A bankruptcy firm on Tuesday confirmed it is working with retailer Steve & Barry's to negotiate with its lenders and review strategic alternatives.
The privately held apparel 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, is advising the company as it negotiates with lenders and reviews alternatives.
The Port Washington, N.Y.-based retailer had no comment.
Steve & Barry's, which operates more than 200 stores, made a name for itself in recent years by keeping all clothing and accessories priced below $19.98, proliferating rapidly and collaborating on products with celebrities and athletes such as tennis star Venus Williams, actress Sarah Jessica Parker and basketball player Stephon Marbury.
However, experts say the company's rapid expansion and low price points likely led to its current difficulties as the retail environment worsened.
Consumers have cut back on discretionary spending as food and gas prices rise, home values decline and the credit market tightens.
The weak environment has already caused companies – including home-furnishings 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 in New York and part of its corporate advisory and restructuring services practice, said the difficult environment likely worsened Steve & Barry's woes.
“The price points for Steve & Barry's are relatively modest,” he said, “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.”