Tuesday, April 14, 2009

Barneys Burps......

NEW YORK, April 13 (Reuters) - Standard & Poor's on Monday cut its ratings on Barneys New York Inc to a deeply distressed level and warned that vendors may tighten terms or limit shipments to the luxury retailer as its liquidity declines.

S&P cut Barney's credit ratings two notches to CCC, eight steps below investment grade, from B-minus. The outlook is negative, indicating an additional downgrade is more likely in the next two years.

"The downgrade reflects the deteriorating liquidity position of the company as demonstrated by the need for a cash infusion by Istithmar World," S&P said in a statement."

This news flash reported by Reuters is not one to take lightly. The unavoidable reality is that one of the pillars of Major Department stores in NYC is not at all well. The center can no longer hold. The cosmic reality check is seeping through the terribly clever Simon Doonan designed windows and spreading like a fungus throughout the well appointed floors. What disturbs me is that a store owned by a huge Dubai investment concern is scraping by, just barely. Vendors are forewarned that they must alter the terms /conditions of doing business with the retailer and that there is no clear and certain safety net.

My worry is that others like Barneys are only waiting in the wings. When you read again and again that Saks and Co. is in dire straits and Nieman MarcusGroup(Bergdorf Goodman's Daddy) are in strained financial positions it begs the question,"Are we headed for a massive shake up from the top down?"

All along it's been assumed that the designer would be first to go down for the count. That is still the case for many, but now the table is starting to turn. With the most sought after and prominent retail outlets in (semi-quiet) trouble, where does that leave the designer? One toils to create a collection,kills oneself and those on the team to break through to the coveted rack or said T-stand only to find out that your dream venue is sinking into the pavement. My fear is that too many will ignore the warning signs and fall prey to the siren song; throwing themselves and their companies into the lion's mouth. Astute business savvy? No. Desperation for what once was the best game in town? Yes.

If Barneys is but a burp, then Bergdorfs is likely to belch. Saks and Nieman's will more than likely fight over who gets the Heimlich first, leaving the loser choking on his tongue. This, granted, is a worst case scenario, but I have come to believe that if one prepares oneself for the worst then if all turns out well, it's a very welcomed and happy surprise.

Let's hope for the very best, but be prepared for something less.

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