One of the most-watched acts in fashion is beginning to play out: Mark Lee’s reinvention of Barneys New York.
This story first appeared in the January 31, 2011 issue of WWD. Subscribe Today.
The highly regarded Lee has been Barneys New York’s chief executive officer for only four months yet already has made sweeping changes in the retailer’s senior fashion ranks and overhauled its creative leadership. On Friday, the retailer tapped a new vice president and fashion director, Amanda Brooks, former creative director of Tuleh and a Vogue contributor. And more changes are said to be on the horizon.
The dawn of the new Lee Era at Barneys is under way — an iconic retailer that over-expanded, lost its way and is bleeding red ink — now headed by a young, seasoned, methodical executive whose track record includes successful stints as ceo of Gucci and Yves Saint Laurent, as well as senior positions at Giorgio Armani and Jil Sander. Sources believe every aspect of the company’s operations are being closely examined, with the goal of returning the company — whose losses reportedly approached $60 million last year — to profitability for an eventual sale. Its volume reportedly hovers between $675 million and $700 million.
Industry observers believe Lee’s main priorities should be:
• Close unproductive units such as those in Dallas and Las Vegas.
• Place more emphasis on “commercial” merchandise and better execution overall.
• Put a greater investment in the store’s e-commerce strategy and social-networking initiatives.
• Create a new image campaign touting Barneys’ distinctiveness and sophistication.
• Bring more in-store excitement and create more compelling visual displays.
• Freshen the merchandise mix and add more femininity and color, as well as a much-needed paint job at the Madison Avenue flagship.
A major signal the retailer is headed in a new direction occurred when Lee tapped Dennis Freedman as the store’s creative director. Most recently creative director of W magazine, Freedman is known for pushing aesthetic boundaries and for his close ties to prominent photographers. He succeeds Simon Doonan, who was named creative ambassador at large. For the past 25 years, Doonan, the quip-a-minute, flamboyant Brit, has been the public face of the store as well as the man behind Barneys’ showstopping windows, serving up a blend of kitsch and pop culture that have ranged from Prince Charles and the Duchess of Cornwall to Madonna and Tammy Faye Bakker. Doonan is believed to be on board with the change.
The tectonic shift in Doonan’s role occurred two months after Lee replaced the store’s top women’s merchant, Judy Collinson, and installed his former Gucci colleague Daniella Vitale as chief merchant and executive vice president overseeing all of women’s and barneys.com. Julie Gilhart, the store’s longtime fashion director who nurtured many up-and-coming designers, also exited and was succeeded by Brooks, who most recently was director of fashion at William Morris Endeavor Entertainment and is also the author of a book, “I Love Your Style: How to Define and Refine Your Personal Style.”
“He [Lee] is the first person who’s taken over that store who isn’t afraid to lose everybody,” said one industry source.
Vitale’s arrival has stirred some angst in the fashion world, as designers worry Barneys will cut back on its support of young talent in favor of more established, commercial collections. But numerous vendors, analysts and industry observers believe Barneys needs to do just that in order to broaden its appeal — especially in markets outside New York and Los Angeles. As one source joked, “They’re too New York- and L.A.-centric, even for New York and L.A.”
Shifting its fashion focus may prove a tricky proposition, though, since the store built its reputation on its designer discoveries and quirky, edgy and artisanal merchandise. Going more mainstream would put it in head-to-head competition with Saks Fifth Avenue, Bergdorf Goodman and Neiman Marcus.
“Mark [Lee] will keep the DNA of Barneys and will change the methodology of how the store is run. It’s a different era and a different time. You can’t run it the same way as 2006 or 2007, or even the Nineties. He’s bringing in some people with a lot of experience,” said one vendor, who requested anonymity. Another vendor noted, “He’s the first one who comes with a back pocket of all the right people. This is the one man who can compile an A-list team.”
Barneys needs one. It’s been a bumpy ride for Istithmar World, the investment arm of the state-controlled holding company Dubai World investment fund, which bought Barneys in 2007 from Jones Apparel Group Inc. for $942 million, and has since pumped millions into the stores. The retailer today is worth significantly less since the recession and the consumer slowdown in luxury spending. Last year’s losses were attributed to sluggish sales and interest payments stemming largely from debt, which includes about $500 million long term. Even without a ceo, Barneys opened flagships in Chicago and Scottsdale, Ariz., and rolled out more Co-ops, which specialize in contemporary merchandise, moves that were plotted by former ceo Howard Socol.
