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.

Headline Links: Bankruptcy hits Steve and Barry’s

Background: ‘Fashion and “Sin Sectors” Flourish Despite Economic Downturn’

Opinion & Analysis: Discount apparel democratizes fashion, but at what price to retailers?

Reference: Bargain hunting guide


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