Steve & Barry’s gets help from bankruptcy firm

The retailer’s low prices haven’t protected it from a slow economy.

NEW YORK (AP) — A bankruptcy firm confirmed Tuesday it is working with apparel retailer Steve Barry’s LLC to negotiate with its lenders and review strategic alternatives.

The privately held company’s apparent financial difficulties are the latest indication of the increasingly hostile environment for retailers.

Bankruptcy attorney Harvey Miller said his partner Lori Fife at law firm Weil Gotshal Manges LLP is advising the company as it negotiates with lenders and reviews alternatives.

The Port Washington, N.Y.-based retailer had no comment. It has more than 200 stores, including one at the Eastwood Mall in Niles.

Steve Barry’s made a name for itself in recent years by keeping all of its clothing and accessories priced below $19.98, proliferating rapidly and collaborating on products with big-name celebrities and athletes such as tennis star Venus Williams, actress Sarah Jessica Parker and basketball player Stephon Marbury.

However, experts say it is likely the company’s rapid expansion and low price points led to its current difficulties as the retail environment steadily worsened.

Consumers have cut back on discretionary spending as food and gas prices rise, home values decline and the credit market tightens. The weak operating environment has already caused companies including home-furnishing retailer Linens ’n Things, gift catalog and online retailer Lillian Vernon and gadget-seller The Sharper Image to file for bankruptcy protection.

Michael Imber, director at Grant Thornton LLC in New York and part of its corporate advisory and restructuring services practice, said the difficult environment likely worsened Steve Barry’s woes.

“A weak environment is absolutely a catalyst for what’s going on here,” he said. “The price points for Steve Barry’s are relatively modest, but people are still being tight with dollars.”

He added that rapid expansion, as well as beefed-up inventory to stock its quickly growing store base, may have pressured margins.

“If you’re carrying a lot of inventory, that ties up your cash,” he said. “If it moves very slowly, you’re not getting the kind of return on investment you’d like to have.”

Michael Appel of Quest Turnaround Advisors, a turnaround management and advisory firm in Purchase, N.Y., said keeping costs down could have been an issue as well.

He said prices for footwear coming out of manufacturing hubs such as China have risen 5 percent to 15 percent, and apparel prices are likely rising as well.

“They may have not been able to increase prices as much as vendors, which increases pressure on margins.”

Dan Ansell, a partner at Greenberg Traurig LLP and chairman of its real estate operations division, said Steve Barry’s apparent troubles — as well as other retailer’s woes — should serve as a warning for landlords who might give tenants concessions to rent out a space in a mall.

Instead, they should practice “defensive leasing,” to avoid being left in the lurch, he said.

“The appearance of runaway success is sometimes an illusion,” he said. “Recent bankruptcy filings by companies that appear profitable on the surface highlight a need for landlords to have a coherent national strategy to prepare for and address tenant failures.”