Steve & Barry's facing bankruptcy
Commentary: Once red-hot retailer becomes cautionary tale
NEW YORK (MarketWatch) -- How quickly retail fortunes turn.
Not too long ago, Steve & Barry's LLC was lauded as a model of apparel retailing. The chain, based in Port Washington, N.Y., started out as a scrappy retailer selling college-themed apparel with not much to make it stand out.
Fast forward a few years and it had hit on a winning formula: selling celebrity designed and endorsed clothing and accessories, at dirt-cheap prices, with many items selling for less than $10.
Steve & Barry's attracted attention when it rolled out Starbury, a line of $14 basketball sneakers in association with National Basketball Association star Stephon Marbury of the New York Knicks, and perhaps its biggest coup was cutting a deal with actress and fashion icon Sarah Jessica Parker. Parker's line, Bitten, received loads of publicity and raised Steve & Barry's profile with the fashionista set.
The retailer's other celebrity partners include tennis star Venus Williams
, surfer Laird Hamilton and actress Amanda Bynes. It was marketing genius, cheap "designer" clothes at a time when the economy was sputtering. They plugged into the fast-fashion trend and were more accessible than H&M, sassier than Zara.
Now, Steve & Barry's -- which has more than 200 stores -- is having trouble paying the bills and is considering bankruptcy and liquidation, The Wall Street Journal reported.
One problem was that most of its earnings came in the form of one-time payments from landlords, often for $2 million to $3 million, each time it opened a Steve & Barry's store, the Journal reported, and there was little profit from ongoing operations. New stores were unable to keep up the opening momentum.
The company could be looking at a bankruptcy as early as this week, the report said, and is trying to line up about $40 million in debtor-in-possession financing if it must file for bankruptcy protection. It has also reached out to Wal-Mart Stores Inc.but the response has not been positive.
Even though Steve & Barry's has seen some success, times have changed drastically from even 18 months ago, and retailers and investors are much more cautious about the types of business risk they will take on.
The retailer surely has its own particular problems and its decline cannot be blamed purely on the economy's gyrations, but Steve & Barry's fall from success story to cautionary tale illustrates the unforgiving nature of the retail industry right now.
-- Angela Moore
, U.S. commentary editor