It’s finally over.
Barneys New York’s $271.4 million sale to Authentic Brands Group has been finalized, according to sources, and the retailer’s next life is beginning. Chief executive officer Daniella Vitale announced she has left the company.
Vitale notified staff of her departure via e-mail Friday morning. The retailer’s leader “truly apologized for the difficulties that we caused,” noting “please know we did everything we could to avoid this situation and protect the Barneys brand.”
“It is with deep regret that I announce my resignation as chief executive officer and president of Barneys New York,” she wrote. “Today is my last day with the organization. I hope you’ll accept my profound thanks for your continued support and encouragement. I truly apologize for the difficulties we caused, but please know we did everything we could to avoid this situation and protect the Barneys brand.
“The many, many years of success at Barneys would not have been possible without your partnership,” she wrote. “Thank you for allowing me to be part of your wonderful brand. Working with all of you has been one of the highlights of my career. We did everything we could to avoid this situation and protect the Barneys brand.”
Vitale could not be reached for comment Friday.
The sale to ABG clears the way for imminent store liquidations, as other hopeful bidders failed to rally within the tight deadlines of the bankruptcy case.
Daniel Levy, president of Ashkenazy Acquisition Corp., which owns the Barneys flagship on Madison Avenue in New York and in Beverly Hills, said it had reached a deal with ABG to keep the Madison Avenue flagship open with a smaller footprint for a year while they “explore longer-term solutions.” The Fred’s restaurant will also remain open.
“We are extremely disappointed by the outcome of today’s proceedings,” Levy said. “We worked tirelessly with potential buyers and operators to preserve Barneys operations at our properties. The New York and Los Angeles stores produce approximately $20 million and $30 million, respectively, in profitability for Barneys per year — even after the recent rent resets at both locations…We are saddened by the loss of jobs for Barneys employees and the iconic stand-alone brand.”
It was a rent increase from the landlord that many point to as the final straw for Barneys’ finances.
“We understood from the beginning that looking at spreadsheets and numbers, it did not make sense but we saw a future beyond that,” Ben-Avraham said in a statement Friday. “We knew that once we overcame that hurdle there would be light at the end of the tunnel.
“I apologize if I have failed anyone, and gave anyone false hope by not being able to close the deal,” he wrote.
The New York bankruptcy court overseeing the proceedings had previously approved the sale during a roller-coaster hearing Thursday, which had abounded in hopes that a rival bidder might still step in at the last moment to buy Barneys in a going concern sale.
But hope gave way to reality as Judge Cecelia Morris approved the sale, though she didn’t seal off the potential window for any other viable bids to materialize before the sale to ABG was set to close Friday morning at 10 a.m. EST. But those bids never came through.
ABG, which will acquire Barneys’ intellectual property and e-commerce platform as part of the sale, plans to liquidate its current inventory, negotiate with Barneys’ landlords, and potentially open Barneys outposts in Saks Fifth Avenue stores.
Barneys’ employees include nearly 800 who are represented by the New York-New Jersey Regional Joint Board of Workers United union, including sales representatives, warehouse workers and tailors. Many of those employees will likely remain employed during the upcoming going-out-of-business sales, Thomas Kennedy of Cohen, Weiss and Simon LLP, an attorney for the union, told WWD.
“The union deeply regrets that Barneys was unable to obtain a going concern bidder that would have saved these jobs,” he said.
At Thursday’s hearing, attorneys for Barneys and the creditors committee took turns expressing their disappointment at the prospect of an inevitable sale of Barneys to ABG — one that would transfer the retailer’s brand to the licensing company, and radically reshape the business.
Already, Barneys, which filed for Chapter 11 protection on Aug. 6, closed 15 underperforming stores, whittling its store presence down to five flagships and two outlets.
Thursday’s hearing took place in an unusually packed courtroom in Poughkeepsie, N.Y., with Vitale and other Barneys representatives filling the pews, along with attorneys for ABG, B. Riley and Solitaire Partners. The proceedings were punctuated by frequent recess breaks in which attorneys for Barneys, ABG, the creditors committee and others filled the hallway outside the courtroom, or shut themselves inside conference rooms in the building or, at times, milled around in the uncertainty.
Barneys attorney Joshua Sussberg of Kirkland & Ellis LLP told the court later that “we’re not negotiating from the hallway,” and that Barneys’ only apparent prospect in the end seemed to be the one before them.
“It’s not our first choice. We want people to be employed and the stores to stay open,” Sussberg told the court Thursday, “but it’s our only choice.”
To the consternation of some in the process, including the creditors’ committee and the U.S. Trustee, ABG had teamed with lender B. Riley Financial Inc., which has also been behind Barneys’ debtor-in-possession financing during the bankruptcy. Brigade Capital Management LP was another DIP lender in Barneys bankruptcy.
B. Riley affiliate Great American Group LLC has also been involved in Barneys’ store liquidations, sparking some controversy during the proceedings about B. Riley’s multiple roles in the process.
“Unfortunately, when a retailer enters into DIP financing with a liquidator, such as B. Riley, it is a Faustian deal that frequently leads to a liquidation due to short milestones,” said Bradford Sandler of Pachulski Stang Ziehl & Jones LLP, who represents the creditors committee. “This is a very sad day for NYC, the fashion industry, the vendors — many of whom got their start at Barneys, the landlords who will have empty boxes, and the employees, who were the heart and soul of Barneys.”
Vitale took on the ceo role in 2017 after serving as Barneys chief operating officer. At Barneys, she reported to owner Richard Perry.
Vitale joined Barneys in 2010 as chief merchant and executive vice president. In 2013, her role was elevated to chief operating officer where she oversaw all of women’s merchandising, business development, digital strategy and store operations.
She was responsible for overhauling the retailer’s merchandising structure, creating operating efficiencies, as well as building a competitive and dynamic digital portfolio, where the brand’s e-commerce business has grown tenfold during her tenure.