The fact that Barneys has been able to survive despite the recession and a lack of leadership at the top clearly indicates the inherent strength of the retailer. “Barneys, on the whole, has had a pretty major impact on the industry,” said Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates. “Its top-of-mind awareness is much bigger than its volume.”
Bonnie Pressman — a 15-year Barneys veteran and former wife of Gene Pressman, grandson of company founder Barney Pressman — now has her own consulting firm, BLP Consulting Inc., and believes Lee has the wherewithal to restore Barneys’ leadership position.
“With any new management, there’s always going to be a shake-up,” said Pressman, who earlier in her career was executive vice president, general merchandise manager, women’s ready-to-wear and accessories at Barneys. “Mark took the position to better Barneys’ future. He didn’t need to do this job. It’s a great opportunity to turn it around. Yes, it needs improvement. It needs some fresh blood. I’ve known Mark for a long time [from his days at Armani]. He really knew the DNA of the store and what the Pressman family was doing when the store was growing. Out of anyone out there, he’s the right guy.”
Pressman believes one of Lee’s major strengths is the fact that he’s worked with the top retailers around the world while at Armani, YSL and Gucci.
“Imagine what he knows. What he brings to the table could be the best of the best. He’s seen it all being on that side of the business. He understands the merchants and understands designers. That’s what you need,” said Pressman. “In the past, there have been a lot of ‘suits’ running the place.”
Some may criticize Lee and Vitale for being “one-dimensional,” since they only know the wholesale side of the business, but Pressman dismisses that concern. “Daniella worked with us. She knew the standards the Pressman family wanted,” said Pressman.
Socol, who departed in 2008, came from an entirely different background, said Pressman, and was more operations driven. During his seven-year tenure under both Jones and Istithmar ownership, Socol oversaw an aggressive expansion of the chain to 38 U.S. stores, including seven flagships. Management was determined to open stores, grow volume and get a return on its investment. Among the stores that opened during his tenure were flagships in Dallas, Las Vegas and Boston.
Socol led the regional Burdines department store chain until 1997 and joined Barneys in 2001 at the recommendation of Allen I. Questrom, whom he succeeded as ceo and who led Barneys out of bankruptcy. During his tenure, Socol disagreed sharply with Istithmar over strategies, and particularly opposed overseas expansion. According to sources, one of the reasons Socol resigned was because he was reluctant to report to David Jackson, ceo of Istithmar.
“It wasn’t about creativity. He did a good job at the back end, operationwise. [But] opening the other flagship stores around the country was not a wise thing,” said Pressman, pointing out that the expansion mirrored what the chain did in the Nineties, which eventually drove it into bankruptcy. “Do we have to repeat the errors multiple times?”
It is widely believed Barneys New York is bolstered mainly by its three flagships in New York, Beverly Hills and Chicago, and dragged down by newer stores opened in Dallas, Las Vegas, San Francisco, Boston and Scottsdale.
Consultant Robert Burke of Robert Burke Associates believes Barneys needs to retain its existing customer base while attracting new ones. “It needs a broader reach,” he said. He believes the store can still champion the underdogs and support emerging brands “but you can’t build a business on that.”
“You need to look at the brand assortments and the allocation of space,” said Burke. “It needs some dusting off. As with any mature business, it got set in its ways. The business has changed dramatically. The customer today is more discerning and more willing to mix and match price points than ever before.”
Burke believes Vitale, who was most recently Gucci’s president of the Americas after positions with Giorgio Armani and Salvatore Ferragamo, will be a strong asset to the business. “She’s a very smart merchant. She understands product and certainly understands the business.” Burke, as others, stressed that one of Vitale’s attributes is that she’s interacted with every top retailer throughout her career. “She has seen the good, the bad and the ugly. She knows the best practices. She’ll approach it in a very unique way.”
Most observers believe that Barneys can still be the go-to store for emerging designers and should maintain its sense of discovery and experimentation. It also needs to work harder to distinguish itself from Bergdorf, which it has been looking more and more like.
“Yes, it can still be the champion of the underdogs,” said Kim Vernon, a marketing consultant. “Between Saks and Bergdorf Goodman, all have been jockeying for underdogs more than ever. Barneys will continue to be supportive of emerging brands.”
She said the retailer can change the merchandise mix and still find ways to remain special. “They’ve got a big merchandising team that’s been there. I think they can maintain being Barneys but can move it toward what more customers want,” said Vernon. “My clients tell me he [Mark Lee] is intent on keeping the uniqueness and specialness of Barneys intact.”
