That’s where some of the suppliers of the bankrupt retailer expressed a willingness Monday to sell some of their claims for as little as 34 cents on the dollar.
Just who would be getting the bargain, however — the seller or the buyer — remains to be seen. It all depends on how the Barneys Chapter 11 scenario finally works out.
The warehouse sale — an annual event in California and a semiannual affair in New York — is of particular interest this time, of course, because of the Chapter 11 filing by Barneys on Jan. 10. Conducted in a 30,000-square-foot hangar at the Santa Monica Airport, it began Saturday with a fund-raising benefit for Stop Cancer, and on Monday it was bringing in $100,000 in hourly sales from 8 a.m. to 1 p.m., according to Barneys. Saturday’s opening was an invitation-only benefit. About 950 attended, each paying $10 for a first crack at the offerings.
The sale, which ends Feb. 11, features markdowns of 50 to 70 percent and is the second to be held on the West Coast. The first was a year ago. The New York warehouse sale is scheduled to run from Feb. 15-25.
“The warehouse sales are all very well planned and predictable,” said Charles Bunstine, president and chief operating officer of Barneys Monday. “It’s important to manage them correctly, but there is no more focus [this time] than normal. We’re running it as if nothing has happened.”
The total annual volume brought in by the warehouse sales is about $40 million, or roughly 10 percent of the chain’s total volume, Bunstine said.
“It’s important,” he conceded, “but the warehouse sale doesn’t carry any more weight than before.”
While creditors will be eager to closely examine Barneys’ business over the next several months, Bunstine insisted, “The issue [surrounding the bankruptcy] isn’t about the viability of the revenue side of the business. The issue is about the relationship with Isetan. You will see increasing actions by the creditors’ committee and Barneys that will focus on the issue between us and Isetan.”
Isetan is Barney’s Japanese partner, as well as its landlord in three key locations, and the two companies are feuding over the nature of their partnership.
In addition to Los Angeles and New York, Barneys holds warehouse sales once a summer in Chicago and Detroit. In New York, the event has become a fixture on the retail scene, attracting long waiting lines outside the Barneys warehouse at 255 West 17th St., across the street from the original store.
Some markets observers have attributed Barneys’ problems, in part, to high prices of designer goods, and many at the warehouse sale here Saturday supported that observation.
“When I go to Barneys, I find that the pieces I really like, I can’t afford,” said Nancy Willen, a movie studio vice president, shopping the women’s designer sportswear racks. That’s why, Willen said, she loves the warehouse sale.
“You can find a lot of great pieces here that you can throw on with anything,” she said.
While being assisted by a sales associate, actor David Keith said he had a better source than Barneys for clothing bargains, but it’s one not generally available to most people.
“I usually buy stuff I have worn in the movies at the end of shooting — at half off,” Keith said.
Many shoppers at the sale said they do not normally shop at Barneys because the prices are too high; some appeared to think the warehouse sale was a result of the bankruptcy. One sales associate in women’s shoes said she had to explain to several shoppers that this was part of regular business — not a going-out-of-business sale.
Barneys’ first warehouse sale here was a year ago, following the opening of the Beverly Hills flagship. It’s been going in New York for about 25 years, said Bunstine.
Meanwhile, Barneys’ suppliers, while in large part shipping spring goods to the retailer, were nonetheless looking to sell their claims in large numbers — some for as little as 34 cents on the dollar.
Analysts at vulture funds, those companies that invest in claims and securities of distressed firms, were saying Monday that the price could go even lower.
Immediately after Barneys filed for Chapter 11, vendors’ claims were selling for 70 cents on the dollar. Since then, the price has fallen steadily as doubts concerning Barneys’ finances have risen.
Analysts said suppliers are eager to unload Barneys’ claims. Most vendors, though, are being left hanging because the vulture funds are still unable to get their hands on verifiable financial information on the privately held Barneys.
Without such data, managers of the vulture funds said they have had a hard time establishing a highly liquid claims market.
The reason for the uncertainty is that Barneys and Isetan — its landlord for the Madison Avenue flagship in New York as well as the stores in Beverly Hills and Chicago — have been presenting different pictures of the retailer’s financial health.
While Barneys continues to say that its business is strong, Isetan tells a different story. Barneys, said Isetan, claimed it was making healthy profits — until November 1995.
Then, Isetan said in a statement following the Chapter 11 filing that the Pressmans — Barneys’ founding family — revealed in a meeting that the chain was running “significant losses on an operational basis for some time.”
In addition, analysts, who spoke on condition of anonymity, said it was surprising that Barneys would have less than $1 million in cash on hand when it filed after having not made payments to vendors and missing its $1.25 million January rent payment on its three flagship stores.