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David Duprey/AP
Steve and Barry’s Not Immune to Economy After All
July 10, 2008 05:39 PM
by
Anne Szustek
The fashion retailer known for bargain-basement prices filed for bankruptcy Wednesday. It had been touted as a business model for businesses looking to weather recessions.
30-Second Summary
Steve and Barry’s may close its 276 stores, reports The Wall Street Journal. As of June 9, the retailer was cutting 172 corporate positions, some 1 percent of the company’s 16,000-odd staff, all of whom may be expecting pink slips sometime in the near future.
The retail chain had posted a 70 percent increase in sales from the beginning of 2008 through the end of May. But a dwindling cash flow, underscored by its default on a $197 million loan, has left the company scrambling to find $30 million to cover its balance sheets. Chicago-based retailer Sears has emerged as one of a host of possible buyers.
A large portion of the company’s $1 billion in reported annual sales amount came from its product lines designed by celebrities such as actress Sarah Jessica Parker and basketball star Stephon Marbury, often retailing below $10.
The company prided itself on its operational frugality. For example, the corporate offices in Port Washington, N.Y., are furnished with items sourced from the basement of store cofounder Barry Prevor.
But much of the retailer’s cash flow came from mall operators looking to lure Steve and Barry’s, prompting the chain to add more stores, which in turn cut into profit margins.
“While there’s talk of Sears looking at the company and some of its assets, that’s not going to happen. … There’s no proof that Steve & Barry’s ever had a working model. The margins were too low,” said Stevan Buxbaum, executive vice president of appraisals and liquidation firm Buxbaum Group.
The retail chain had posted a 70 percent increase in sales from the beginning of 2008 through the end of May. But a dwindling cash flow, underscored by its default on a $197 million loan, has left the company scrambling to find $30 million to cover its balance sheets. Chicago-based retailer Sears has emerged as one of a host of possible buyers.
A large portion of the company’s $1 billion in reported annual sales amount came from its product lines designed by celebrities such as actress Sarah Jessica Parker and basketball star Stephon Marbury, often retailing below $10.
The company prided itself on its operational frugality. For example, the corporate offices in Port Washington, N.Y., are furnished with items sourced from the basement of store cofounder Barry Prevor.
But much of the retailer’s cash flow came from mall operators looking to lure Steve and Barry’s, prompting the chain to add more stores, which in turn cut into profit margins.
“While there’s talk of Sears looking at the company and some of its assets, that’s not going to happen. … There’s no proof that Steve & Barry’s ever had a working model. The margins were too low,” said Stevan Buxbaum, executive vice president of appraisals and liquidation firm Buxbaum Group.
Headline Links: Bankruptcy hits Steve and Barry’s
“A souring economy has made this a brutal period for retailers, who are pinched by slackening consumer spending and higher transportation costs. For Steve & Barry’s, which ran its operations on the thinnest of margins, these factors made it all the more difficult to survive,” The Wall Street Journal reports. TA Associates, which provided $320 million in capital to the retailer, “faces far worse recovery prospects” than does GE, another major lender, in recouping its losses.
Source: The Wall Street Journal
For the moment, “the chain’s 276 stores remain open, with gift card, store credits and return policies continuing as is,” according to The Wall Street Journal’s Law Blog.
Source: The Wall Street Journal Law Blog
Many of the store’s celebrity signature lines, such as Dear by Amanda Bynes, Bitten by Sarah Jessica Parker and Eleven by Venus Williams are not owned by Steve and Barry’s, and thus might not be included with the sale of the company, Women’s Wear Daily explains.
Source: Women’s Wear Daily
Background: ‘Fashion and “Sin Sectors” Flourish Despite Economic Downturn’
Despite rising unemployment, financial industry woes and falling real estate prices, as of May, check-out lines at the Steve and Barry’s midtown Manhattan store were 20 people long. Analysts were advising “sin-sector” alcohol and entertainment stocks as a bulwark against the economic slump.
Source: findingDulcinea
Opinion & Analysis: Discount apparel democratizes fashion, but at what price to retailers?
Robin Ghivan, the editor of the fashion page for The Washington Post, writes in an editorial for fashion magazine Harper’s Bazaar that the advent of ready-to-wear clothing lines allowed people outside of the fashion world, as well as lower-income consumers, to dictate trends. “Now it’s possible to go into Target and buy a $29.99 designer frock along with a new litter box for Fifi. … Pop stars have become designers; designers have become TV stars.”
Source: Harper’s Bazaar
Reference: Bargain hunting guide
FindingDulcinea’s Web Guide to Bargain Hunting has a host of resources to help online shoppers live richly on a tight budget, including how to snare the best deals, score free samples and find e-retailer coupon codes.
Source: findingDulcinea
© 2010 Dulcinea Media, Inc.
