. You can't run it thesame way as 2006 or 2007, or even the Nineties. He's bringing in somepeople with a lot of experience," said one vendor, who requestedanonymity. Another vendor noted, "He's the first one who comes with aback pocket of all the right people. This is the one man who can compilean A-list team."

Barneys needs one. It's been a bumpy ride forIstithmar World, the investment arm of the state-controlled holdingcompany Dubai World investment fund, which bought Barneys in 2007 fromJones Apparel Group Inc. for $942 million, and has since pumped millionsinto the stores. The retailer today is worth significantly less sincethe recession and the consumer slowdown in luxury spending. Last year'slosses were attributed to sluggish sales and interest payments stemminglargely from debt, which includes about $500 million long term. Evenwithout a ceo, Barneys opened flagships in Chicago and Scottsdale,Ariz., and rolled out more Co-ops, which specialize in contemporarymerchandise, moves that were plotted by former ceo Howard Socol.

The fact that Barneys has been able to survive despite the recessionand a lack of leadership at the top clearly indicates the inherentstrength of the retailer. "Barneys, on the whole, has had a pretty majorimpact on the industry," said Arnold Aronson, managing director ofretail strategies at Kurt Salmon Associates. "Its top-of-mind awarenessis much bigger than its volume."

Bonnie Pressman — a 15-year Barneys veteran and former wife of GenePressman, grandson of company founder Barney Pressman — now has her ownconsulting firm, BLP Consulting Inc., and believes Lee has thewherewithal to restore Barneys' leadership position.

"With anynew management, there's always going to be a shake-up," said Pressman,who earlier in her career was executive vice president, generalmerchandise manager, women's ready-to-wear and accessories at Barneys."Mark took the position to better Barneys' future. He didn't need to dothis job. It's a great opportunity to turn it around. Yes, it needsimprovement. It needs some fresh blood. I've known Mark for a long time[from his days at Armani]. He really knew the DNA of the store and whatthe Pressman family was doing when the store was growing. Out of anyoneout there, he's the right guy."

Pressman believes one of Lee'smajor strengths is the fact that he's worked with the top retailersaround the world while at Armani, YSL and Gucci.

"Imagine whathe knows. What he brings to the table could be the best of the best.He's seen it all being on that side of the business. He understands themerchants and understands designers. That's what you need," saidPressman. "In the past, there have been a lot of ‘suits' running theplace."

Some may criticize Lee and Vitale for being"one-dimensional," since they only know the wholesale side of thebusiness, but Pressman dismisses that concern. "Daniella worked with us.She knew the standards the Pressman family wanted," said Pressman.

Socol, who departed in 2008,came from an entirely differentbackground, said Pressman, and was more operations driven. During hisseven-year tenure under both Jones and Istithmar ownership, Socoloversaw an aggressive expansion of the chain to 38 U.S. stores,including seven flagships. Management was determined to open stores,grow volume and get a return on its investment. Among the stores thatopened during his tenure were flagships in Dallas, Las Vegas and Boston.

Socol led the regional Burdines department store chain until1997 and joined Barneys in 2001 at the recommendation of Allen I.Questrom, whom he succeeded as ceo and who led Barneys out ofbankruptcy. During his tenure, Socol disagreed sharply with Istithmarover strategies, and particularly opposed overseas expansion. Accordingto sources, one of the reasons Socol resigned was because he wasreluctant to report to David Jackson, ceo of Istithmar.

"Itwasn't about creativity. He did a good job at the back end,operationwise. [But] opening the other flagship stores around thecountry was not a wise thing," said Pressman, pointing out that theexpansion mirrored what the chain did in the Nineties, which eventuallydrove it into bankruptcy. "Do we have to repeat the errors multipletimes?"

It is widely believed Barneys New York is bolsteredmainly by its three flagships in New York, Beverly Hills and Chicago,and dragged down by newer stores opened in Dallas, Las Vegas, SanFrancisco, Boston and Scottsdale.

Consultant Robert Burke ofRobert Burke Associates believes Barneys needs to retain its existingcustomer base while attracting new ones. "It needs a broader reach," hesaid. He believes the store can still champion the underdogs and supportemerging brands "but you can't build a business on that."

"Youneed to look at the brand assortments and the allocation of space," saidBurke. "It needs some dusting off. As with any mature business, it gotset in its ways. The business has changed dramatically. The customertoday is more discerning and more willing to mix and match price pointsthan ever before."

Burke believes Vitale, who was most recentlyGucci's president of the Americas after positions with Giorgio Armaniand Salvatore Ferragamo, will be a strong asset to the business. "She's avery smart merchant. She understands product and certainly understandsthe business." Burke, as others, stressed that one of Vitale'sattributes is that she's interacted with every top retailer throughouther career. "She has seen the good, the bad and the ugly. She knows thebest practices. She'll approach it in a very unique way."

Mostobservers believe that Barneys can still be the go-to store for emergingdesignersand should maintain its sense of discovery andexperimentation. It also needs to work harder to distinguish itself fromBergdorf, which it has been looking more and more like.

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