Questrom Authority

When the Barneys flagship on Madison Avenue was built in the early nineties, the eighth floor was earmarked for Gene Pressman’s exclusive health club – a place where Barney Pressman’s high-flying grandson could perfect his much-admired abs and the store’s most elite clientele could find well-appointed refuge. But as the Pressman era at Barneys recedes into a cautionary tale, this week the vacant top floor finally goes into service in a more populist cause: as the site of an ambitious $3.5 million expansion of the Co-op, the store’s seventh-floor mecca for young designers – and equally young customers – and the first major initiative of Barneys’ new CEO, Allen Questrom.

Simon Doonan, the store’s in-house stylist-provocateur and its creative director, is fiddling with one of the Co-op’s dressing rooms: a sheet of Plexiglas that holds row upon row of multicolored Tic Tacs. “We want to be kitschy and hip, but nothing too forced. None of that anal-retentive hip. We want theater and humor and a little bit of trouvé.

Doonan regularly peppers his utopian fantasies with French mots as he explains the inspiration for the whimsy and drama that has made Barneys, well, Barneys. For the Co-op, the “found object” was an airbrush poster of a budgie that Doonan discovered in a Long Island souvenir shop, which prompted him to hang vintage birdcages inhabited by live parakeets along the stainless-steel stairwell connecting the seventh floor to the eighth.

His other muse for the Co-op project is the 1954 Rock Hudson film Magnificent Obsession, set in a glowing, full-Technicolor hospital. “We’ll have blue walls and rubber plants and surgical lamps. It will be a chic-looking clinic. But we won’t upset the customers.”

Customers are, of course, top priority for Questrom, as the veteran luxury-retail executive moves to transform Barneys from bankrupt glamour palace to profit-making institution. And the Co-op, the once-quirky lab for unknown designers, has evolved into an exploding junior-miss style market, where sales are growing at twice the rate of the rest of the store’s – accounting for nearly a quarter of revenues in the women’s department.

Doonan sketches a pyramid to illustrate the breakdown of the store’s sales, pointing to a wide middle section where the Co-op is grabbing the lion’s share of shopper dollars. “And here’s the bottom line.” He draws two perpendicular lines at the bottom of the triangle, and then appears perplexed by his own picture. He shrieks, “My God! I’ve just drawn a Noguchi lamp.”

Perhaps it is best that Doonan leave the business plan to his new boss. “Allen Questrom,” Doonan intones with something between reverence and relief. “There are not too many fabulous people in retail. We are lucky that we got one.”

“We would be seated at the Thierry Mugler show,” recalls former Neiman Marcus VP Ron Frasch, “and he would be quizzing us on how many pieces we sold in Fort Worth.”

He may not know just how lucky. Allen Questrom was two years into his fourth retirement when he was approached by Barneys last spring. Tom C. Shull, an interim CEO, had spent a year dousing stores and cutting debt. In January, he’d finally pulled the troubled fashion empire out of bankruptcy. With Barneys emerging from the transition period in a healthier state, the company’s two major holders, Whippoorwill Associates and Bay Harbour Management, went looking for a new leader.

“I was on the company board at the time,” Questrom says with characteristic matter-of-factness, “and everyone agreed it was in the best interest for me to take over. So I decided to see if I could help them out.”

In fact, it had taken a few months of nudging to persuade the much decorated CEO to reenter the fray. Questrom had been busy skiing and biking his way around the world since he completed the spectacular turnaround of the Federated Department Stores chain in 1997. He had logged 200 days on the slopes during one recent global hop, cutting the trip short only reluctantly, because his wife, Kelli, missed their two Labradors.

Questrom likes to say that Kelli – “the quintessential Barneys shopper,” as one friend describes her – actually made the decision for him. “My wife basically kicked me out of the house.” He is leaning back in his seat at the round conference table in his Fifth Avenue office, popping lozenges cautiously. Tall and trim and bespectacled, he is a study in English tailoring. His urbane but guarded pose – not to mention a Boston accent as heavy as a Kennedy’s – evokes more politician than shmatte magnate. And despite running references to himself as “just an old man,” Questrom looks a decade younger than his 59 years. Teasing self-deprecation is part of his shtick, and it’s how he charms the employees, customers, and creditors alike. Which is what he needs to do if he wants to make Barneys a little less fabulous and a lot more profitable.

