What to Know
Barneys New York, the iconic luxury chain, says a bankruptcy judge has approved the sale of its assets
A fashion licensing company, Authentic Brands Group, plans to license the Barneys name to Saks Fifth Avenue
Barneys New York will likely close most of its seven stores in cities like Boston, Beverly Hills, California, and New York
Barneys New York, which once reigned in the world of high fashion, is now being sold piece by piece.
The iconic department store retailer, founded in 1923, was officially sold on Friday to fashion licensing company Authentic Brands Group and financial firm B. Riley for $271.4 million.
The sale follows approval by a bankruptcy court judge on Thursday. The judge left room for another bidder to come forward but that never materialized.
B. Riley said it will be holding liquidation sales through its Great American Group subsidiary at Barney's remaining seven U.S. stores, starting with private sales events for its most loyal customers next week. Those are its five regular-price stores, including its flagship Madison Avenue store in Manhattan, and two warehouse store locations.
Still, Authentic Brands says it plans to turn the Madison Avenue store into a location for pop-up businesses, bringing together a group of boutiques as well as art and cultural installations. Authentic Brands says it will license the Barney's New York name to Saks Fifth Avenue with plans to reboot Barneys New York on Saks Fifth Avenue's fifth floor. Saks will also launch Barneys New York shops in various stores in key markets in the U.S. and Canada.
Authentic Brands "is committed to preserving the legacy of Barneys New York while positioning it for long-term growth through key partnerships that will expand its global presence as a lifestyle brand and luxury retail experience," said the company in a statement.
Authentic Brands will also maintain Barneys' current licensing agreement with Seven & i Holdings, which operates 12 Barneys retail stores in Japan. The stores will remain open.
Barneys New York filed for Chapter 11 protection in August.
The chain was struggling with escalating annual rents, particularly at its crown jewel store on Manhattan's Madison Avenue. Barney's Manhattan landlord doubled the rent to nearly $30 million this year.
Barneys, formerly controlled by New York hedge fund Perry Capital, listed more than $100 million in debt and more than $100 million in assets in its bankruptcy filing in the Southern District of New York.
The sale comes as luxury retailers are reinventing themselves to respond to their customers who aren't focusing on filling up their wardrobes with expensive items. They're embracing rental services and buying secondhand status goods at places like The RealReal.com. They are also shifting their spending to travel and other experiences.
Given these changes, luxury sales have underperformed overall retail sales, according to MasterCard SpendingPulse, which tracks spending across all sorts of payments including cash and checks. U.S. luxury sales, excluding jewelry, have fallen 2.7% so far this year. That compares to a 3.1% increase in overall retail sales, excluding autos and gasoline.
Steve Sadove, former CEO and chairman of Saks and now senior adviser for MasterCard, says that Barneys New York didn't keep up with the changing spending habits.
"Barneys is a narrow niche brand. It was very fashion-forward and it was always geared toward the West Coast and East Coast customer," he said. "That customer has shifted. It's very hard to support a large business just on a fashion-forward base." Sadove believes that a licensing deal with Saks Fifth Avenue is an attractive one.