575 Fifth Avenue
Barney's, Inc. is a specialty retailer of high-quality men's and women's clothing and accessories, as well as gifts, cosmetics, fragrances, housewares, jewelry, antiques, stationery, and luggage. It leases and operates three large stores in prime areas of New York City, Chicago, and Beverly Hills, California and a few smaller stores in lower Manhattan and other U.S. communities, plus several discount outlet stores. For decades Barney's was a single Manhattan store for cut-rate men's suits. Beginning in the 1960s it went upscale, and by 1990 it had established a chain of stores stretching as far as Tokyo. Because of overspending, the family-run company fell deeply into debt and filed for bankruptcy protection in January 1996. It emerged from bankruptcy three years later under new ownership.
Seventh-Avenue Clothing Store: 1923--88
Barney Pressman started out in the business by pressing pants for three cents each in his father's clothing store. He founded Barneys in 1923 with $500 raised by pawning his wife's engagement ring in order to lease a 500-square-foot retail space at Seventh Avenue and West 17th Street in Manhattan, with 20 feet of frontage and an awning on which were printed the words "Barney's Clothes." Pressman stocked the store with 40 name-brand suits and soon added a big sign reading "No Bunk, No Junk, No Imitations." Barney's was able to sell tailored clothing by noted manufacturers at prices well below list by purchasing showroom samples, retail overstocks, and manufacturers' closeouts, sometimes at auctions and bankruptcy sales. It also offered free alterations and free parking. As business grew, floors above street level were added to the store, beginning in 1934.
Barney Pressman knew how to publicize his wares as well as fill his store. He claimed to be the first Manhattan retailer to use radio and television, beginning with "Calling All Men to Barney's" radio spots in the 1930s, a parody of the introduction to the Dick Tracy show. To advertise Irish woolens, he sponsored radio programs featuring Irish tenors and bands playing jigs. Women encased in barrels gave away matchbooks with the store's name and address. He even chartered a boat to take 2,000 of his customers from Manhattan to Coney Island.
Barney Pressman's son, Fred, joined the business in 1946. The company had sales of about $13 million in 1965, when its name was Barney's Clothes Inc. Beginning in 1964, the store started to shed its discount image. Fred Pressman said in 1973, according to Business Week, that he became "convinced that the discount route definitely was not for us. My father and I have always hated cheap goods.... I didn't want to sell low-end merchandise. Now, many of those who chose to are verging on bankruptcy."
In 1970 Barney's erected an adjacent five-story building called the International House and added another floor to the original four-level store, which was renamed America House. International House, Fred Pressman promised, would feature complete collections of European designers, "from denim pants to $250 suits," not just a watered-down "potpourri of fabrics and models." The renovated America House, he said, would hold merchandise from "manufacturers who are in effect designers." Together, the wings now constituted&mdashcording to Barney's--the world's largest individual men's clothing store, occupying the entire Seventh Avenue block between 16th and 17th streets, with 100,000 square feet of selling space and 20 individual shops.
By 1973 Barney's had annual sales of $33 million and sales per square foot about double the average men's specialty store. The store was stocking 60,000 suits and employing 232 tailors for alterations. It was carrying full lines of such designers as Bill Blass, Pierre Cardin, Christian Dior, and Hubert de Givenchy. Barney's was the first U.S. clothing store to stock the full line of Giorgio Armani, with whom it signed an exclusive agreement in 1976. Its 13 buyers were free to reorder at any time of year. The twice-a-year warehouse sale, a Manhattan event for which prospective customers lined up outside the store, took care of overstocked inventory.
Barney's started carrying women's clothing for the first time in 1976, on the third floor of the international side, with fashions from more than 20 houses represented. Fred's son Gene, who was responsible for the plunge into women's wear, moved the women's area to a new top-level enclosure called The Penthouse the following year. Barney's also added housewares, cosmetics, and gifts to its inventory during this period. In 1977 The Pub, Barney's' restaurant in the store serving only carved roast beef, was renamed The Cafe and began offering salads, soup, and other sandwiches.