The most seasoned CEO might be daunted by the task at Barneys, but Questrom seems unruffled. He’s game enough to forfeit a salary in favor of an undisclosed amount of equity in the company – which could be a gold-rush payoff if the talk of taking Barneys public turns out to be more than speculation.

Questrom, after all, is no stranger to a high-stakes turnaround. In 1990, he was known as the $12 million man for the amount Federated offered him – $2 million a year for five years (plus a $2 million signing bonus) – to turn the overleveraged department-store dinosaur into a powerhouse. He did it in three years. Under him, Federated was transformed from a $15 billion, 400-plus-store white elephant into a retail leviathan. For an encore, he snapped up the competitor R.H. Macy & Company.

This was the crowning achievement for a man who, until then, had spent nearly his entire career at Federated. Questrom started out on the training floor of the A&S store in Brooklyn 35 years ago. He moved up quickly though the ranks, reviving the Brooklyn flagship in the process. A&S is also where he met Kelli, the pretty, pixieish girl he would later marry.

For his work in Brooklyn, he was anointed Federated’s turnaround guy and sent around the country to nurture the ailing and orphaned divisions. His first executive stint was presiding over Rich’s, a family-run department store in Atlanta, where he settled squabbles among feuding factions and turned the struggling division into the corporation’s most profitable one.

A dramatic success to his credit, Questrom was ready to leave the South and head for a bigger challenge. When the board couldn’t provide one, he took off on his first self-imposed sabbatical. He came back when Federated offered him the chairmanship of Bullock’s, a glitzy department store in Los Angeles, which he turned into the premier shop in the city. More than triumphing in business, the Questroms found a cultural home in Hollywood Hills. The couple embraced the Southern California lifestyle as social diplomats, becoming regulars on the gala circuit (Questrom loves to dance; a department store executive says, “He and Kelli are the first ones on the dance floor – and sometimes the only ones”). They sat on boards like that of the Los Angeles Museum of Contemporary Art, headed up charity foundations, and collected contemporary art.

Kelli is an astute collector, as Questrom attests: “My wife was collecting Basquiat two years into his career. She has a great eye.” Kelli, who worked as a marketing director at Ralph Lauren, has a reputation for cutting-edge taste. As one fashion buyer gushes: “Kelli is so elegant – she is one of the few women who can pull off Romeo Gigli, which is not easy.”

In 1988, Questrom’s charmed life took a very erratic turn when Canadian real-estate tycoon Robert Campeau gobbled up Federated in a hostile takeover – once called “the biggest looniest deal ever.” Divisions were broken up and sold off. Questrom, watching in horror as years of work unraveled, said good-bye and set off for his next retirement. Days later, Neiman Marcus called looking for a leader to guide the legendary Texas store. Questrom spent the next two years expanding it into a luxury chain until Federated’s desperate directors dangled the $12 million and begged him to return to the fold.

Though he prefers to treat his latest turnaround job as nothing more than a retail tune-up between skiing vacations, the stakes are high – if not for Questrom himself, then certainly for Barneys.

The Pressman sons, who had served as co-executives, had been muscled into one-year “consulting” positions. Gene Pressman, who recently assumed a contributing-editor position at Vanity Fair, describes his present relationship with the company as “mellow.” Brother Bob is applying his well-known accounting methods at Newmark Retail Restructuring, which provides advice for troubled real-estate companies.

Despite the shuttering of the Costa Mesa store and four off-site outlets, and the reduction of losses from $11 million to $7 million, the chain still carries a large debt load. As of May of this year, there was a revolving loan of $65 million from Citibank; another $61 million is owed to Isetan (the spurned Japanese partner from the ill-conceived Pressman-era expansion). Isetan, the landlord of the Madison Avenue, Beverly Hills, and Chicago stores, also collects $15 million in annual rent; the rent accounts for up to 7 percent of current sales in those stores, compared with the 2.8 percent a store like Neiman Marcus pays. Still, sales were up by 10 percent for the first half of this year.

