BARNEYS TAKES HEAT
Byline: Vicki M. Young
NEW YORK — The financial community, alarmed by a delay in Barneys New York’s third-quarter earnings release and concerned about the slowdown in luxury spending, is taking a hard look at the upscale retailer’s ability to survive the tough retail environment.
According to financial sources, some factors and refactors have either temporarily stopped checking shipments to the New York-based retailer until earnings are released or, in a few cases, have rescinded approvals on orders that were just about to be shipped. The company was expected to release third-quarter results between Nov. 26 and Dec. 7. According to a store spokeswoman, Barneys has until Dec. 18 to file its quarterly statement with the Securities and Exchange Commission. She declined further comment.
While no one is expecting a bankruptcy filing any time soon, the upscale retailer is showing signs of distress. To be sure, this time the company’s lackluster balance sheet is more of a reflection of the uncertain economic times than the free-spending levels of debt generated by its previous owners, the Pressman family. Barney Pressman founded the store in 1923.
Barneys has been making timely payments to vendors since coming out of Chapter 11 after a three-year stay in January 1999, but last month was running late on payments of its accounts, said one vendor. A factor described the payment terms as “typically net-30 days.”
Barneys is in the process of negotiating its bank agreement with its lenders and is seeking amendments to avoid violations of certain covenants. Financial sources expect that once an agreement is worked out, they’ll be better able to determine the store’s credit worthiness. However, if Barneys’ well-heeled and aspirational customers elect to further tighten their purse strings, the new bank deal is likely to buy Barneys only about six months of time, one investment source said. Investment bankers and experts on the mergers and acquisitions side expect that further signs of distress would result in the company being sold instead of another Chapter 11 filing.
Some were surprised by the rescissions of approvals already granted. According to one member of the investment community, a rescission of approval is “more drastic than not checking.”