Barney's Files For Chapter 11 -- Apparel Chain Seeks To Restructure Deal With Japanese Firm

NEW YORK - Barney's New York, the chic apparel chain that has been on an extravagant five-year expansion plan - bringing stores to Beverly Hills, Singapore and Seattle - has filed for Chapter 11 bankruptcy reorganization.

Company officials said Barney's took the action so it could restructure a joint-venture agreement with its Japanese retailing partner, Isetan Co. Barney's also filed suit against the partner. Officials said they did not believe any stores would be closed.

Barney's came to Seattle five years ago and established a store in the U.S. Bank Centre, at about the same time it opened stores in Dallas, Westport, Conn., and Costa Mesa, Calif. At the time, Barney's officials said they chose Seattle because of its maturing high-fashion market.

There had been talk that Barney's was looking at expanding its presence here, perhaps by moving into the downtown Seattle Nordstrom store when Nordstrom moves into the former Frederick & Nelson store. It is unclear where those discussions stand and whether the Chapter 11 filing will change those plans.

The news of the bankruptcy comes at a time of increased anxiety in the retail industry, which suffered a poor holiday shopping season. Analysts expect a number of store closures and bankruptcies in the coming months as retailers scramble to pay their suppliers for merchandise shipped during Christmas.

In this case, however, Barney's officials stressed that the filing was a legal prerequisite to force the restructuring of its agreement with Isetan, which was to supply the major capital to build stores in New York, Chicago and Beverly Hills.

In a statement, Barney's President Charles Bunstine said, "The litigation and reorganization process is not expected to have an impact on our current expansion plans . . ."

According to press accounts, Barney's had faced cash-flow problems throughout the past year as a result of its expansion, which came at a time when most U.S. retailers were retrenching.

"Consumers started to feel that they could do better somewhere else," Kurt Barnard, president of Barnard's Retail Marketing Report, told Bloomberg Business News. "They never made an impact in other markets outside New York."

But officials of the privately held company said the 17-store chain had a 12 percent increase in same-store August-December sales from the year-earlier period.