Though he’s only been in charge for six months, when Allen Questrom speaks of Barneys, he uses the familial “we” utterly comfortably, invoking a stepfather who’s so secure in his authority that the family’s dysfunctional past is forgotten or forgiven. A longtime friend of Questrom’s, Loews CEO Laurence Tisch, believes it’s a perfect marriage of merchant and store: “Barneys is where Allen should be. He is a first-class businessman, and his native ability will make it succeed.”

For the childless Questroms, it really is a family affair. Allen jests about it, but his fashion-savvy wife (legendary on the Dallas benefit circuit for pairing a Chanel motorcycle jacket with a ballgown) may have wanted her husband’s last act in the retail world to be something she could relish. One front-row fashion player and friend of the couple suggests, “She’s whispering in his ear a lot.” During the spring collections in September, Kelli sat beside her husband at every show. “She’s always liked the avant-garde designers. She and Allen have shopped at Barneys for a long time,” explains Ron Frasch, the head of GFT (USA) who worked for Questrom at Neiman Marcus.

During his first weeks as the new chief, Questrom seemed to be everywhere at once: He visited the stores, chatted with floor managers and sales assistants, and sized up his new quarters.

Questrom’s secret is that he does not sleep. Frasch recalls, “He wakes up at four in the morning, and he takes a walk or bikes, and then he does all his paperwork – so when he arrives at the office, his desk is clean, and he’s ready to work.” And for him, work means getting out on the selling floor.

Rose Marie Bravo, who ran I. Magnin when Questrom was at Neiman Marcus and now heads up Burberrys, understands her colleague’s approach: “He’s a people person. At Barneys, he will figure out four or five initiatives, and he’ll see them through. He won’t get bogged down.”

Questrom freely dismisses Barneys’ employees’ notorious “igloo effect,” pointing out: “They may not be so friendly when you first come to the store. But once they get to know you, our people are more knowledgeable and more educated about the product.”

Questrom has a lot of affection for his people, no matter how unruly they might seem to others. He is especially proud of the merchandising team. The general manager of the men’s division, Tom Kalendarian, has been with the company for more than twenty years. “He can not only select the finest-quality product – he could probably make the suit. He grew up in the business,” marvels Questrom, who delights in this kind of old-fashioned-work-ethic nostalgia. If the men’s department impresses him, he is in awe of the women’s buying team, headed up by cool-hunters Judy Collinson and Julie Gilhart. Collinson has been snapping up new designers for fourteen years. She’s got the sartorial eye of a Gene Pressman and is legendary herself for launching and building esoteric design careers like Susan Cinciolo’s and Gregory Parkinson’s.

Questrom continues the pep talk: “This is a great store,” he declares, “and people want to work here. It’s like being part of the New York Yankees – a team that has had 25 championships in 100 years. There’s a bit of magic.”

But if he’s a proud father, he’s an exacting one, too. “Allen won’t go in and shake things up and bring in his own people. He’ll keep the core team,” says Ron Frasch. “He was the most demanding boss,” Frasch recalls of the hard-line Neiman years. “We had all been quite comfortable in our glamorous environment, but when he came in, he made us cut our support staff in half. Now all of the executives had to share assistants, and we were running divisions. We were all angry, but there was no room to argue, and he told us to figure it out amongst ourselves. He put that money directly into the sales floor. We figured it out and we got our work done. He made us better managers – but he was tough.”

“Stores come and go. Look at Charivari,” Questrom points out. “The ones that survive are the ones with new designers. We are very good at finding the nobodies.”

Frasch reports that Questrom was the first Neiman chief to accompany buyers to the European collections. “No chairman had ever done that. We were terrified. On the plane ride over, he drilled us nonstop, for nine hours. And then when we finally arrived at the shows, while everyone else in the front row chatted away waiting for the show to begin, Allen would ask us how the show’s designer was doing in our stores. It was torture. We would be seated at the Thierry Mugler show, and he would be quizzing us on how many pieces we sold in Fort Worth. So for the next collections, we came prepared. I lugged two heavy binders of our numbers all over Europe. While we waited for the show to begin, we would tell Allen exactly how many Dolce & Gabbana skirts were sold in Fort Worth that month.”

