By David Moin
with contributions from Lisa Lockwood
 on February 2, 2017
Daniella Vitale

NEW YORK — Barneys New York, confirming rumors circulating since last summer, said Thursday that Mark Lee has stepped down as chief executive officer and has been succeeded by Daniella Vitale, who had been chief operating officer.

Lee is retiring but will maintain ties to Barneys, having been named executive chairman, a board role reporting to owner Richard Perry. Vitale also reports to Perry.

Dennis Freedman, Barneys creative director since 2010, is also leaving the retailer, according to sources. Barneys declined to comment on whether Freedman has departed.

Though there has long been industry speculation that Barneys’ business, like that of most luxury retailers, has been difficult, Lee and other officials at the company have consistently disputed that, saying it was faring better than the competition. They have also stressed that the company is not burdened by long-term debt. The privately held retailer keeps its results tightly guarded.

Lee led Barneys through a period of downsizing, closing several stores including full-line units in Dallas and Scottsdale, Ariz., and several smaller stores. During the trimming, Lee, working with Vitale, maintained Barneys’ taste level, aura of exclusivity, sharp merchandising eye and its reputation for launching emerging designers and staging innovative, sometimes surprising, collaborations such as those with Disney, Prada and Lady Gaga. The merchandising remains strong, and easy to read in the stores across different lifestyles.

The two also bolstered Barneys e-commerce, renovated much of the Madison Avenue flagship and staged a homecoming of sorts for Barneys by opening in February 2016 an elegant, compact flagship on Seventh Avenue and 17th Street, the very same site where Barneys was founded.

While officials have portrayed Barneys are being above the fray, Perry has been trying to sell all or part of his holding in the retailer in tandem with winding down his underperforming Perry Capital hedge fund. Barneys executives have told WWD that the luxury chain’s fortunes are not tied to those of the fund, which owns a majority stake in the company.

“We are profitable. We are not in distress. We don’t depend on Perry Capital to pay our bills,”  Lee told WWD in September.

Last year, consultants and investment bankers were brought in to help Perry determine a valuation for Barneys, and in July, he hired Goldman Sachs to sell a stake in the retailer. Around that time, Perry, through a spokesman, said “strategic decisions” would be examined to “deliver appropriate value to investors.”

The size of the stake Perry wishes to sell has never been revealed.

Perry Capital took over Barneys in May 2012,  partnering with Ron Burkle’s Yucaipa Cos., in a debt-for-equity swap that cut the luxury retailer’s borrowings down to $50 million from $540 million, enabling the company to invest back in the business. The retailer had been owned by the Middle East-based Istithmar World and was not on a healthy path. Perry Capital has held an array of investments, including stakes in fashion factor Capital Business Credit, The Weinstein Co., Corus Construction Ventures, Juniper Pharmaceuticals Inc. and Endurance Specialty Insurance.

Aside from the possibility of a sale of all or part of Perry’s stake, Barneys faces another issue — impending rent increases at its Madison Avenue and Beverly Hills flagships, which could affect profitability. The retailer has benefited from low rents for many years, set just after Barneys emerged from bankruptcy in 1999.

But one source close to the company said Thursday that Barneys has weathered rent increases before, that current rents at those locations are not below market rates, and that negotiations on future rents for the two flagships have not begun on a formal basis. There’s one landlord for the Beverly Hills and Madison Avenue flagships, Ashkenazy Acquisition, which is likely to play hardball. Barneys does have some bargaining power given the general decline of foot traffic for all retailers, the migration to e-commerce, and the high vacancy rates on Madison Avenue and decreasing rent rates there.

Today, Barneys views e-commerce as its key growth vehicle. No new stores are planned. Of the company’s 16 stores, the “flagships” are on Madison Avenue and Chelsea and in Beverly Hills, Chicago, Seattle, Boston, San Francisco and Las Vegas. Barneys also operates 11 outlets. Performance is said to be best in New York and California.

Two executives leaving — Lee and Freedman — could be interpreted as a shakeup. And last month, Charlotte Blechman, Barneys former executive vice president of marketing and communications, joined Tom Ford as chief marketing officer.

Last summer a source very close to Barneys and Lee told WWD that Lee would continue as ceo “for the near future” — suggesting he would not be there for long. On Thursday, Perry said Lee’s departure as ceo was part of a succession strategy orchestrated long ago, though some sources have suggested that Lee was getting tired of running Barneys, given the rigors of retail, and that he wanted to change his lifestyle, possibly even move to the West Coast.

“When Perry Capital purchased Barneys, Mark Lee and I sat down to discuss the management team,” Perry said in a statement. “He told me that he had recruited Daniella Vitale and she was his heir apparent. In 2012, we put in a formal succession plan for Daniella to become ceo in 2017. Today we are pleased to announce her promotion to ceo and Mark’s move to executive chairman. Mark has provided excellent leadership and vision in his time as ceo. Throughout that period, Mark has had Daniella run every part of Barneys. We have had a great partnership at the top of the organization and I am confident that our partnership, as well as Mark’s long-term commitment to Barneys and our board of directors, will continue.”

In 2010, after spending more than a decade with Gucci, including serving as president of the Americas, Vitale joined Barneys from as executive vice president and chief merchant. She was recruited by Lee, who joined Barneys just a few months earlier as ceo, and was a former president and ceo of Gucci, where they worked together. Barneys had been run by committee and without a ceo for a few years prior to Lee joining.

In 2013, Vitale rose 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 merchandising structure, creating operating efficiencies and building up the digital operations. Barneys said during her supervision of the, it’s grown tenfold.

“I want to thank Mark for being a mentor, partner and friend for the bulk of my career and giving me the opportunity to be part of this incredible company,” Vitale said in her statement Thursday. “I am part of an organization with a rich history, extraordinary talent and an exciting future. There is no other place like Barneys and I look forward to driving our continued success.”

In his statement, Lee said: “Leading Barneys New York has been a privilege and the ultimate finale for my full-time career. When I joined as ceo in 2010, I thought I would remain for four years. Six-and-a-half years later, it’s time for me to turn the day-to-day management over to Daniella, who has long been my planned successor and is uniquely qualified to take the leadership reins. I will continue to support Richard Perry at the board level as I pursue other part-time opportunities and passions in what I am characterizing as my retirement from full-time luxury industry work.”

Lee and Vitale, though they meshed as a team, have different management styles and personalities — Vitale the more outgoing, Lee the more reserved.

“They inspire people in different ways, but the two worked very, very closely,” said one source familiar with the two. “Mark is a creative ceo who gets the balance between art and commerce.”