Not even retail giants can afford to live in New York
CNBC reports that luxury retailer Barneys New York extended the term of its credit line by $50m, giving the famed department store money for growth, as well as needed cash flow to answer ongoing industry challenges.
But the main reason is because New York is too friggin expensive. Rent at Barneys’ building on Madison Avenue grew from almost $16m a year to around $30m a year in January, nearly wiping out the company’s earnings before interest, tax, depreciation and amortization.
AR-you kidding me-BITRATION
Well, rent did rise significantly, but Barneys hasn’t filed for bankruptcy yet. Instead, it extended its credit line to literally buy more time to afford its rent — all so it can keep competing in the losing race of retail.
The retail industry continues to bleed out…
With the rise of online shopping and D2C commerce, upper-echelon department stores like Barneys have proved that they’re not immune to the internet’s ways.
So to confront that reality, brands like Barneys are launching expensive new initiatives to get the company hip to how the cool kids want to shop.
The department store recently announced new growth plans, and both in-store and digital innovations — like an incoming luxury head shop on its way to Barneys Beverly Hills store (one is expected in New York as well).
But to sell in-store bongs, you’ve gotta afford rent
It’s not just Barneys. In 2017, a survey found that 12% of stores on one stretch of the Upper West Side were unoccupied and available “for lease.”
Ralph Lauren closed its Fifth Avenue store in 2017, while Lord & Taylor closed its Fifth Avenue flagship in January.
It’s hard to feel bad for a company that caters to elite yoga moms and investment bros, but if mainstays like Barneys can’t afford rent, how is American-dream Danny’s vegan handbag store supposed to?