Barney’s In Credit Penalty Box?

Credit is drying up for Barney’s. It’s on the block, but price expectations need to come down to Earth. Indirect impact on vendors is a greater consideration than a near-term hit.

Rumors are swirling in the industry that the Factors (intermediaries facilitating frictional credit between retailers and suppliers) have put Barney’s in the penalty box and stopped approving Spring orders. Unfortunately for Barney’s, this is usually a self-fulfilling prophecy in that once ‘payment issues’ are the topic du jour, it usually ends up impacting product flow and business to a greater degree.

I’m not sure if the issue here is solvency. In fact, since Istithmar (Dubai’s government-funded investment arm) bought Barney’s from JNY in 2007, it has underperformed, but remains profitable. The issue is that there is no CEO, and Istithmar is trying to sell Barney’s for a price in the vicinity of the $942mm it paid JNY in July 2007.

Guess what Istithmar… the 14x EBITDA you paid in mid-2007 before the credit crisis is a lot different from where such an asset would be priced today. You should know this -- $75 oil helped fund your mid-’07 purchase when you outbid Japan’s Fast Retailing. Not as much to bank on after a 45% slide in oil, a 2-3 point slide in margins, and weaker sales on the margin. I’d need to assume a high teens multiple no for anything close to $1bn. Sorry… no can do.

Fortunately, no vendors are overly exposed to Barney’s. Most of the companies dependent on Barney's listed in public documents (per Cap IQ) are systems and software-related. But Barney’s is an important ‘showcase’ account. For example, Timberland had a big win when it got a pair of its lux boots sold in Barney’s last year. This creates a halo effect for the brand. Saks is not exactly knocking the cover off the ball either. I don’t like seeing fewer showcase locations. If Barney’s situation gets worse, this will definitely nudge some companies into evaluating how they approach brand positioning.

An important consideration is if that Barney’s credit issues are solely because of uncertainty around its future ownership – but as a stand-alone retailer it remains a viable entity (quite possible), then this could be an opportunity for those retailers with solid balance sheets (i.e. RL) to pick up a few points of share by working with Barney’s during this period.

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

Today 12PM ET: LIVE Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more