After being financially troubled because of soaring rents and following a number of earlier unsuccessful attempts to find a buyer have ultimately forced the United States luxury department store chain Barneys New York to put it up for sale and file for Chapter 11 bankruptcy.
In order to stay afloat, new funds from Hilco Global and the Gordon Brothers Group to the tune of $75m has been secured by the company. In addition to five smaller concept stores and seven Barneys Warehouse locations, the company would be closing down its stores in Chicago, Las Vegas and Seattle.
Troubles started for the company when its Manhattan flagship store on Madison Avenue, New York, was faced with very steep rise in rent which increased from $16m to $30m.
The provisions of Chapter 11 under the United State corporate laws, gives some time to an ailing company reorganize its debts or sell parts of the business to gather some funds for its obligation to pay its creditors.
“Like many in our industry, Barneys New York’s financial position has been dramatically impacted by the challenging retail environment and rent structures that are excessively high relative to market demand. “In response to these obstacles, the Barneys New York board and management team have taken decisive action by entering into a court-supervised process, which will provide the company the necessary tools to conduct a sale process, review our current leases and optimise our operations,” said the company’s Chief executive Daniella Vitale said.
The company has decided to keep open its flagship stores in the locations of Madison Avenue, Downtown NYC, Beverly Hills, San Francisco and Copley Place in Boston as well as two Barneys Warehouse locations. The websites of the company would also be kept open.
Trade vendors, manufacturing partners and suppliers are expected to be paid in full for goods and services provided, the company said.
Barney Pressman, the founder of the company, started the business in 1923 after he generated funds for the purpose by pawning his wife’s engagement ring. With the funds, he opened a men’s discount clothing store on Seventh Avenue measuring just 500-square-feet and another at 17th Street in New York. The tagline of the company back then was “No Bunk, No Junk, No Imitations.” The company was transformed into a luxury destination form being a discount store in the 1960s by his son Fred.
(Adapted from BBC.com)