At Gene's behest, the apostrophe in Barney's' name was dropped by 1979, and about 1981 the company name became Barneys Inc. and the store Barneys New York. In 1981 the women's penthouse became a duplex. Some 80 percent of the women's merchandise was being imported, compared to 40 percent of the men's goods. In 1986 Barneys completed construction of a 70,000-square-foot women's store in a row of six restored townhouses and two larger adjacent buildings along 17th Street, two years behind schedule and at a cost of more than $25 million. The new store included a unisex beauty salon and restaurant, antiques, and accessories, gifts, and housewares boutiques. The New York Times article by Michael Gross on the opening called it "at least the equal of the best of its kind in New York, in terms of space, design, display and merchandise." It accounted for about one-third of Barneys' sales of some $90 million the following year.
Going National and International: 1988--95
In 1988 Barneys opened a 10,000-square-foot store for men in lower Manhattan's swank World Financial Center. Soon after, the company announced it would build a national chain of as many as 100 clothing stores, starting with three in Manhasset, New York; Short Hills, New Jersey; and Newton, Massachusetts. The proposed new stores would offer 75 percent women's apparel and 25 percent menswear, with the company's own private-label merchandise representing about 20 percent of sales. The stores were to be run by Barneys America, with Gene Pressman and his brother Bob as co-chief executives. (They later became co-presidents of the parent company; their father ascended to chairman, serving until his death in 1996.) To meet the ambitious goals, however, the parent company needed investors, and Wall Street looked askance at what Joshua Levine called "several sets of financial statements, depending on who was supposed to be looking at them."
Barneys found the financial partner it was seeking in 1989, when it announced a joint venture with Isetan Co., one of Japan's largest retailers. The agreement provided for Isetan to hold 80 percent and the Pressman family 20 percent in stores to do business in Asia under the Barneys New York name. The first of these, opened in Tokyo in late 1990, was the largest U.S. specialty store in Japan. Barneys would own 65 percent and Isetan 35 percent of Barneys America, with plans to open more small, upscale specialty clothing stores in malls. (The parent company reinserted the apostrophe in "Barney's" about this time.)
The original three Northeastern Barney's America stores were so intimidating to some women that a secretary visiting the Manhasset store (on Long Island's tony North Shore) called it "the kind of place you'd have to dress up to go shopping." A reporter covering this store's opening wrote that "Even the babies were dressed to the nines." The first U.S. branches under the new agreement were opened in 1990 in Dallas, Seattle, and Costa Mesa, California. Like the three Northeastern stores, they featured mostly women's merchandise and carried no men's suits. The goods at the Costa Mesa store included what Forbes writer Lisa Gubernick called "items the industry generally describes as 'fashion forward'--stuff that you tend to see more in magazines than on real people," such as skin-tight synthetics by the French designer Jean Paul Gaultier. Blouses in the Seattle store by the Italian designer Romeo Gigli ranged from $275 to $480.
By October 1990 Barney's America had opened a seventh store in Westport, Connecticut, and had added tailored clothing for men. It also opened stores in Houston and Cleveland in 1991. Meanwhile, a joint venture half-owned by Barney's and Isetan each was buying property for large new Barney's stores in midtown Manhattan, Chicago, and Beverly Hills, with Isetan committed to providing $236 million in acquisition and construction costs. The Chicago store opened on the city's fashionable Near North Side in 1992.
For the new 230,000-square-foot Manhattan Barney's--the largest new store in New York City since the Great Depression--the joint venture purchased an 11-story building on Madison Avenue between East 60th and 61st streets. This structure was gutted for a 22-story building with 14 floors of offices above the store. Extravagantly furbished with flooring made of exotic woods--and a marble mosaic on the lobby floor--gold-leaf ceilings, and lacquered walls, the new Barney's cost $267 million, according to one account. It opened in 1993. The following year Barney's New York also opened, at a cost of $120 million, a 125,000-square-foot store in Beverly Hills, including a five-story underground garage hastily built to meet an unforeseen zoning ordinance.
