TOKYO — Barneys and Isetan are winding down a long and sometimes anguished relationship.
Isetan, a major Japanese department store retailer based here, will sell its 100 percent stake in the three-unit Barneys Japan chain to Sumitomo Corp. and Tokio Marine Capital. By the middle of July, Sumitomo will acquire 50.1 percent and TMCAP will receive 49.1 percent. Isetan declined to comment on the price of the sale.
Barneys Japan was established in June 1989 as a venture between Isetan and Barneys New York. Barneys has been receiving a licensing fee and will continue to receive a licensing fee from the new owners. “It’s business as usual,” said a spokeswoman for Barneys New York on Tuesday.
As part of the arrangement, Barneys New York has been providing creative services, including window concepts, and the two stores carry many of the same designer brands. However, Barneys Japan has its own buyers.
Barneys Japan operates two stores in Tokyo and one in Yokohama. Separately, there is a Barneys shop inside an Isetan store in Singapore. Its fate is unknown at this time.
Isetan explained that it wanted its management to concentrate on its core department store business, which has been faced with a tough retail market. Also, profits margins at Barneys Japan have not been stellar. For the fiscal year ended in February, Barneys Japan generated net profits of $3.4 million (391 million yen) and sales of $136.9 million (15.6 billion yen). Dollar figures were converted from the yen at the current exchange rate.
Sumitomo, a major Japanese trading conglomerate, is said to be interested in acquiring a fashion business, having recently sold its shares in Coach Japan.
The relationship between Barneys and Isetan goes back to 1988, when Isetan was brought in by the Pressman family, then the owners of Barneys New York, to fund a U.S. expansion and buy real estate for the stores. Reportedly, a partnership was formed while the Pressmans and officials from Isetan were golfing.
Several stores were opened, including the 220,000-square-foot Madison Avenue flagship, which cost $185 million to build, and a 120,000-square-foot Beverly Hills flagship at a cost of $50 million.
The ill-managed expansion drove Barneys into bankruptcy and into a bitter legal feud with Isetan over money matters and property ownerships. Isetan, teaming with Saks Inc., tried to buy Barneys out of bankruptcy. But in early 1998, an agreement between Barneys’ creditors and Isetan Ltd. Co. was ironed out, giving control of Barneys New York to two vulture funds and establishing Isetan as the landlord of the Madison Avenue, Chicago and Beverly Hills flagships, which all continue to operate.
The agreement also gave Isetan a 5 percent stake in a reorganized Barneys in the U.S. and a 100 percent interest in the Japan stores. Prior to that it had held 80 percent. Isetan has since sold the real estate to other landlords, and the vulture funds sold the Barneys business to Jones Apparel Group Inc.
At one time, the Pressmans and Isetan envisioned a much bigger Barneys operation in the Far East and scouted prospective sites in a variety of countries.