Steve & Barry's

Steve & Barry's

Former type	Private equity
Industry	Retail
Fate	Bankruptcy
Founded	1985
Defunct	2009
Headquarters	Port Washington, New York
Key people	Steven Shore, Founder Barry Prevor, Founder Gary Sugarman, COO
Products	Apparel
Revenue	$656 million (2008) reported
Website	None

Steve & Barry's was an American retail clothing chain, featuring casual apparel. By mid-2008, the chain operated 276 stores in 39 states. The company was headquartered in Port Washington, New York. The company liquidated all of its stores throughout 2008.

The chain's origin was based on various university campuses across the United States. Until 2007, it was called Steve & Barry's University Sportswear, and the chain specialized in college-related apparel and private-label casual clothing. The chain dropped the "University Sportswear" tagline after securing licensing agreements with several celebrities to develop and distribute private-label lines of clothing designed or inspired by each of them, in an attempt to expand the chain's customer base.

History

Steve & Barry's store at West Oaks Mall, Houston, Texas

Founded by Steven Shore and Barry Prevor at the University of Pennsylvania in 1985, while Prevor was an undergraduate student, Steve & Barry's became a local popular destination due to its low prices compared to other university bookstores and gift stores. The success of the original store led to the opening of locations on several Big Ten campuses, including Michigan State University, the University of Michigan, the University of Illinois, the University of Wisconsin–Madison, Indiana University, and Purdue University.

In 1998, Steve & Barry's opened a large mall-based store at Great Lakes Crossing in Auburn Hills, Michigan. The new line of products included denim, business casual, active wear, outerwear, and T-shirts. In addition, the company began marketing "All-American" brands such as Hershey's, Marvel Comics, Ford, WWE, and General Mills cereal, amongst others.

In 2005, Steve & Barry's leased over 3,500,000 square feet (330,000 m²) of space in shopping centers throughout the United States, the most of any mall-based chain in the country. The result was 62 brand new supermarket-sized stores, which doubled its outlets.

In 2006, TA Associates, a $10 billion private equity firm, closed a minority investment in the company for an undisclosed amount.

In March 2008, General Electric Holdings lent Steve & Barry's $197 million on which the company defaulted.

By the end of 2008, the company filed for Chapter 11 bankruptcy and planned to close the business. The company then liquidated all remaining merchandise, stores, and other assets., finally ceasing all operations on Jan. 30, 2010.

Celebrity lines

In 2006, the chain announced its partnership with NBA point guard Stephon Marbury, a joint venture in which the chain would produce Marbury's Starbury Collection, a 50-item line of discount clothing, athletic apparel, and sneakers. The centerpiece of the line was the Starbury One, a basketball sneaker that retailed for $14.98. Marbury, who developed and endorsed the line, wore the sneakers during the entire 2006-2007 NBA season to prove their quality. In March 2007 the company announced that then Chicago Bulls center, and 4-time NBA Defensive Player of the Year, Ben Wallace, would endorse the Starbury brand, wearing Starburys during all his games and debuting his own Big Ben Starbury sneaker in the 2007-08 NBA season.

Similarly, Sarah Jessica Parker introduced her own clothing line, BITTEN, on June 7, 2007. The brand was originally leaked to the press during an early fashion show in March 2007. The Bitten name came from the phrase that one who becomes an actor has been "Bitten" by the acting bug. After an appearance on The Oprah Winfrey Show, the brand launched in early June, with roughly 400 pieces of apparel that was reported to grow to 500 or more by the fall.

Announced during the summer of 2007, former Nickelodeon star Amanda Bynes also debuted a clothing line, Dear, on August 16, 2007. Similar to the Bitten line, Dear was a women's brand that appealed mostly to younger women.

Steve & Barry's signed tennis star Venus Williams to market her own clothing and sneakers line called EleVen. Likewise, American golfer Bubba Watson had his own clothing line called "Bubba Golf".

On May 15, 2008 the company debuted Laird Hamilton's "Wonderwall" collection. The collection featured men's clothing for surfing and skating.

Business model

The company claimed that its prices undercut all competitors, including national chains like Wal-Mart and Target, with most items within the store priced around $6.98. Shore and Prevor discussed their methods for keeping prices down.

Steve & Barry's business model was to keep prices low by not advertising through traditional streams, relying on publicity and viral marketing to get the word out, running its company and stores very efficiently, selling in large volumes, and making modest profits on each item. It also sourced apparel progressively, meaning it purchases product from a wide variety of manufacturers at different times throughout the year. The bidding between manufacturers allowed the buyer to purchase at a lower per unit cost than larger retailers who frequently have standing contracts with suppliers.

With fiscal problems mounting at the company, many reports surfaced claiming that the only real profit at the company came from the $2 to $3 million payments that the company received from landlords when it would open a new store (most of the time in distressed or hard-to-lease locations). The company made little (if any) profit on its actual apparel sales and while new stores would be very profitable for the first few months, sales would decline sharply after the store had been open for a few quarters.

Financial problems and bankruptcy plan

As of June 21, 2008, the retailer had been seeking at least $30 million to fund operations through 2008. They were freezing all assets and hired a bankruptcy lawyer to advise on filing for Chapter 11. The company was deficient in paying back a $200 million credit loan from General Electric Commercial-lending unit. On July 1, 2008, The Wall Street Journal reported that the struggling company might close approximately 100 of its 245 stores as a prelude to the liquidation of the entire chain. The company did not have enough capital to take it through the end of the year and was actively trying to secure financing to take it through the holiday season.

The firm filed for bankruptcy protection under Chapter 11 on July 9, 2008 according to The Wall Street Journal. All stores were to remain open with the store's return policy, store credit and gift cards unchanged. Founders and co-Chief Executives Steve Shore and Barry Prevor cited liquidity concerns and the generally harsh conditions for retailers in recent months.

The Associated Press reported that Steve & Barry's was considering a plan to sell all or some of its assets to repay its outstanding debt. Steve & Barry's was also in talks with Sears Holdings Corporation for a possible acquisition. It was reported that Sears might be interested in buying some or all of Steve & Barry's brands.

On August 21, 2008 Steve & Barry's announced that BH S&B Holdings LLC, a newly formed affiliate of investment firm Bay Harbour Management L.C., agreed to acquire certain assets of Steve & Barry's. In addition to acquiring merchandise inventories and transfer rights to Steve & Barry's store leases, BH S&B Holdings would acquire all Steve & Barry's intellectual property rights, including its celebrity and brand licenses, and the company's key facilities, including its Port Washington, New York headquarters, Columbus, Ohio distribution center, and certain overseas offices. The acquisition was expected to be completed Monday, August 25. Bay Harbour planned to keep open about 150 of the chain's 276 stores, and brought Hal Kahn, chairman and CEO of Macy's East, on board as the new CEO.

Bankruptcy documents reveal annual sales of $656.6 million.

On November 24, 2008, after filing for Chapter 11 bankruptcy protection and closing many stores, Steve and Barry's parent company filed for Chapter 7 bankruptcy liquidation and announced the chain was going out of business. This liquidation was completed on January 30, 2009.

The New York Post reported on Jan. 9, 2009 that New York City mega-landlord Jeff Sutton had sued founders Steven Shore and Barry Prevor, along with the company's CFO and real estate director for fraud, alleging that they misappropriated $1 million set aside for store improvements.