Barneys’ flagships have always had a distinctive look. Never overflowing with merchandise, the stores have always maintained a spare, art-gallery look. [See box below.] The current merchandise mix ranges from The Row, Derek Lam and 3.1 Phillip Lim to Jil Sander, Lanvin, Thakoon and Rodarte. Co-op vendors include J Brand, Rag & Bone, Diane von Furstenberg, Theory, Rogan and Trovata.
In a telephone interview, Gene Pressman, former co-ceo, creative director and head of merchandising and marketing for Barneys, — who recently was spotted having lunch with Lee at that media mecca Michael’s but has no involvement in the business — didn’t want to talk too much about the new management but offered, “I have confidence in Mark that he will find a bridge between knowing how to make a profit and being very demanding on his merchants to constantly find and develop emerging brands.”
Observers believe there’s plenty of work to be done to restore Barneys’ bottom line, but feel the end result could be an eventual sale.
“Mark is going to revitalize the franchise,” said Gary Wassner, ceo of Hilldun Corp., factors for Barneys. “He’s a fashion person with a European perspective. Nobody knows what Istithmar’s long-term commitment to Barneys is. Do they want to keep it for the next 10 years? I don’t know. Other players have expressed interest. Ron Burkle would love it,” said Wassner. “There’s a lot of value in the Barneys name. I don’t know why anyone couldn’t do well with the company, even if they didn’t overpay.”
Burkle’s Yucaipa Cos. bought about 15 percent of Barneys’ senior term loan in late 2009, along with roughly 60 percent of the retailer’s subordinated loan. It’s unclear what the unpredictable, low-profile billionaire — who has a mixed track record with investing in the fashion world with holdings that include Sean John, Scoop, the jeweler Stephen Webster and a small stake in American Apparel — might do with Barneys if he were able to buy it. Nor is Burkle the only predator lurking: Perry Capital swooped in before him and bought up a large chunk of Barneys’ senior debt.
As for the retailer’s financial health, Wassner said that he’s been very pleased with the way Barneys has been dealing with its financial commitments. “They’re paying on time. On the button,” he added. Wassner said that recently, Barneys’ merchandise didn’t look all that different from Bergdorf’s. “They’ve allowed Bergdorf Goodman to take from them relationships that were so strong in the past,” he said, noting several younger lines, such as Alexander Wang, Band of Outsiders, Gilded Age and Vena Cava, are now carried at both stores. He noted that it will take time to instill changes in Barneys’ merchandise mix, since spring buys have already been committed. “The buys in the next market will be quite a different buy. Some lines will be dropped, others will be added,” he said. “Barneys still has a much edgier list of younger designers, but the question is: What will it be next season? I’ve heard that the smaller collections will be limited, and younger designers may be dropped from the list. How they buy for fall will determine the direction going forward. When I see the fall orders, then I’ll have a clear sense,” said Wassner.
Wassner doesn’t think Barneys needs to change its focus or become more accessible in price points. “They have Co-op for that. That’s been successful for them. They just have to make better decisions and know who their customer really is.”
The Co-op, which celebrated 25 years in business last year, is a profitable operation and accounts for 10 to 15 percent of Barneys’ total sales. Its best-performing stores are in Manhattan, where there are three freestanding locations; in California, where there are four, and within certain Barneys’ flagships, including Madison Avenue and Beverly Hills. While several Co-ops are slated to close next year — in the Houston Galleria in January and the Westchester Mall in White Plains, N.Y. by March — the plan is to continue to open more Co-ops.
To be sure, one of Lee’s main objectives should be to bring back its sizzle, which the company used to possess in spades. Barneys hasn’t kept up its creative efforts the last two years, due to both the economy and a lack of leadership at the top, said market sources. Karl Hermanns, executive vice president of merchandise planning, marketing, e-commerce and operations, exited in the fall. Charlotte Blechman, former vice president of public retailers at Gucci, has been tapped as Barneys’ senior vice president of marketing and communications, reporting to Lee.
“The new ceo needs to bring back the magic that existed around Barneys,” said Marc Gobe, ceo of Emotional Branding. “It was the hottest and hippest place to go. It was your first choice for fashion, innovation and style. They’ve become one of the pack now. I would immediately start to build a community online. They need to find their social voice. The brand needs to be talked about. In the old days, people used to talk about ‘I bought this at Barneys,’ or someone would ask ‘Where did you buy it?’ and it was Barneys.”