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Barneys on the Market: Iconic Retailer’s Value In Eye of the Beholder

The prospectus on Barneys is expected out soon and is said to have a starting value of $400 million and could go as high as $500 million.

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Barneys’ L.A. flagship.

Photo By WWD Staff

Inside Barneys’ Chicago Co-op

Photo By WWD Staff

New York — Purchasing a business such as Barneys New York is like buying a house — there’s often a little romance involved.

The seller has to convince the buyer the property is worth the asking price, and that the big and little touches added over the years have enhanced value. And it helps if the seller is able to persuade the buyer that they have put a lot of love into the home.

The owners of Barneys, Whippoorwill Associates and Bay Harbour Management put the company up for sale this month at an opportune time. The specialty chain catering to well-heeled consumers has been riding the luxury wave. Its reported earnings reflect sales growth for 2003 and the first quarter of 2004. Comparable-store sales — stores open for at least a year — shot up 22 percent in the first quarter, marking the fourth consecutive quarter of positive comps.

That’s quite a turnaround from the days preceding Barneys’ Chapter 11 filing in January 1996. The retailer exited bankruptcy three years later.

The prospectus on Barneys will soon be released publicly. A person familiar with the chain’s balance sheet didn’t rule out the possibility of a $500 million price tag, and said Barneys has a starting value of $400 million. That calculation is reached in part by multiplying the 14.1 million shares outstanding by Barneys’ stock price, which has been in the $20-per-share range. In addition, most buyers assume debt, and the chain’s long-term debt is $90.5 million, according to the firm’s annual report filed with the Securities and Exchange Commission in April for the year ended Jan. 31. Another $10 million for the cash on its balance sheet and $15 million for future debt notes reaches the $400 million figure.

Another way of valuing Barneys is to give it a multiple of one-times sales, also in the $400 million range. But with a little romance, which includes showcasing its prime real estate and expansion opportunities, Barneys might fetch $500 million, according to an accountant familiar with luxury firm valuations.

“A one-times multiple of sales is within the range for a luxury retailer,” the accountant said.

Barneys’ annual volume in 2003 was $409.5 million. For the fiscal year ending Jan. 31, the chain anticipates $464 million in sales. Someone familiar with the retailer’s operations said the company also expects a 44.1 percent jump in earnings before interest, taxes, depreciation and amortization to $49 million, from $34 million last year.
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