July 10:
In the ongoing saga of the demise of Steve & Barry’s, an apparel retailer that sells Laird Hamilton’s clothing line, Wonderwall, the company said in a bankruptcy filing late Wednesday that it doesn’t have the money to stay in business and is being forced to undergo a fire sale. Lenders led by General Electric Co.’s (GE) General Electric Capital Corp., which control Steve & Barry’s access to cash, are demanding that the company be sold or hire liquidators by July 31.

“Without any cash, (Steve & Barry’s) cannot replenish their inventory, and, therefore, the value of their business is declining on a daily basis,” lawyers for the company wrote in documents filed in the U.S. Bankruptcy Court in Manhattan.

According to Sportsonesource.com: “Court documents indicate that harsh capital markets put bankruptcy financing out of reach for the privately held Port Washington, N.Y. company. Steve & Barry’s has no cash of its own that’s not subject to seizure by senior lenders owed a total of $165 million. That leaves the company with no choice but to heed lenders’ demands that it sell its assets “by no later than July 31,” court documents say.

“Due to its bankruptcy petition, Steve & Barry’s needs court permission to strike a deal with the banks that will allow it to use cash for a brief period, until Aug. 1. “Absent authorization from the court to use the cash . . . (Steve & Barry’s) will have to cease operations immediately,” lawyers wrote in documents filed with the U.S. Bankruptcy Court in Manhattan.

“According the new filings, Steve & Barry’s tried and failed to find a buyer or investor before it filed for Chapter 11 protection. Court documents say the company has not abandoned hope that a buyer will step up by a July 29 auction and offer to keep the business open as a going concern. If no prospective owner appears at the auction, however, the retailer will be picking a firm “to liquidate the inventory at all or some” of its retail stores, according to court documents. The time from Chapter 11 filing to liquidation or sale “will take approximately 30 days,” court documents say.”

To read the full story click HERE.

July 9:
Apparel retailer Steve & Barry’s announced on July 9 that it is seeking the protection of Chapter 11 bankruptcy due to a liquidity crisis. The brand, which recently launched a discount surf line called Wonderwall in conjunction with Laird Hamilton, said it is moving forward with operational improvements while exploring a possible sale of the company and/or its assets, to repay outstanding debt. Steve & Barry reported in a press release that the filing was due to “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.”

Here’s the statement:
“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.”

Tags: laird hamilton, steve & Barry's, wonderwall

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