Steve And Barry's files for Chapter 11

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By Anne D'Innocenzio, AP Business Writer

 

NEW YORK - Steve & Barry's, once a growing force in low-price0 fashion retailing, said Wednesday it filed for Chapter 11 bankruptcy protection, the latest merchant to succumb to a harsh consumer spending climate.

 

It also announced that it is considering a plan to sell all or some of its assets to repay outstanding debt, and said it is eliminating 172 corporate and field staff positions immediately.

 

The chain operates 276 locations in 39 states and made a big splash with merchandising endorsements bbbby actress Sarah Jessica Parker and other celebrities.

 

The parent company and 63 of its affiliates filed for protection from its creditors in the U.S. bankruptcy court for the Southern District of New York.

 

It joins home furnishings chain Linen 'n Things, catalog retailer Lillian Vernon and specialty retailer Sharper Image in filing for bankruptcy protection this year.

 

Steve & Barry's officials blamed a cash crunch as a result of tighter credit markets and sluggish economic conditions. That hurt its plans to open stores and its ability to borrow money.

 

"The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords and to our company," Steve Shore and Barry Prevor, co-founders and co-CEOS, said in a statement. "It has become increasingly difficult for us to continue operating normally under these circumstances."

 

They also noted that speculation in the marketplace about the company's cash issues in recent weeks became "self-fulfilling prophesies." They said that many suppliers cut off access to services and supplies. They said landlords stopped making "contractually owed payments for construction and store opening work" the retailer performed.

 

"As a result of all of this, our loans have gone into default, and we have had no alternative but to file Chapter 11 to enable continued operations," they said.

 

The bankruptcy filing marks a hard and fast fall for Steve & Barry, founded in 1985. Its success was built on selling $10 apparel while keeping costs low by using virtually no advertising, manufacturing its own clothes and selling in large volume.

 

In fact, its low-price fashion formula should have thrived in this environment as shoppers have been trading down to cheaper stores. But the founders conceded that in this climate, marketing prowess and cheap prices just weren't enough.

 

From a sales perspective, the company's founders said that the chain performed well, with total sales in the first five months of 2008 rising 70%; average store sales rose 25% and same-store sales, or sales at stores open at least a year, rose 15%. In particular, its exclusive branded lines of merchandise created with Parker and others have performed "exceptionally well."

 

But that was not enough given the overall tightening of credit and harsh economic environment. The company noted that high costs of materials and fuel prices have increased the costs of goods and cost of operating.

 

Company founders also noted that its customers are "feeling the pain of high food and gas prices and declining home values, and many of them are being forced to shop closer to their homes and cut back on discretionary purchases."

 

Sharper Image, which filed for bankruptcy protection in February, is now being liquidated. In early June, Sharper Image said it is selling its remaining assets to an investment group for $49 million, a markdown from the price that the fallen retailer had negotiated in May as part of its liquidation.

 

 

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As I understand it, they owe Schneider National and some other carriers ample sums of money, so these stores aren't likely to be re-stocked soon. Now might be a good time to pick through before they fall completely to hellz.

[brwrsfan]

Well that sucks. I would always head down to the one on State St whenever I was in the Madison area. Couldn't resist stocking up on some more Badger apparel - can't beat the prices or the massive selection. Sad... http://forum.brewerfan.net/images/smilies/frown.gif

[drezdn]

I'll admit it, I actually liked their shoes and jeans.

[bjkrautk]

Their old "Buy 1 T-Shirt, get 5 Free" sales campaign takes on a whole new meaning now.

 

I always appreciated the old store down on State Street, but they've massively overextended themselves in the past 5 years. Can't say I'm surprised to hear they're going bankrupt.

[lcbj68c]

I always go there for jeans now. Nice jeans at like $6-8 bucks a pop. Also, university apparrel tends to be quite cheap, even warm stuff like a hooded sweatshirt.

[burniebrewer]

Geez, I've had a gift card for over a year that I haven't used--maybe I should look into buying something.

[InsomniacInkRoss]

I had no idea how a place could stay in business selling everything for $8, but maybe it can't

[dadofandrew]

They'll reorganize and probably come out much stronger, as they'll settle their debts for 50-70 cents on the dollar.

 

As Ben says, they have a good model, just grew too quickly and got carried away.

[endaround]

How is making all your money through lease bonuses a good business model? Its not that they expanded too quickly, its that they couldn't expand anymore and their ponzi scheme fell apart.

[burniebrewer]

Bringing this thread back....

 

Just got back from S&B at West Towne in Madison and they are definitely going out of business. Everything is for sale including the display TVs. I think everything in the store is 50-80% off.

 

Anyway, I got out of there with 10 items of clothing for $30. I bought two pairs of Starbury basketball shorts (kind of look like Knicks jersey shorts) after discount for $1.89/pair. I also bought 7 college logo tees (good quality, not S&B label) for $3.99/each or less.

 

Just thought I'd post this in case anyone was interested in checking it out.

[Diskono]

I had no idea how a place could stay in business selling everything for $8, but maybe it can't

I think they get you in with things that look like good deals (like an $8 pair of pants or a coat), but then make their money back when you buy a bunch generic t-shirts for $8. Also, sweatshops.

[hawing]

Also, sweatshops.

Yeah, some years ago during a quiet moment at the library we were wondering out loud (though not too loud) if Steve and Barry's had a website. A google search yielded a monster.com ad seeking people to manage what were not named as sweatshops, but were very obviously sweatshops. I wish I could remember the euphemisms used in the ad.

 

I work two blocks from the State St. location and still never think to walk over and look to see what's left.

[burniebrewer]

Right now, everything is a good deal.

 

There are a lot of generic shirts with their own label. That's why I looked at the tag before grabbing anything.

[temke]

Just got back from S&B at West Towne in Madison and they are definitely going out of business. Everything is for sale including the display TVs. I think everything in the store is 50-80% off.

the southridge location is selling everything...cash registers, shelves, tv's (42" off-brand plasma for $700), tables, chairs, desks, mannequins.

 

really

[burniebrewer]

The one at West Towne had 36" TVs (doubt they were plasma) for I think, $300 (again, I think that's what it said.)

 

They are selling the rest as well. There was a bulletin board near the register with prices for all fixtures, etc.