Istithmar, the private equity firm from Dubai that owns Barneys New York, is reportedly considering selling the fashion retailer. According to the New York Times and Bloomberg News, no deal is imminent.
Barneys was bought by Istithmar in 2007 for $942 million after a fierce bidding war with Fast Retailing Co. Ltd. (Yamaguchi, Japan), which owns the Uniqlo specialty clothing chain.
The Times said Istithmar’s purchase of Barneys left the luxury chain burdened by heavy debt and weakened credit. The struggling economy has cut heavily into sales and delayed new store openings. Barneys does not report sales figures but Moody’s said same-store sales were negative for the chain during the holidays. And discounting merchandise has eroded its profit margin. The Times noted that recent promotions have offered merchandise at a 75 percent discount. In November 2008, Moody’s downgraded Barneys credit ratings, citing deteriorating business conditions.
Additionally, the company has been trying to endure a recession without a chief ever since former president and ceo Howard Socol resigned, in July 2008, and has yet to be replaced.
According to Bloomberg, Istithmar doesn't want to sell the business for less than the $942.3 million it paid in 2007. But speculation is that Barneys would probably fetch no more than $300 - $400 million in the current market. “The price they paid is fantasyland given what is happening now,” one industry insider told the Times.
Istithmar — which means “investment” in Arabic — is an arm of the Dubai government. It was one of seven Gulf funds that lost a cumulative 15 percent in 2008, according to Saudi bank Samba Financial Group.