U.S. luxury department-store chain Barneys New York Inc is nearing a roughly US$270 million deal with brand developer Authentic Brands Group that could lead to Barneys shops opening in Saks Fifth Avenue stores, people familiar with the matter said on October 14th. 

Without an offer from Authentic Brands, Barneys faced winding down its business entirely. It filed for bankruptcy protection in August, citing rent hikes as a factor in its decision.

Authentic Brands’ offer for Barneys calls for a handful of its storied brick-and-mortar outposts to remain open, potentially including its flagship Madison Avenue store in Manhattan and its Beverly Hills, California, location, the sources said.

Whether the existing retail locations remain open will depend on negotiations with landlords, they said. Barneys currently has seven physical retail locations remaining. 

As part of the Authentic Brands deal, it will license the Barneys name to Hudson’s Bay Co (HBC), the owner of luxury department store chain Saks Fifth Avenue, the sources said. The agreement would also allow HBC to operate the Barneys website, one of the sources said.

The expected deal with Authentic Brands sets a floor for bids in a bankruptcy-court auction scheduled for later this month, should any arise. A group led by fashion executive Sam Ben-Avraham has explored a bid for Barneys and is continuing to work an a potential deal that envisions keeping many of the retailer’s current stores open, one of the sources said.

Ben-Avraham did not immediately respond to a message seeking comment.

“We are encouraged by the strong buyer interest and recognition of the value in the Barneys assets and brand name,” Barneys CEO Daniella Vitale said in a statement.

“We continue to work diligently on the sale process with the goal of maximizing value and ensuring a long and successful future for the benefit of our employees, customers, vendors and other business partners.”

Authentic Brands did not immediately respond to requests for comment. HBC declined to comment. The sources spoke on the condition they not be identified because the discussions are confidential.

The Wall Street Journal reported on the value of Authentic Brands’ bid for Barneys and its partnership with HBC earlier on October 14th.

Barneys is one of the most high-profile victims of the downturn in retail, and underscores how even luxury department stores are not immune from fierce competition with e-commerce firms such as Amazon.com Inc.

In addition to its upscale department stores and Freds restaurants, Barneys operates Barneys Warehouse outlets. 

Barneys made its name in the 1930s by placing women dressed in barrels outside beer halls in New York City, where they would hand out matchbooks advertising the store, according to the retailer’s website. The store began as a destination for middle-class families and it transitioned to luxury fashion in the 1960s.

Source: Financial Post