Barneys may be on the cusp of filing for bankruptcy protection as the luxury Manhattan retailer contends with high rents and shoppers going online, according to two media reports.
Reuters, citing unnamed sources, reported Saturday that Barneys has tapped law firm Kirkland & Ellis LLP and is weighing a potential bankruptcy filing among other options that could occur in the coming weeks.
The move is largely to address expensive leases, especially its flagship location on Madison Avenue in Manhattan, that are hampering the retailer’s business, the report said.
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CNBC also confirmed the report, citing unnamed sources, and noted that rent at the Madison Avenue store leaped from about $16 million to $30 million in January, almost eliminating the retailer’s earnings before interest, tax, depreciation and amortization. The location is owned by Ashkenazy Acquisition Corp.
Other retailers with Manhattan flagship locations have faced similar circumstances and have ultimately shuttered those stores. Ralph Lauren closed its Fifth Avenue store in 2017. Lord & Taylor shut down its Fifth Avenue flagship in January.
If it does file for bankruptcy protection, Barneys would follow a long line of retailers, especially mall brands, to succumb to the changing retail landscape.
Sears, Toys “R” Us, Payless and Gymboree have also filed for bankruptcy in the last year.
It would also underscore that luxury brands are also vulnerable to the stiff competition coming from online retailers, most notably Amazon.