Counting couture pieces only solves part of the problem. Questrom is also focusing on growing markets. In the first week of January, a new bridal shop housed in the Co-op’s swank penthouse setting, complete with a terrace overlooking Central Park, will open. The atelier will offer daring designs from Azzedine Alaïa, Olivier Theyskens, and Josephus Thimister as well as a custom-veil-maker. Ellen Carey, who worked at Barneys and is now a retail consultant, applauds the strategy: “It’s genius, because with their reputation and their ideas, they’ll do it better than anyone else and it’s a good market to go into. It’s like the fur salon at Bergdorf’s. It’s meant to be there.”

There is also a private-label maternity line, Procreation, the brainchild of Collinson and Doonan. Questrom is excited to show off the clothing’s sweet pink label. Expectant moms can opt for leather pants and jeans with expandable waists. “As far as maternity wear went,” Barneys’ P.R. chief, Jason Weisenfeld, snickers, “the only thing we sold was Kiehl’s baby products … maybe.” The old Barneys simply would not have considered these blooming (and moneymaking) markets.

But the new 9,000-square-foot Co-op is the main arena of Questrom’s sales-boosting plan. And it isn’t just the size of the department that makes it different from the old days. In another break with the Barneys formula, the clothes will have a lot more color. “I think Bonnie Pressman did the all-black thing,” teases a competitive fashion executive. “Maybe if they had done more color back then, Barneys would have been profitable.”

Questrom hopes to cash in on the appeal to younger buyers; sales at the Co-op are projected to grow by 40 percent in this year. “It will be very item-oriented and have a quick and constant turnover rate of new pieces by young designers,” he says. (Questrom was known at Federated for his “20 percent policy”: no more than 20 percent of the merchandise on the floor can be more than three months old.)

Questrom describes the customer the Co-op targets. “It’s for a more confident and educated shopper who is not afraid to mix and match – who shops across the market.”

“We’re thinking Sarah Jessica Parker’s character on Sex and the City: Dolce & Gabbana top, ripped Levi’s, Fendi baguette,” Weisenfeld offers. Questrom adds, “Because now women wear a jean jacket with the designer dress,” identifying the twentysomething uniform. “And people shop across the market.” Gap sweater sets are paired with pashminas; $140 Helmut Lang T-shirts are worn with a pair of Canal Street cargo pants.

“Our customer will buy designer items on the fifth floor,” Questrom predicts, “and then come up here for weekend pieces – like for the beach.” Within the Co-op, the seventh floor will feature accessories as well as higher-end downtown designers like Prada Sport and Daryl K, while the eighth floor will carry a more casual tier of Juicy Couture and Three Dot T-shirts (not to mention Bond’s T-shirts, the Australian undershirts the store can’t seem to keep in stock). The eighth floor will also have a twenty-foot denim bar displaying Earl jeans and more obscure dungaree labels from abroad. “There is a denim thing happening right now,” Weisenfeld informs, “with that Gucci-feathered-jeans phenomenon.” In Gene Pressman’s day, capitalizing on last season’s Gucci trend, long after the elite fashion house has moved on, would have been as blasphemous as carrying a size 12.

“My friends were telling me,” Questrom goes on, “that their daughters were looking for less-pricey designer clothes. At the Co-op, they can find both casual items and career.” Weisenfeld quickly interrupts: “I’m sorry; we don’t refer to it as career,” politely modifying his boss’s slip into Federated-style retail-speak.

Questrom, however, has no intention of rolling racks of Charter Club business suits onto the Barneys sales floor. In fact, he has an acute understanding of the Barneys edge, despite some mispronunciations: “We’ve got Maharachi,” Questrom garbles the Maharishi label – a wildly popular London-based sportswear line that Barneys carried months before Saks Fifth Avenue got it and a year before Old Navy created its $24.99 knockoff version. He knows what’s hot and, more important, what sells. “There’s an accessories revolution going on in the industry right now,” he observes. “There was no interest in handbags or jewelry before; now it’s all about beads and fringe and patchwork,” all of which will be well stocked in the Co-op.

“Look at Fendi – three years ago that company couldn’t get arrested, and now, with the baguette, it’s the hottest company around. We were quick to get on that. The lifeblood of this business is new ideas, but you don’t have to always have the first idea.”

