Steve & Barry's just announced they've filed Chapter 11 bankruptcy. So that probably means the store that was supposed to open in the old Tower Records space on 4th Street isn't opening anytime soon. Though Steve & Barry's sales increased 70 percent in the first five months of 2008, they couldn't conquer the flailing economy. And all the rumors about the company's financial woes haven't helped either. The chain's founders, Steve Shore and Barry Prevor, said in a statement:
Recent rumors and speculation surrounding Steve & Barry's financial situation have become self-fulfilling prophecies. Many suppliers are rightfully nervous and cutting off access to services and supplies. Landlords have stopped remitting contractually-owed payments for construction and store opening work performed by Steve & Barry's. 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.
Steve & Barry's 276 stores will remain open and conduct business as usual today. Thanks to the Chapter 11 filing, its employees will remain protected as well. Click through for the full release.
STEVE & BARRY’S® INITIATES CHAPTER 11 CASE
Steve & Barry’s Stores Open and Serving Customers as Usual
Taking Steps to Reduce Operating Expenses
(PORT WASHINGTON, New York, July 9, 2008) – Steve & Barry’s LLC and 63 of its affiliates announced today that they have initiated cases under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, to address the Company’s financial challenges.
Steve & Barry’s stores and operations across the nation, including its 276 retail locations, are open today and conducting business as usual. The Company’s gift cards and store credits will continue to be honored as always, and its return policies will remain in place.
The Company said that the commencement of Chapter 11 cases was based on a combination of factors, including a liquidity shortfall as a result of credit market volatility and general economic conditions, which, in turn, have impacted the Company’s store opening plans and borrowing capacity. The Company has performed very well from a sales perspective, with total sales in the first five months of 2008 up 70%, average store sales up 25%, and comparable store sales up 15%. In particular, its exclusive branded lines of merchandise created with high-profile entertainers and athletes have performed exceptionally well.
As part of the Chapter 11 process, the Company is moving forward with operational improvements in tandem with exploring a potential sale of the Company and/or its assets, to repay outstanding debt.
The operational improvements include taking immediate steps to reduce expenses through staff reductions, office consolidations, and other actions. Steve & Barry’s began this initiative today with the reduction of 172 corporate and field staff positions.
The Company also filed customary “First Day” motions to support its employees, customers and suppliers by providing for the Company’s corporate and field associates to continue to be paid in the usual manner, and for their medical, dental, life insurance, disability and other benefits to continue without disruption. Suppliers will be paid under normal terms for goods and services provided after the filing date of July 9, 2008. The Company has obtained an agreement from its secured lenders to use cash collateral for its operating needs.
Steve & Barry’s Founders and co-CEOs Steve Shore and Barry Prevor commented, “Steve & Barry’s opened its first store 23 years ago with the mission of providing affordable, quality clothing to everyone. This mission has grown beyond our wildest dreams, providing our customers with 80 million units of affordable clothing and accessories during the past year alone – including products designed and endorsed by celebrities who have believed in our vision. Every one of these lines has met with great success. BITTEN™, by Sarah Jessica Parker, transformed our stores overnight into a destination for women shoppers and has grown at an unprecedented pace since its launch in June 2007.
“Unfortunately, in the current credit and economic environment, this has not been enough. High costs of materials and fuel prices have increased our cost of goods and cost of operating. Our 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. The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords, and to our Company. It has become increasingly difficult for us to continue operating normally under these circumstances.
“Every member of our management team has been devastated by these events and is deeply sorry to all of our employees and partners who have been affected by the Chapter 11 filing.”
A more detailed statement from Steve Shore and Barry Prevor, Founders and co-CEOs of Steve & Barry’s, is attached.