The Madison Avenue store did good business in spite of stiff competition in its posh locale, but some of the trade was at the expense of the downtown store. Sales in Beverly Hills suffered from the recession-gripped California economy. Barney's America also played poorly in the provinces, where women were put off by hipper-than-thou black-on-black fashions and styling for pencil-thin models, with larger sizes sometimes hard to find. In Dallas, a flap developed when a Barney's employee said the beauty salon would not style "big hair." The Cleveland store closed in 1993. Company sales came to about $180 million that year and operating income to about $19 million.
By 1994 there were indications that Barney's' finances were in serious disarray. Some of the company's more than 7,000 vendors were refusing to furnish the chain with goods because of late payments--often as tardy as six months. The company's obsolete inventory and distribution systems were only beginning to respond to the installation of state-of-the-art computerization. There were tales about how the Pressmans--eight of them on the company payroll--helped themselves to store merchandise without accounting for it, according to the New York Times article "Haughty Couture" and Joshua Levine's "Let Them Wear Black." To relieve its cash-flow problems, Barney's turned to insurance companies, which purchased about $45-million worth of unsecured long-term notes.
In and Out of Bankruptcy: 1996--99
In September 1995 Barney's received a letter from Isetan, seeking to take control of the company after having spent $616 million on Barney's-related affairs, including about $168 million in emergency loans, personally guaranteed by the Pressman brothers, to cover the cost overruns for the Madison Avenue and Beverly Hills stores. Barney's also owed banks nearly $170 million and others about $150 million. Instead of reaching an agreement with its creditors, Barney's filed for Chapter 11 bankruptcy in January 1996. It was later revealed that in fiscal 1995 (the year ended July 31, 1995) the company lost $120.8 million on sales of $338.7 million.
Isetan, whose claims came to $480 million, won a judgment against the Pressmans for the loans they personally guaranteed. It also won title to the three Barney's New York stores in New York, Chicago, and Beverly Hills. The original Barney's closed in 1997. Four Barney's America stores, including the ones in Houston, Dallas, and Troy, Michigan, also closed in 1997. "Basically," Thomas C. Shull, who was named president of the parent firm, told the New York Times in August 1998: "Barney's had taken a New York store and placed it in other cities without really appreciating the needs and wants by market." He concentrated on making the enterprise more customer-friendly, "hip but not haughty."
Barney's, in fiscal 1996, lost $71.9 million, including a charge of $29.4 million for reorganization costs, on sales of $366.4 million. In fiscal 1997 the company lost $95 million, including a charge of $72.2 million for reorganization costs, on sales of $361.5 million. In fiscal 1998 it lost $20 million on sales of $343 million but recorded operating earnings of $17.7 million, compared to an operating loss of $2.1 million the year before. By the end of the summer of 1998 only seven Barney's stores remained in existence. In addition, there were 11 to 13 discount stores in early 1999 and a distribution center in Lyndhurst, New Jersey. Gene and Bob Pressman stepped down as chief executives of Barney's in June 1998.
A bankruptcy plan was approved in December 1998. It acknowledged Isetan's ownership of the three big stores and also granted the company a small equity stake of around 7.3 percent, $23.2 million in cash, and $15 million in annual rent payments by Barney's for the three big stores. Some 70 percent of the stock was allotted to Whippoorwill Associates Inc. and Bay Harbour Management L.C., so-called vulture investors who had bought Barney's' debt at an average of 40 cents on the dollar. In August 1998 they held $133 million (and about $149 million in December) of the estimated $320 million in secured claims and had provided, or had promised to provide, Barney's with an equity infusion of $62.5 million. They paid $240 million for their stake in the company. The Pressman family retained about 1.5 percent of the stock. Remaining trade claims against Barney's were selling for about 15 cents on the dollar in February 1998.