By  on December 23, 2004

NEW YORK — Barneys New York chief executive officer Howard Socol is on the road again and this time it’s to find real estate, not investors, as part of an intensifying drive to create a billion-dollar national luxury chain.

With Jones Apparel Group’s acquisition of the luxury retailer complete, Socol is pursuing the roll out strategy. He was in San Francisco this month, exploring real estate options in and around Union Square, according to people familiar with the situation.

And Barneys is said to be close to securing a site in Boston, most likely Copley Place, where Neiman Marcus has a store. Miami, Washington and Las Vegas, among other cities, are high on the radar screen, as well.

“There are some very attractive sites throughout the country that we are exploring right now,” Socol said in an interview Wednesday. “Obviously, San Francisco makes sense, as does Florida, Boston and Washington. Vegas is a definite possibility. Most definitely, we will be rolling out Co-op stores [Barney’s contemporary sportswear and premium denim concept] and more flagship stores over the next four or five years.”

In San Francisco, “We think we can [house] both a full-line and a Co-op,” he said. Boston may also support more than one Barneys format.

Socol said the company is set to open three Co-ops next spring — Chicago, Atlanta and Costa Mesa, Calif. — and will announce more in the fall.

Although the competition to buy Barneys didn’t generate a groundswell, Jones competed with rivals such as designer Elie Tahari, financier Nelson Peltz of Triarc Co. and the Bear Stearns Merchant Banking Group. The acquisition was considered a stretch for Jones, which is primarily known as a leading moderate and better apparel manufacturer, though it operates about 900 stores.

“As [Jones Apparel Group ceo] Peter Boneparth has said, there’s a big opportunity for top-line growth,” via new stores and same-store-sales growth, Socol said. Boneparth has said he believes Barneys can be a billion-dollar business, though there is a long climb. Last year, the chain reported $444.2 million in volume. There are six full-line stores. They are on Madison Avenue in Manhattan and in Beverly Hills; Manhasset, N.Y.; Chicago; Chestnut Hill, Mass., and Seattle. There are also 11 outlets and four Co-op units. The Jones-Barney deal, completed on Monday, was valued at $397.3 million.However, whether Barneys can orchestrate a successful and profitable expansion remains a question. Some retail experts say the store’s edgy, fashion-forward appeal is too limited. An expansion in the Nineties failed because of mismanagement, and many of the collections sold at short-lived Barneys satellite stores were too advanced for the local consumers. The key now, experts say, is not just picking affluent markets. It’s picking affluent markets where people appreciate and shop for advanced fashion.

“I don’t think this is a ‘let’s roll out 50 stores’ game plan,’’ said Steve Greenberg, president of the Greenberg Group retail real estate advisers. “The strategy has to be carefully and selectively executed. Barneys has to be myopic about market research. They need to study not demographics, but psychographics — how consumers behave.

“An example would be Palo Alto, Calif., where dot-com millionaires wear jeans and T-shirts, versus Union Square, San Francisco, where [the affluent] shop Wilkes Bashford [the high-end men’s store] and buy $500 suede loafers and women wear Jimmy Choo shoes in spite of the hills.”

Gene Pressman, a former Barneys co-chairman whose bid to expand more than 10 years ago was a factor in the chain’s bankruptcy, is among those who think the growth plan can succeed.

“More people are open to new fashion, so I think in terms of Barneys offering the latest and greatest designers in more locations, it’s not going to be as much of a problem as before,” said Pressman, grandson of Barneys founder Barney Pressman.

During the Nineties, Barneys was first out selling designers such as Prada and Jil Sander. Unfortunately, “People just didn’t get it,” Pressman said. “Today fashion is more conservative and more about luxury per se than very, very forward fashion.”

Still, distribution issues with vendors are likely to arise as Barneys goes head-to-head with more of the competition, including Saks Fifth Avenue, Neiman Marcus and independent designer boutiques. Some retail experts expressed concerns that Barneys might lose some of its edge as it opens more locations and compromises its merchandising. Barneys always strived to develop young design talent, take risks and start new concepts.One former luxury executive, who spoke on condition of anonymity, recently visited Barneys in Beverly Hills and noticed the Prada shop on the main floor. “The problem is, it looks like everybody else’s Prada shop,” the person said. “Barneys always prided itself on being a specialty store. It’s starting to look like a department store. The big question is, does Barneys have enough of a different point of view to distinguish itself in many more locations?

“Jones certainly can’t give them the creative vision, but it can give them the capital to open stores and update the systems,’’ the former executive said. “For the past few years, the focus has been on profitability, not new and innovative merchandising concepts. But it’s a huge brand, undervalued, and Jones was smart to buy it. What they do with it is another thing. Execution is everything. The brand has to have a strong, definitive personality and it has to be organic — constantly moving forward, surprising and cutting edge.”

Greenberg’s position is that a Barneys expansion can work, noting there are 25 to 35 cities in America with sophisticated fashion audiences, including Houston, Dallas, St. Louis, San Diego, San Francisco, Memphis and Louisville, and that stores must be appropriately sized for each market.

“Co-op is clearly the vehicle to drive their expansion, because Co-op appeals to a young, hip audience and isn’t quite at the price points of a full-line Barneys,’’ Greenberg said. “Therefore you can access more urbane locations, there are some regional malls that have an urban feel to them, for instance, the Houston Galleria. It’s a shopping center with a roof, but it attracts a sophisticated urbane-type customer, whether they come from Mexico City, a suburb of Houston or downtown.”

Greenberg added that San Francisco’s Union Square has “plenty” of real estate opportunities for Barneys and other retailers. In addition, “traditional mall developers are clamoring for a new exciting anchor. Barneys does represent an anchor type.”

Among the mall possibilities: Lenox Square in Atlanta, NorthPark Center in Dallas, Fashion Valley in San Diego, Tysons Galleria in Washington and NorthBrook and Old Orchard shopping centers in suburban Chicago. “I’ve seen [the Barneys] name on a whole bunch of lease plans,” Greenberg said.

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