About Steve & Barry’s
New York-based Steve & Barry’s is a leading national casual apparel retailer that offers high quality merchandise at astonishing low prices for men, women and children. Founded in 1985, the company operates 276 anchor and junior anchor shopping center and mall-based locations throughout the U.S. At STEVE & BARRY’S ® stores, shoppers will find brands they can’t find anywhere else, including the BITTEN™ collection, the first-ever apparel line created by actress and global fashion icon Sarah Jessica Parker, and the STARBURY™ collection of athletic and lifestyle apparel and sneakers created with NBA ® star Stephon Marbury. Steve & Barry’s is also the exclusive home of the DEAR™ collection by Amanda Bynes, the BIG BEN WALLACE™ collection , the ELEVEN BY VENUS WILLIAMS™ collection, the BUBBAGOLF™ collection by professional golfer Bubba Watson, and the WONDERWALL™ collection by surfer Laird Hamilton. Additional information and store locations can be found at www.steveandbarrys.com.
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Statement from Steve Shore and Barry Prevor, Founders and co-CEOs of Steve & Barry’s
We deeply regret that our company has filed for protection under Chapter 11 of the U.S. Bankruptcy Code and the effect it has on so many dedicated people and organizations. Steve & Barry's opened its first store 23 years ago with the mission of providing affordable quality clothing to everyone. This mission has grown beyond our wildest dreams, providing our customers with 80 million units of affordable clothing and accessories during the past year alone. We have commenced this reorganization case only because we have exhausted all alternatives and have no other choice.
During these 23 years, Steve & Barry's has grown together with countless suppliers and service providers. We have often opened retail locations in economically-challenged areas with household-income levels, crime rates and population trends that caused other retailers to abandon the neighborhood. Economic growth, access to affordable merchandise, and thousands of jobs were created in areas that were most in need. We weathered ups and down in our business and the economy, and still managed to grow the business every year to the current 276 stores in 39 states.
During the past two years, Steve & Barry's launched products designed and endorsed by celebrities and athletes who have believed in our mission. Our first women's brand, BITTEN by Sarah Jessica Parker, transformed our stores overnight into a destination for women shoppers, winning accolades from consumers and performing at an unprecedented level since its launch. Every one of our partner lines has met with tremendous success, on track to sell millions of units, making great leaps in the style and quality of our offerings, and spreading the word about Steve & Barry's accessible quality to millions of new customers. The dedication and support of each of our celebrity and athlete partners has been incredible.
2008 continued the long history of growth at Steve & Barry's. In a very difficult environment for retail apparel sales, January to May 2008 brought a 70 percent increase in total sales compared to the same period in 2007, a 15 percent increase in comparable store sales, and a 25 percent increase in average store sales. Thousands of dedicated people worked around the clock to achieve these results.
Unfortunately, in the current credit and economic environment, this has not been enough. High costs of materials and fuel prices have increased our cost of goods and cost of operating. At the same time, our customers are not in a position to pay higher prices, impacting our operating margins. Our 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. The generally poor environment for apparel retailers has reduced funding for our suppliers, landlords, and for our company. Since mid-2007, difficult credit markets have caused delays in store openings and landlord reimbursements for store-opening expenditures advanced by the company which have created cash shortages. The Company invested substantially more in capital expenditures last year than the amounts reimbursed, and unfortunately, the Company has not yet had an opportunity to fully realize the planned returns from these investments.
These challenges have impacted operations, caused inventory and fixtures to lie idle while incurring interest and storage costs, and reduced liquidity. Even with our strong growth and sales performance which far outpaced the industry, tough economic times, the credit crisis, and a landscape of other troubled retailers reduced the appraised value of our inventory and our access to funding. Recent rumors and speculation surrounding Steve & Barry's financial situation have become self-fulfilling prophecies. Many suppliers are rightfully nervous and cutting off access to services and supplies. Landlords have stopped remitting contractually-owed payments for construction and store opening work performed by Steve & Barry's. 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.
Every member of our management team has been devastated by these events. Our employees, vendors, and landlords have been our partners and friends over the past 23 years, and there are no words to express our grief and disappointment in the current situation. We have been through 23 years of economic cycles, but we never thought it would be possible for things to change so quickly and dramatically. We brought on the best advisors and experts in the industry, but we were not able to find a solution without filing for Chapter 11 protection.
The management of Steve & Barry's is deeply sorry to all who have been affected. We are in discussions with potential strategic and financial partners and working on solutions for a stronger Steve & Barry's to emerge from this process. We will continue to do everything possible to achieve the best outcome under the circumstances.