Barneys reportedly mulls bankruptcy as rent woes take toll

Dive Brief:

Barneys New York is exploring financial options that include a possible bankruptcy filing, Reuters and other media reported over the weekend. A Barneys spokesperson did not immediately reply to request for comment.
A filing could come within weeks, but is not the only option, according to Reuters, which cited unnamed sources. The luxury department store retailer faces liquidity issues caused in part by a rent hike on its Manhattan flagship store, CNBC reported (citing unnamed sources).
Barneys is also reportedly exploring a possible sale or additional financing, which could head off a filing, according to CNBC.

Dive Insight:

In 1993, Barneys opened its Madison Avenue store — a 230,000-square-foot behemoth the retailer called "the largest new store in New York City since the Great Depression." Barry White christened its opening. Now it may be dragging the retailer's finances into dangerous territory.

This spring, news broke that Barneys planned to cut the space at the flagship by more than half to save on its rent, which reportedly doubled to $30 million (not including taxes and other costs) after arbitration with its landlord failed. According to the New York Post, Barneys had threatened to file for bankruptcy amid the arbitration process as it tried to negotiate a lower rate.

Barneys refuted the reports of the downsizing at the time. A spokesperson told Retail Dive in April that the reports were "incorrect."

"Barneys New York is committed to maintaining the footprint of its Madison Avenue flagship, and continuing to serve its customers within this iconic store," the spokesperson said at the time. "There are no active conversations regarding the store's footprint, and all statements indicating otherwise are false."

Barneys isn't alone in its rent travails. Tommy Hilfiger, Lord & Taylor, Ralph Lauren and others have exited stores in Manhattan as rents spiked. In early 2018, Barneys itself closed its Upper West Side location, the smallest of its three New York stores.

The upscale retailer may be more stable and at a healthy size compared to its department store peers. It has 13 Barneys New York stores sprinkled mainly throughout the Northeast and West Coast, as well as nine Barneys Warehouse stores, according to its website.

The retailer was taken over in a 2007 $942 million leveraged buyout by Dubai's state-owned investment firm. Most of the resulting debt load was erased in a debt-for-equity deal that turned over ownership in 2012 to Perry Capital.