A NEW BOSS IN TOWN: SOCOL NAMED CEO, CHAIRMAN OF BARNEYS
Byline: David Moin
NEW YORK – Barneys New York, which has been inching closer to profitability since emerging from bankruptcy in January 1999, has a new captain who wants to accelerate the revival without shaking the store by its roots.
“It’s great to be involved with one of the great retail names,” said Howard Socol, who, as expected, was named chairman, chief executive officer and president of Barneys New York on Tuesday, confirming WWD reports on Dec. 4 and Jan. 5.
“We have a great team of luxury buyers. The merchant staff is the best in the country. That’s not going to change. I will be part of that great merchant staff, but there’s more to running Barneys besides the merchandise. I bring a background of running all parts of the store.”
In an interview Tuesday, Socol said a top priority is to achieve more productivity out of current store locations. While examining growth vehicles, it’s too early to think about new locations, he added.
As far as bringing a new vision to the company, “I see Barneys staying the way Barneys is,” Socol explained. “It’s not the time to make wholesale changes when you are on a positive march.”
Socol, along with Douglas P. Teitelbaum, managing principal of Bay Harbour Management and David A. Strumwasser, a principal of Whippoorwill Associates Inc., the two majority stockholders of Barneys, sent out some strong messages. They said the company is not up for sale right now, performance is improving and growth will come from existing units, though the Co-op and possibly other new formats will continue to be tested.
“Barneys had a very good year,” Socol said. “Barneys will continue to grow within its four walls, by having great product that the consumer wants. We can increase our sales in all of our outlets. All of our stores can grow.”
Barneys is also putting energy into positioning its Co-op contemporary concept for a possible rollout. There’s a freestanding Co-op unit in Chelsea and a branch in Chestnut Hill, Mass., that over the past year was transformed. “That’s basically a Co-op store now, with a slight bit of designer, accessories and cosmetics,” Socol said. Both sites are modeled after the Co-op women’s contemporary floors on the seventh and eighth levels of the Madison Avenue flagship, with merchandise variances due to local market preferences. A rollout doesn’t seem imminent, however, since the company is still trying to work out the kinks.
“We’re looking for formats that we can roll out,” Socol acknowledged. “I don’t think we are ready to discuss them yet. The first idea was the Co-op, which we are trying to fine-tune.”
The team suggested that a Barneys store with a narrow concept, like a Co-op, would open before another Barneys New York store opens.
“Certainly, Barneys could have more flagship stores, probably in the U.S. and abroad,” Teitelbaum said. “But with Bay Harbour and Whippoorwill, the odds are that we’re not building a new 80,000-square-foot flagship with a 10-year payback. That’s probably not us as owners.”
Strumwasser and Teitelbaum emphasized that Socol was their first choice for the top job, ever since the search began around Labor Day, even though Socol is not experienced in luxury retailing. Socol did, however, compile one of the best track records in retailing as ceo of Burdines, the Miami-based division of Federated Department Stores, for 13 years up until 1997. During that time, he expanded the business from 17 to 45 stores and grew sales from $475 million to $1.4 billion. He’s low key, thoughtful and, at Burdines, amassed a broad skill set in merchandising and marketing and a reputation as a team builder. Unlike the old reputation of Barneys, he believes in merchandising the store with the bottom line in mind.
Socol began his career at Burdines as an assistant buyer. He spent 30 years there and covered just about every category, including women’s, men’s, cosmetics and accessories, as a buyer, a divisional and general merchandise manager. At 35, and after only 12 years at the store, he became its president, and the youngest president in Federated’s history.
After leaving Burdines in 1997, he demonstrated a thirst for challenges beyond department stores, reemerging as ceo of J. Crew. That was a brief stint, from February 1998 to January 1999, due to clashes with the daughter of the catalog’s founder and then-chairman, Emily Woods. Most recently, Socol has invested in dot-com businesses, including Syd & Sam, joined the Guess board and formed a consulting business.
“Howard was the one Barneys wanted for several months,” said Hal Reiter, ceo of Herbert Mines Associates, which conducted the search. “The decision principally was whether he wanted to go back into a full-time opportunity. He was doing a tremendous amount of consulting and sitting on several boards and was really enjoying that. But at the end of the day, he enjoys working with people and managing a business more than anything. His lack of luxury experience wasn’t really an issue. The issue was finding someone with superior general management and leadership skills.”
Reiter agreed that the compensation at Barneys also helped lure Socol back into full-time retailing, but he would not divulge details of it. Socol signed a three-year contract and received stock options.
“Mr. Socol has one of the great track records at operating retailers profitably,” Teitelbaum said. “He has a proven ability to be able to jump from one area to another area. He’s not going to be out picking fabrics, colors or prints with Judy Collinson [general merchandise manager, women’s] He has all the right disciplines and understands what customers need. This whole thing about not being a luxury retailer is not important. A much rarer commodity in the world of retailing are people who know how a company can make money. There may be a short list of luxury retailers but there is an even shorter list of people who have a history of doing this profitably.”
