Barneys New York — The Tastemaker Priced Out of Its Own Address

Summary

Barneys New York was the arbiter of American luxury taste for the better part of a century, and on August 6, 2019 it filed for Chapter 11 bankruptcy — a prelude to liquidation. It had begun, improbably, as the opposite of what it became: a 500-square-foot men's discount shop opened in 1923 by Barney Pressman, who raised the lease money by pawning his wife's engagement ring and sold off-price suits to working men. Over three generations the Pressmans inverted that origin entirely, turning Barneys into the store that introduced America to Giorgio Armani, Comme des Garçons, and a downtown-Manhattan sensibility that the uptown department stores spent decades trying to copy. At its height it ran roughly two dozen stores, anchored by a 230,000-square-foot, $267 million flagship on Madison Avenue that opened in 1993.

What killed it was not, in the end, a failure of taste. It was real estate and the internet, arriving together. The lease on the Madison Avenue flagship contained a fair-market-value reset, and in 2018 an arbitrator handed the landlord — Ben Ashkenazy's Ashkenazy Acquisition — the right to raise the annual rent from roughly $16 million to about $30 million, beginning in January 2019, nearly erasing operating earnings on a store that was the company's identity. At the same moment, luxury was migrating online and, worse for a multi-brand retailer, the designers Barneys had championed were increasingly selling directly to customers, cutting out the middleman that had made them famous in America.

Squeezed between a doubled rent and a disintermediated business model — and carrying the strain of years of ownership turmoil and debt — Barneys filed in August 2019 with $218 million in financing to hunt for a buyer. It closed most of its stores immediately, looked for a savior, and found instead a liquidator's logic. In October 2019, a partnership of Authentic Brands Group and the financial firm B. Riley won the assets for about $271.4 million, announced it would close the remaining full-price stores, and licensed the name to Saks Fifth Avenue. The institution became a trademark.

What was lost was a point of view. Barneys was not merely a place to buy clothes; it was a curator, a launchpad for designers, the author of the wry holiday windows and the satirical catalog voice, the store that told a certain kind of New Yorker what was next. A licensed nameplate inside a rival's department store can sell the logo. It cannot replace the eye.

Timeline

The Downtown Store That Set the Uptown Tone

Barneys spent its first four decades as exactly what its name suggested: a no-frills men's clothier where Barney Pressman undercut the competition and bought billboard space to shout about it. The transformation came with the second generation. Fred Pressman, who had grown up in the business, understood something his father's discount model could not exploit — that there was a customer who wanted not the lowest price but the first look, the designer no one else carried yet, the assurance of being correctly dressed before correctness had become obvious. Beginning in the 1960s and accelerating through the 1970s, Fred turned Barneys into an importer of European fashion and a maker of reputations, bringing Giorgio Armani's tailoring and Comme des Garçons' deconstruction to American shoppers and, in the process, defining a downtown New York sensibility.

That sensibility was the product. Barneys did not simply stock fashion; it editorialized it — through its store design, its provocative and funny advertising, its holiday windows, and its famous warehouse sales, where the same downtown crowd that paid full price the rest of the year queued to dig through markdowns. The Madison Avenue flagship of 1993 was the apotheosis of the strategy: a soaring, 22-story, $267 million temple that planted the downtown tastemaker in the heart of uptown luxury, blocks from the department stores it had spent a generation out-cooling. For a moment it looked like the future of American retailing — the curated, experience-driven store. It was also, it turned out, an enormous and inflexible fixed cost wearing a beautiful façade.

Three Owners, A Lot of Debt

The flagship's opening sat almost on top of the company's first collapse. The expansion had been financed in partnership with the Japanese retailer Isetan, and when that relationship soured into litigation, Barneys filed for Chapter 11 in January 1996. The reorganization that followed cost the Pressman family the company their grandfather and father had built — the founding lineage was, in a phrase the luxury press could not resist, sold off the rack.

What came next was a procession of owners for whom Barneys was an asset to be financed rather than a culture to be tended. The chain passed through investment hands and Jones Apparel Group, then in 2007 — at very nearly the peak of the pre-crisis market — was acquired by Istithmar World, an arm of the Dubai government's investment apparatus, for roughly $942 million, loading the company with debt sized to a boom about to end. When the financial crisis hit, that debt became the story. By the early 2010s, after restructurings, the hedge-fund manager Richard Perry's Perry Capital had converted its position into control of the company.

None of these owners was a retailer in the sense the Pressmans had been, and the carousel left its mark: each transaction had to be serviced, each restructuring bought time rather than a strategy. By the time the existential threat arrived, Barneys was a beloved brand with a thin balance sheet, dependent on a handful of expensive flagship stores, and ill-equipped to absorb a shock. The shock, when it came, arrived in the most prosaic possible form: a rent bill.

The Five Factors

Aftermath

Barneys' roughly two dozen stores went dark across 2019 and into 2020, and several thousand employees — buyers, stylists, the floor staff who embodied the store's expertise — lost their jobs in the liquidation. The Madison Avenue flagship, the building at the center of the whole drama, was emptied; the address that had cost the company its life passed back to its landlord and into redevelopment, its luxury-retail era over.

The brand outlived the company, as luxury brands tend to under the modern licensing model. Authentic Brands Group, which specializes in keeping dead retailers' names alive as trademarks, paired Barneys with Saks Fifth Avenue, which ran "Barneys at Saks" shop-in-shops and held the name in the US market. The afterlife is real on paper and hollow in practice: the logo persists, licensed and leased, while the curatorial institution it once labeled — the eye that picked the designers, dressed the windows, and set the tone — does not exist. The arbiter of taste became a font on someone else's wall.

The lasting mark is a cautionary one for the experiential, multi-brand model Barneys helped invent. Its death showed that being the best-curated store in the country protects you from neither a landlord with a fair-market reset clause nor a designer with a direct-to-consumer website. The two forces that killed it — luxury real estate priced beyond what even luxury retail can pay, and the collapse of the middleman in a direct-selling age — did not stay confined to one store. They are the same pressures squeezing the department-store model wherever it survives.

Lessons

References

• Barneys New York files for Chapter 11 bankruptcy protection The Boston Globe (Associated Press)
• Authentic Brands, B. Riley bid $271M for Barneys Retail Dive
• Barneys Files for Chapter 11 Bankruptcy Protection WWD (Women's Wear Daily)
• Barneys New York Wikipedia (founding, ownership chain, flagship, liquidation)