Barneys New York Still Struggling Financially, Prompts Bankruptcy Fears

Is Barneys on the brink? The quirky high-end retailer has been working for years to revamp its business model, including a management overhaul in 2010, and some highly publicized promotional events such as the Daphne Guinness window display and Lady Gaga's Workshop this past Christmas. But behind-the-scenes things may be a bit less upbeat for the retailer. Barneys just hired law firm Kirkland & Ellis LLP, WWD is reporting. The firm is being brought in to help renegotiate a $200 million revolving loan that will come due this September. This immediately fueled speculation and concern that the retailer would be closing stores or possibly even filing for bankruptcy.
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Is Barneys on the brink? The quirky high-end retailer has been working for years to revamp its business model, including a management overhaul in 2010, and some highly publicized promotional events such as the Daphne Guinness window display and Lady Gaga's Workshop this past Christmas. But behind-the-scenes things may be a bit less upbeat for the retailer. Barneys just hired law firm Kirkland & Ellis LLP, WWD is reporting. The firm is being brought in to help renegotiate a $200 million revolving loan that will come due this September. This immediately fueled speculation and concern that the retailer would be closing stores or possibly even filing for bankruptcy.
Lady Gaga w/Barneys\' CEO Mark Lee (Photo: Getty)

Lady Gaga w/Barneys\' CEO Mark Lee (Photo: Getty)

Is Barneys on the brink? The quirky high-end retailer has been working for years to revamp its business model, including a management overhaul in 2010, and some highly publicized promotional events such as the Daphne Guinness window display and Lady Gaga's Workshop this past Christmas. But behind-the-scenes things may be a bit less upbeat for the retailer.

Barneys just hired law firm Kirkland & Ellis LLP, WWD is reporting. The firm is being brought in to help renegotiate a $200 million revolving loan that will come due this September. This immediately fueled speculation and concern that the retailer would be closing stores or possibly even filing for bankruptcy. Istithmar, the company that owns Barneys, has been trying to sell it for a few years, after putting millions of dollars into the retailer. Isitithmar hasn't historically been very forthcoming about Barneys' financials, and this may have an effect on the stores' stock.

While a few credit-checking firms haven't been approving orders for Barneys, market sources reported to WWD that the retailer has been paying its bills and that vendors seem to like the new management. Small designers and brands in particular will continue to ship to Barneys, if only because they don't have a lot of other options. One source told WWD, "I sense that they might be having a hard time getting some of the more commercial brands they are seeking and that most of these brands already have all the points of distribution they want."

But despite lousy credit ratings, reps for Barneys claim that they posted gains for the 2011 fiscal year, consistent with other luxury retailers like Neiman Marcus, but wouldn't comment on the success (or failure) of Gaga's Workshop and a reported disappointing holiday season. A Barneys rep told WWD, "We enjoyed a record December, with comp sales of plus 18 percent.”

Barneys is continuing its renovation of the Madison Avenue flagship, and spending more on marketing, with the goal of "re-energizing." Here's hoping their bottom line gets re-energized, too.