Barneys New York, through all the turmoil plaguing the retail industry this year and last, has kept its profile low under the cloak of private ownership — until now.
The luxury chain is said to be up for sale again and close to naming a new chief executive officer.
Sources said an individual has been selected as ceo and might need to fulfill obligations on another job before officially joining Barneys. The identity of the individual could not be learned.
David Jackson, ceo of Barneys owner Istithmar, would not comment on whether the chain is for sale or that it’s found a new ceo.
Meeting both objectives would be a feat for Barneys for several reasons. The deteriorating economy has decimated the luxury sector — both Saks Inc. and Neiman Marcus Inc. have been saddled with excess inventories and double-digit sales declines — and has dried up the market for mergers and acquisitions.
In addition, Barneys has an unproven expansion strategy, with its flagship openings over the last three years in the U.S. not yet gaining momentum. Handsomely designed flagships were opened in March 2006 in Boston, followed by Dallas, Las Vegas and San Francisco. Barneys in that stretch also relocated its stores in Chicago and Seattle.
“Barneys New York’s taste level has not been widely accepted elsewhere, as they built stores across the country,” said Joyce Greenberg, an investment banker, formerly with Financo Inc. “The market for Barneys merchandise does not appear to be as broad as originally anticipated.”
Last November, Moody’s Investors Service downgraded Barneys’ debt, citing weaker-than-expected operating performance and debt-protection measures since the company was purchased in September 2007 by Istithmar, an investment firm controlled by the government of Dubai. Istithmar purchased Barneys from the Jones Apparel Group Inc. for $942.3 million, beating out Link Theory Holdings Co. Ltd. of Tokyo in a bidding battle and thinking the brand was exportable internationally. Istithmar bought Barneys at the peak of the market. At the time, Barneys generated about $50 million in EBITDA.
But the Dubai economy is facing serious pressure as real estate values there plummet, unemployment rises and tourism dries up. There was speculation this week that on top of its retail difficulties, Istithmar’s real estate holdings are losing value. Bloomberg News first reported Barneys was up for sale. Instead of selling Barneys outright, Istithmar could seek an equity partner in the business.
Selling Barneys for anywhere near its purchase price of two years ago would seem almost impossible at this juncture. Jones acquired Barneys from Whippoorwill Associates Inc. and Bay Harbor Management in 2004 for $397.5 million.
Moody’s also cited concerns that Barneys continued to operate in the tough retail environment for months without a ceo. Howard Socol served as Barneys president, ceo and chairman for over seven years but left the store at the end of last June amid speculation he disagreed with Istithmar on exactly how the chain should expand. Barneys had sales of over $780 million for the year ended Aug. 2. “It’s strange there has been no ceo at Barneys since July,” said another financial source. Since Socol’s departure, the luxury chain has been run by a tier of veteran Barneys executive vice presidents. To its credit, Barneys has maintained its hip image and most of its senior staff.
U.S. luxury retail executives are not likely candidates for Barneys since most would have non-compete clauses in their contracts, eliminating such individuals as Saks Fifth Avenue’s Ron Frasch, Jim Gold of Bergdorf Goodman or Karen Katz of the Neiman Marcus stores. On the international front, names that have surfaced are Vittoria Radice of La Rinascente; Mark Lee, formerly of Gucci; Caryn Lerner of Holt Renfrew, and former Topshop chief Jane Shepherdson. Barneys also could choose an individual from outside the retail sector.