The retail sector since the housing crash has seen its share of see-sawing but as the folks at Charles Schwab attest with their latest commercial, “Without Investors There is No Industry, Economy, Jobs, Growth.” Swing the propaganda over to the Fashion industry, and it’s hard to rebuke the facts. Christian LaCroix, Saks 5th Ave and their brush with bankruptcy, and Chanel have experienced their fair share of scares this past year.
Add Barneys to the list of distressed retailers.
Billionaire Ron Burkle’s investment firm Yucaipa Cos. has offered $50 million, that would allow Yucaipa Cos. to attain a 80% controlling stake in Barneys New York buttressed by last year’s significant purchase of Barneys’ debt via Citigroup Inc. for 60 cents on the dollar.
But, Barneys’ worries are far from over after financing companies dealing with Barneys’ shipments cut ties that provided shipment from designers to manufacturers. How does one alleviate the animosity? With more money.
In long term equilibrium, firms earn zero economic profit because of the free entry into the industry. In other words, eventually Barneys will cease to exist. How long the department store chain can survive remains to be seen.