Barneys is the Latest Retailer to File for Bankruptcy Protection
The retail market continues to be roiled, and this time the latest victim is a high-end retailer, Barneys. There is no question that ecommerce has caused the retail sector to shrink. Instead of walking into a store, consumers can shop and order practically anything they want online, which is then delivered straight to their door.
However, to date, most of the stores affected have been big box stores like Sears or K-Mart. Barneys is a luxury retailer that caters to the wealthy and had been around for almost 100 years, so the latest filing is a little surprising.
Falling Revenue and Skyrocketing Rent to Blame
According to Reuters, Barneys intends to close 15 of its current 22 stores and has taken on financing to help it reorganize some of its debts. The company is also looking for a buyer, which its bankruptcy attorney admits is not on the horizon.
The company spent at least 2 months trying to find a buyer before filing its bankruptcy petition. One cause of financial distress was its rent, which was hiked from $16 million to $30 million. The company was also being squeezed by high-end retailers that operate online, such as Farfetch and Net-A-Porter.
Financial Problems are Not Recent
Barneys has been down this road before. The company filed for bankruptcy in the 1990s and restructured debt outside of bankruptcy in 2012. Just last year, it needed another infusion of cash to the tune of $50 million to help it pay creditors. Vendors reportedly were delaying shipments to Barneys or demanding that the company pay in cash.
In its bankruptcy filing, the company reported funded liabilities of $200 million and $800 million in revenue from 2018. Its net operating loss was around $120 million.
Barneys currently employs 2,300 people. Many of them will likely lose their jobs, though some will continue to be employed in the 5 Barneys stores that remain open.
How a Chapter 11 Bankruptcy Can Help
Although Barneys has admitted it might have to liquidate the company, it has bought itself a little time by filing for bankruptcy. With a Chapter 11, the debtor can continue to operate as it works to restructure its debts or find a buyer. The bankruptcy filing prevents creditors from taking legal action, which allows the company to maintain cash. All debts will be dealt with in an orderly fashion, and some creditors might end up taking a haircut. Many companies have been able to come back from a Chapter 11, though others will eventually have to liquidate.
Contact Nowack & Olson Today
Our clients have ranged from individual consumers to small and family businesses. If your business is struggling, we can talk about your options. Some businesses can stay afloat and reorganize debt with a Chapter 11 while others should probably liquidate. There are many factors to consider, which you should review with an attorney.
Give Nowack & Olson a call at 888-813-4737. You can discuss your financial situation during a confidential consultation with a Plantation bankruptcy lawyer.