Most Recent Articles In Department Stores
Latest Department Stores Articles
- Karstadt Interim CEO Steps Down
- Terry Lundgren Upbeat as Macy's Profits Rise
- Macy's Q2 Earnings Rise 3.9%
More Articles By
NEW YORK — Barneys New York is having a full-circle moment.
After nearly 20 years, the iconic specialty retailer is returning to its Chelsea roots.
In 2017, Barneys will open a 57,000-square-foot flagship at Seventh Avenue and 16th Street, its old stomping ground. The five-story unit will have 200 feet of frontage along the majority of Seventh Avenue between 16th Street and 17th Street and wrapping the corner of 16th Street. It’s the same building where Barney Pressman started his discount men’s wear business in 1923.
Barneys will continue to operate its Madison Avenue store.
The new downtown unit will be about half the size of the original Barneys flagship, which at the height of its prowess measured 120,000 square feet and encompassed the entire Seventh Avenue frontage from 16th to 17th Streets. “This is the right moment to do something like this,” said Mark Lee, chief executive officer of Barneys New York. “We think there’s a void in the market. There are smaller boutiques and some monobrands and the Internet. Nobody has come along since we left to completely capture and create a real destination.
“I always had in the back of my mind the idea of this location,” Lee continued. “We really did a lot of diligence, thinking about the new downtown and looking at a lot of spaces. Over the years we looked at dozens of spaces. At the end of the day, this was an opportunity.”
The timing is also right financially to invest in a second Manhattan flagship, Lee said. “A few years ago we knew there was this opportunity, but we were not in a financial position to make this kind of investment,” he explained. “Richard Perry [Barneys’ chairman] coming on as majority investor allowed us to have an absolutely clean balance sheet. That, coupled with our strong operational performance, enables us to make this comeback. In the last few years, we’ve closed a significant amount of stores — 16. Any real estate decision is taken really seriously.”
Prior to Perry’s involvement in 2012, Barneys had about $590 million in debt. Perry’s hedge fund, Perry Capital, Barneys’ largest bondholder, converted its debt into equity, giving Perry a majority stake in the company and wiping out the nearly $600 million in long-term debt Barneys had on the books.
Lee declined to discuss volume projections for the new flagship. In terms of Barneys’ overall business, he said the retailer is aiming to do a total of $1 billion in sales and “we’re in a very good trajectory toward that.” The company’s volume was $800 million in 2011 and experienced a record year in 2012. Lee said, “2013 is shaping up as another record year. Business has been very strong. I have to knock wood.”
Lee dismissed the idea of cannibalization when the downtown flagship opens. “We did convert the small Co-op store on Atlantic Avenue in Brooklyn to a small Barneys,” he said. “We ran the zip code analysis and looked at the customer database and it’s shockingly small in terms of real downtown zip codes. That led us to believe this was an untapped opportunity. Given our history, since 1923 and through the Nineties, and given our name, we have a claim on dominating the New York region.
“To do something downtown, it needed to have enough presence so that it could stand next to the [235,000-square-foot] Madison Avenue flagship,” Lee said. “The downtown store will have a huge presence with a huge facade and two entrances. Although it’s only 57,000 square feet, one-fifth the size of Madison Avenue, if you drive by, it will feel and look like a nice bookend to the uptown flagship.”
Lee said the real estate deal was built “in a solid, prudent financial manner,” adding that the company figured out “what we could pay for it and what we could project. We feel very confident.” Barneys is leasing the downtown retail space from Equity One, which owns the retail unit. “We think it’s a fair deal for them and for us,” said Lee. “We are a long-term tenant.”
Any tenant faces the prospect of having to renegotiate its lease, as is the case with the flagship on Madison Avenue and 61st Street. The lease expires in 2019, but rents are usually negotiated years in advance. On Madison Avenue between 57th and 72nd Streets, asking rents in the fall climbed to $1,380 a square foot, a 42 percent leap over fall 2012, according to the Real Estate Board of New York.
“There’s no news on uptown,” Lee said, responding to a question about whether Barneys has begun to renegotiate. “We’re having two flagships in New York. Uptown is staying put.”
The downtown flagship will feature men’s and women’s designer clothing, shoes and accessories; a Foundation level for cosmetics, skin care and fragrance, and a Freds restaurant on the top floor. It was too soon to talk about merchandising, Lee said, but he allowed that the breakdown of men’s and women’s will be consistent with the Madison Avenue unit.
“Men’s is the history, but women’s is the significant business today,” he added. “That’s a change from the old days. We’re planning it in line with the business today. We’re going to have a great time assorting. The store is a fifth of the size of Madison Avenue, and we’re going to be turning brands and designers away because we can’t fit everything from Madison in,” he said. “It will be, as always, the best of the best and a great edit. We’ll get a broad spectrum of customers, just as we have uptown.”
Lee and his team are planning to build a store of tomorrow, since the opening is still a few years away.
Barneys’ namesake opened the downtown store 90 years ago with the $500 he got from pawning his wife’s engagement ring. The original store sold discounted men’s wear that Pressman bought at sample sales, closeouts and auctions. Son Fred slowly transformed the store from its discount roots to a purveyor of European designers. Women’s clothing was introduced in 1976, and a full-fledged women’s store was unveiled in 1986 in a row of six town houses and two larger adjacent buildings.
“That sweeping staircase is so memorable, and the restaurant downstairs — there were always so many people great hanging out there,” said Simon Doonan, creative ambassador to Barneys. The store had a cultural focus, said Doonan, with its vintage Schiaparelli jackets, new designers from Belgium and Romeo Gigli. “It was very much an intense style hub. That was the jump-start of it. Fashion and art and culture all came together at that store. It’s very logical to do it all again. Mashing up has reached a real zenith, so it’s perfect to reestablish that center.
“I was hired in the beginning of 1986,” Doonan added. “I walked into the men’s store and saw Andy Warhol and Jack Nicholson shopping, but not together. Cindy Crawford and Richard Gere would come in. They were the couple du jour. You’d see Lenny Kravitz and Lisa Bonet. And the artists, Basquiat used to buy Comme des Garçons suits, and he would [use] them to wipe his brushes on.”
The new downtown flagship won’t be an exercise in sentimentality. “We didn’t do this just for nostalgic reasons,” Lee said. “We think we’ll open in 2017, which is a long way from 1997 [the year the original flagship closed]. The store is really being built and strategized as a modern investment for a modern downtown.”
“I don’t know that so much of the focus [of the new store] is about being sentimental,” said Tom Kalenderian, general merchandise manager and executive vice president of men’s at Barneys. “There is some charming nostalgia about the Chelsea location. Yes, without a doubt it’s sweet, but it’s really about the business.”
“The downtown store seemed like it was always in a constant state of renovation,” Kalenderian added. “Fred [Pressman, Barneys’ son, who took over the business in the Seventies] was one of the most modern-thinking retailers. Fred brought in [Giorgio] Armani. That’s very consistent with how we operate today. We’re trying to promote more cross-shopping and a store that’s really logical and modern. The current expansions and renovations we’ve done provide an idea of what the new store will look like. The market will be driven by designer, not casual.”
“I was obviously very happy to learn about this,” Armani told WWD. “The news of Barneys reopening in its original location took me back to the beginning of my career, when my brand landed in the United States for the first time, finding an important partner in Barneys. The ‘One Night Only’ event I recently held in New York was a celebration of my success in the States, and my collaboration with Barneys was one of the key starting points of this incredible journey.”