Questrom is grown-up enough to recognize a profitable idea – and isn’t ashamed to exploit it, either. One colleague recalls bumping into him in Paris recently: “I was wandering around the Left Bank one afternoon and ended up in this remote section, and I walk down the quiet alley and there’s Allen in the only shop open, holding a pile of pashmina scarves, trying to broker a deal with the owner – in English.”

Questrom says he’s not worried so much about the competition from the recent crop of Madison Avenue hyper-marts like DKNY and Nicole Farhi – lifestyle destinations with sleek in-house cafes and iMac stations.

“I’m more interested in what they are doing downtown than on Madison Avenue,” he says.

“Downtown has more innovation, but most of them are just copying Colette.” He knows the Paris shop, with its obsessively edited selection of accessories and clothes, is worshiped by fashion’s international set. “I visited the store two years ago when it first opened. I liked it a lot. It had a wonderful display, but it was not well executed. If you wanted to purchase the Japanese high-tech camera and walk out the door with it, you had to wait for a sales assistant to get one from the basement. It took forever.”

Questrom enjoys pointing out the trouble spots. He ticks off from a similar mental checklist when he visits the Manhattan boutiques. On Jeffrey, the meatpacking fashion emporium owned by former Barneys shoe-buyer Jeffrey Kalinsky: “I think he has talent, and I respect that he is taking a chance on opening a store in such a remote location. It’s not such a nice area at night. The friendly service can be a little overbearing – I can take it in doses.” On Kirna Zabête: “It’s nicely edited. They’ve gotten a lot of press. But it’s too soon to tell with any of them.”

But Questrom isn’t only taking notes. Impressed by the explosion of trendy boutiques opening below 14th Street, he’s upping the ante and returning to the old neighborhood, to steal back some of the thunder Barneys lost when it shuttered its 17th Street store.

The latest strategy, which emerged two weeks ago, is to convert Barneys’$2 17th Street warehouse, just a block west from the original store, into a freestanding Co-op shop. Slated to open this spring, it will offer its lower-priced collection of clothing and accessories as well as some men’s items. Barneys buyers were scrambling last week to increase their orders enough to fill the new store.

Kalinsky professes to welcome his former mentors back in the neighborhood – though the Barney’s annex, carrying some of the same vendors, will be only a few blocks north of his store. “I think it’s great news,” he says.

Questrom sounds like the old retail hand he is when he puts the boutique boom into perspective. “It’s no different from in the seventies or eighties. Stores come and go. Look at Charivari. The ones that survive are the ones with new ideas and new designers. We are very good at finding the nobodies.”

And according to Questrom, the shops in question only represent one point of view in fashion, while Barneys’ offers a fuller scope. Steven Alan, who pioneered the downtown lifestyle-boutique movement when he opened his Wooster Street shop in 1994 and who sells clothing lines to Barneys, agrees: “Kirna Zabête and Zao and some of the NoLIta shops are catering to one shopper. I call it the Face-and-iD-magazine-lifestyle point of view. Barneys knows how to curate a collection, and even if another store sells the same designer, Barneys will buy it differently. Most shops buy deep and shallow – lots of pieces of one or two styles. But Barneys selects pieces in order to create a story and not dismiss the designer.”

This is the reason why designers still kill to get a spot on the Barneys sales floor. “Questrom understands this,” Alan continues, “and he won’t ‘Federate’ the store.” Questrom knows his core customer and will not push out any Gucci Jackie bags to make room for cut-rate khakis.

“It’s still the best department store,” Sarah Hailes, co-owner of Kirna Zabête, spins, knowing full well that Barneys is a specialty retailer, not a department store, “with the best selection, best designers, best layout.”

Another downtown fashion doyenne gushes: “I love Barneys – it’s the most beautiful store.” But then she pauses and admits, “I went there a few weeks ago on a Monday night, and it was dead as a doornail. Fine – it’s midtown on a weeknight – but across the street DKNY was jumping. Don’t get me wrong, I adore Barneys: I dropped $3,000 that night, and I buy most of my clothes wholesale.”

So it goes. The extravagant Barneys that won the hearts of the fashion world must now compete in a fashion-retailing universe it helped create. No one seems to recognize this better than Questrom and his peers.

“There’s been a lot of backlash against the place,” the fashionista admonishes, “but God forbid Barneys wasn’t around. What would we do? They educated the retail world.”

Questrom Authority