At Barneys, Socol succeeds Allen Questrom, who in September became chairman and ceo of J.C. Penney Co. Questrom, 60, will remain a director of the company, and the size of the board has been increased to 11 members.
Hiring Questrom in 1999 was a major coup for the owners. It quickly restored Barneys’ credibility with vendors and the financial community and raised hope for the future. His departure was not a good thing, though even after joining Penney’s in September, he continued as chairman of Barneys, serving more in an advisory role and having a hand in finding a successor. Reportedly, Socol was his first choice, too.
It would have been tough to hire from within the luxury arena, for a few reasons. First, the talent pool in the luxury sector is limited and further limited by contracts with noncompete restrictions. Most recently, Barneys was run by an interim office of the president, comprised of three executive vice presidents: Michael Celestino, store operations; Tom Kalendarian, gmm of all men’s; Chelsea Passage and Collinson.
Socol’s challenge to raise store productivity could require a broadening of the merchandise scope and appeal and attracting new customers without alienating the current customer base or trashing the store’s hip, luxury image — and he must do all that at a time when the luxury sector, along with the general economy, is slowing.
The upscale chain has never quite recovered from its bitter bankruptcy, which lasted from January 1996 to January 1999. Before the filing, Barneys was considered by many in the fashion industry as the hippest store in town with the most innovative merchandising and marketing. Its assortments were edited with a distinct and pricey point of view and Barneys was on the growth track, both nationally and internationally.
But a lack of productivity, lavish spending, particularly in building the Madison Avenue flagship, and disagreements with its Japanese landlord and expansion partner Isetan forced Barneys into bankruptcy. And after closing several stores, including the original flagship on Seventh Avenue and 17th Street in Manhattan and losing talent through the bankruptcy process, the retailer suffered a blow to its prestige. The founding Pressman family was thrown out and the business was taken over by Whippoorwill and Bay Harbour. These two funds, and the clients they represent, want to get a return on their investment in Barneys and do plan to sell the chain, but apparently are not in a rush.
“The company continues to not be for sale,” stated Teitelbaum. “Obviously, we don’t own companies forever. When we feel we have the right kind of buyer who wants to make significant capital investments, we might sell. We’re not there yet.”
Added Strumwasser: “Whippoorwill and Bay Harbour are patient. We want to maximize the value of Barneys.”
That’s where Socol comes in. While some bids have already come in, they fell far below the desired price.
Barneys also faces a more competitive landscape from the Nineties. During the last holiday season — a disappointment for almost all of retailing — the luxury sector was particularly hard hit. Retailers planned aggressively, building up inventories, but fell far short of targets.
“There are definitely questions on the economy and how it will affect upper- and lower-consumer segments,” Socol said. “The best stores are still going to do well in any kind of economy, if you have the right service and the right products. Our December results say we are marching in a positive venue.”
The Barneys owners said comparable-store sales were up 5.4 percent in December and double-digit gains are seen for the year overall, which concludes at the end of January. Total sales are seen at around $400 million.
According to Strumwasser and Teitelbaum, Barneys should break even or make a slight net profit for the year, which would be the first time Barneys posted a net profit since the bankruptcy filing in January 1996. During the year, Barneys also reduced debt by $12.6 million and should show about $90 million in debt left, Strumwasser said.
For the quarter ended Oct. 28, 2000, Barneys reported income increased to $3.3 million, against $2.2 million in the year-ago period. Sales rose 9.2 percent to $110.2 million from $101 million, with comparable-store sales ahead 9.4 percent. The company said increased marketing and good full-price selling and outlet sales contributed to the growth.
Barneys flagships are in New York, Beverly Hills and Chicago. In addition, the company operates five stores, in Chestnut Hill, Mass., Manhasset, N.Y., the World Financial Center, Seattle and the Co-op in Chelsea, as well as 10 outlets and two semiannual warehouse sales. The company also maintains corporate offices here, an administrative and distribution center in Lyndhurst, N.J., and has 1,400 employees.
While primary competitors Saks Fifth Avenue and Bergdorf Goodman have begun extensive renovations at their Manhattan stores, Barneys has embarked on some of its own at the Madison Avenue flagship, to maximize the selling. It’s moving the restaurant from the lower level to the ninth floor in the fall and expanding first-floor accessories and cosmetics into the lower level by the first quarter of 2002.
Meanwhile, there’s still another big job in the luxury arena. The ceo post at Neiman Marcus Stores is still open. H.W. Mullins quit that job to become ceo of St. John Knits, and Burt Tansky, president and chief operating officer of the Neiman Marcus Group, which includes Bergdorf Goodman, NM Direct and Neiman’s dot-com business, has taken over Mullins’s responsibilities, until a successor is found.