If barneys goes bankrupt, what does that mean for the state of luxury retailers?

by MR Magazine Staff

Q: If Barneys New York, one of the highest-profile luxury stores in the world, is facing bankruptcy, what does this say about the luxury market in general? Is it a case of bad management, or something else luxury merchants should be aware of?

Steve Pruitt: It sounds like Barneys has been caught long on leases. This includes not just spending too many dollars per square foot but also having too much square footage overall.

As far a retail management is concerned, Barneys has one of the best teams in the business, and the luxury market continues to thrive, especially in resort areas.

Where we should take caution is in the area of retail rents. You can’t put all the blame on the landlords; Barneys willingly signed leases that stretched their finances. This is surprising for two reasons: 1) we live in an increasingly online retail world where fewer physical stores are required, and 2) with widespread store closures and little to no inflation, why have rents gone up, and why did the merchants agree to them?

What this says to me is that when looking at a new physical space, you should get professional help in negotiating rents and square footage needs. Some merchants simply try on too many hats. To be great at merchandising, marketing, and real estate is a rare thing. Barneys has done a great job in many aspects of merchandising. It’s unfortunate that leases are what have set them back on their heels.

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  1. Steve is correct. Also the customer moved into a different lifestyle that wss not reflected in their merchandise mix

    1. I think if Barney’s takes their stores with their impeccable taste levels and becomes the highest quality men’s custom Store where customers can still get the Barney’s shopping personal experience without the amount of space that often houses markdowns and profit loss. Custom gives them unlimited amounts of opportunities in every classification with ZERO markdowns.

  2. It’s not a rent lease problem.

    It the past seasons all bran’d have squeezed Markups, the “big ones” wich might represent 80% of the market – Kering, Prada & LVMH Groum – brought margins of accessories down to 2,29 ! from previous 2,75 donw 18%. While their manufacturing cost to the stores can be 7 times cost . – Who can compete ? – Mutibrands murkup is 2,29 and the monobrands is 8.

    The “big Ones” start private sales on their stores and, online weeks ahead of the multibrand stores, wich “pushes” everybody to do so.

    At the end is a Markup problem, as multibrands try to compete in a market controlled by the Monobrands and now, e-comerce wich allows the brands to directly contact the customer without the need of the Multibrands. At the end it is a market dominated by 4 groups, wich share high retail pricing policies – Strange no? -, distribute to whom they want, and rely on their freestanding stores, e-comerce, and parallel market.

    Leases have an impact, but the margins wich multibrands are obliged to work are the main impact, this together with slower traffic due to e-comerce, it is a time bomb.

    Multibrands can not compete any more. its the End of the big multibrands or department stores.

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