One of the plum jobs in American retailing has just opened up — but it’s rife with challenges.
This story first appeared in the May 14, 2008 issue of WWD. Subscribe Today.
Howard Socol, chairman, president and chief executive officer of Barneys New York, on Tuesday confirmed recent speculation and said he will retire from the specialty chain at the end of June. A search firm will be hired “in short order” to find a replacement, David Jackson, ceo of Barneys owner Istithmar, told WWD.
However, with Socol’s decision to resign coming sooner than expected, finding a successor seems a long way off.
The departure comes at a pivotal time for Barneys. The retailer is feeling the impact of the weakened economy, and has experienced a few disappointing flagship openings around the country since launching a renewed expansion strategy two years ago in Boston.
Despite these issues and Socol’s departure, officials said the company hasn’t lost sight of the long-term and is sticking with its agenda for growth. This involves more flagship openings in the U.S., with Chicago and Scottsdale, Ariz., units already slated and others expected to be revealed this year; entering the international arena, with the Middle East likely to be the first stop; further rollout of the Co-op chain, which specializes in contemporary merchandise, and building up the relatively new Web business.
“Through the process of the acquisition, Howard always indicated he wanted to stay a shorter period rather than longer,” said Jackson. “We feel quite lucky he stayed as long as he did and are very sad to see him go. We would have loved to have kept him.”
Socol said he stayed longer at Barneys than he anticipated when he joined the retailer in the year 2000, having initially signed on for three years, but staying over seven, and through three different ownerships. Istithmar bought Barneys from Jones Apparel Group Inc. last year for $942 million. Jones had acquired it from Whippoorwill Associates and Bay Harbor Management in 2004 for $397.5 million.
While there has been widespread speculation his resignation was triggered by disagreements with Istithmar over strategy, Socol explained his decision by saying, “This is a full-time, seven-day-a-week job. There are a lot of things I love to do. I plan to enjoy life, travel a lot, and expand my mental and physical capacities. There is a lot on my “‘I want’ list.” Taking another job in retailing, said the 62-year-old Socol, is not on the list. “I have no inclination to do that.”
Barneys, he said, now needs a new ceo who can steer the business for a long time, in light of all the growth plans. He added the replacement could be a retail veteran.
Asked if he had differences with Socol, said to revolve around the pace of expansion and the ceo being able to steer the ship without second-guessing from its new owner, Jackson replied, “I’m always reluctant to respond to rumors. Unequivocally, from our perspective, we have enjoyed a very positive relationship with Howard. Better than I could have hoped for at any stage. Certainly, I think any difference of opinions were not anything other than positive. I don’t perceive there to be any of the warring factions portrayed in the press. We think the world of Howard. We wished he would continue. This was 100 percent Howard’s decision.”
Jackson said Socol disclosed his decision to resign “very, very recently,” which led to “whirlwind discussions” to try to retain him.
As far as choosing a successor, Jackson said he didn’t want to speculate on whether Barneys will choose an insider or someone from outside the organization. It’s probable the retailer will search for an outsider, though, considering Socol did not groom a successor. Considering Socol’s departure is only six weeks away, Istithmar is under immense pressure to identify a successor quickly.
“It will be very tough to fill [Socol’s] shoes,” Jackson said, though he added he believes the fashion industry is very talented.
Jackson said he isn’t wedded to having a luxury retail executive run Barneys. “We are looking for someone really who is a leader. To the extent we can find that person, it could be someone from a slightly off-beat path.” He said he preferred a retailer, but it could be someone from wholesaling, considering many wholesalers operate retail stores. Socol added his successor should understand the Barneys DNA and its delicate presentation of what’s “cool” and what generates “commerce.”
“This is a very special job,” Socol continued. “It’s all about creativity, energy, fashion. It’s not about price. It’s not about promotion. It’s about the things that get a lot of retailers’ juices going.” Barneys is not so big so you can still be a merchant, Socol noted. “On this job, you can be a merchant, and a businessman. You can touch and feel the merchandise. You can touch and feel the people,” he said.
He responded to reports that Barneys is feeling the pinch of the weak economy by saying, “I feel good about how Barneys has acted in the tough economy. This is going to be a tough year for everyone. The things we have done are smart. We are controlling our inventory. I’m proud of our organization for that. We have very good expense control. We have been creative in our merchandising. We haven’t veered away from who Barneys is….Our domestic expansion continues. Next year we open in Chicago [a replacement store] and in Scottsdale [a new market]. There will be other announcements domestically.”
Socol also said despite domestic issues, overseas expansion continues to be explored. “I visited Dubai, before Istithmar was ever involved. We visited a number of different locations [abroad.]”
“As we look at all of our business, it’s important not to get caught up in [economic] cycles,” added Jackson. “From our standpoint, the strategy on growing Barneys hasn’t changed just because of the financial condition of the U.S.”
Asked how many flagships Barneys could open in the U.S., Jackson said, “The Barneys experience is unique. I don’t think there is ever going to be 100 stores. It will be in the low double digits.” Currently, there are seven flagships, two smaller stores, 15 Co-ops and 13 outlets.
Regarding the potential for stores abroad, Jackson said Barneys flagships could open in “all the places you have to see, when you are coming of age and have the notion of going on a grand tour and seeing all the major cities” and “think of those cities where retail is an important part of the DNA.” He did not specify any cities, though it is believed that London, Paris and Macau, along with Dubai, are among those being scouted.
Back on the home front, Socol only hinted at which locations are not performing and which are. “I definitely think New York is a good place to be. Beverly Hills is a good place to be. Chicago is a good place to be. Seattle has done very nicely. There are a lot of good places to be. The Web continues to be a good place.”
Barneys also operates flagship stores in Dallas, San Francisco, Las Vegas and Boston, and a unit in Chestnut Hill, Mass. “There is no question I would like to have last year’s economy,” Socol continued. “The idea is to run a very professional ship. Keep the brand image at its highest level and wait for the economy to turn, and then you will be poised for great growth.”
“As the owner, we believe Barneys is in all the right locations,” Jackson said. “We are not looking at [Barneys] in terms of any individual stores in light of the current economic situation.”