Barneys to Open More Co-Ops

Barneys to open Co-Ops in Brooklyn, Santa Monica, reflecting renewed optimism about business generally.

Barneys New York, riding some sales momentum, will enter Brooklyn for the first time with a Co-op unit and is seeking to cluster additional Co-ops around its flagships.

This story first appeared in the March 31, 2010 issue of WWD.  Subscribe Today.

“We believe in the expansion opportunities for the Co-op concept,” Karl Hermanns, executive vice president of merchandise planning, marketing, e-commerce and operations, told WWD. “I don’t think it will ever be a 100-store concept, but we do see opportunities for several more.”

The moves reflect renewed optimism about business generally. According to the retailer, comparable-store sales rose 7 percent in January, 11 percent in February and more than 20 percent in March as of Tuesday, all of which compare with relatively weak months the year before.

“We think this is a watershed for luxury retailing recovering faster than most people expected,” Hermanns said. “It’s true it’s not back at the peak level yet. But 2010 has started off stronger than we expected.…People talk about [the possibility] of a double-dip recession. Our feeling is it’s unlikely.”

He acknowledged that, with double-digit declines last year, “comparisons are easier, but we’re getting back the business faster than we thought.” The recovery is “very broadly based, both in merchandise categories and geographically,” Hermanns said, citing women’s designer ready-to-wear, shoes, handbags, jewelry and men’s tailored and designer lines as pacing the business.

Hermanns attributed recent gains to the stock market being up, big Wall Street bonuses and a psychological shift among consumers to feeling better about shopping again. In addition, he said, “Fashion is more interesting than it has been for a while, particularly fashion that fits into what Barneys has always stood for — the creative and craftsman end of the luxury spectrum.”

Among the brands at Barneys seeing strong response are Lanvin, Dries Van Noten, Azzedine Alaïa and the relaunched Celine. Barneys.com is up more than 50 percent year to date, the company said.

Many retailers also will show big March gains due to Easter falling earlier in April this year, but Hermanns said Barneys, compared with more mainstream players, is less affected by Easter.

Another piece of good news came last week when the government of Dubai disclosed it would restructure its debt-laden Dubai World conglomerate, which includes the Nakheel real estate arm and the Istithmar investment arm, which owns Barneys. The deal implies less pressure to sell assets, such as Barneys. “We have no impact from that restructuring,” said Vince Phelan, executive vice president and chief financial officer of Barneys. “They are committed to supporting us.”

Asked if Barneys is up for sale, Phelan replied: “Not that we are aware.”

Barneys has been without a chief executive officer since July 2008, and for about as long, has been dogged by reports that certain flagships, excluding those in New York, Beverly Hills and Chicago, have been weak performers. However, according to Phelan, San Francisco is showing “good growth;” Boston is “bouncing back;” Chicago, which expanded to a new site, is up 50 percent, and Scottsdale, Ariz., is meeting “moderate expectations.…It opened in the middle of the recession. We didn’t overplan that store.”

The upcoming Co-op in Brooklyn, at 194 Atlantic Avenue in the Cobble Hill neighborhood, is expected to open the second week of September. It’s a 6,300-square-foot unit next to Trader Joe’s. A 5,400-square-foot Santa Monica Co-op will open in mid-August in Santa Monica Place in California. Barneys Co-ops average 7,000 to 7,500 square feet.

A year ago, Barneys undertook a sweeping review of Co-op, which specializes in contemporary fashion, emerging designers and denim. Barneys currently operates 19 Co-ops and has no definite number on how many it ultimately sees operating. The company concluded Co-op could still grow, but most successfully by operating stand-alone units clustered around flagships, as it does in the New York and Los Angeles markets. San Francisco and other locales are being explored.

Though no additional Barneys flagships are set, Hermanns said there are a few markets that could support them.