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Starbury Not Enough; Steve and Barry's Contemplates Liquidation

With its reliance on low cost shoes and clothing, often attached to prominent figures in sports and entertainment, you would think that retailer Steve and Barry's would be perfectly suited for the current economic times. The empire built on cheap tee shirts, Stephon Marbury's Starbury shoes and clothing lines endorsed by the likes of Venus Williams and Sarah Jessica Parker (with nothing costing more than $20) this is a retailer that hit the sweet spot of name brands and low prices. However, too quick expansion spread the company too thin and stretched the finances to the breaking point.

With cash now running short, the company is readying plans for the closing of more than 100 stores and contemplating a full liquidation if emergency financing is not found. What has become apparent is that Steve and Barry's earnings came from opening stores not operating them. The company would receive large upfront payments from landlords for opening stores, while operating margins were only 1% to 3% on sales of roughly $1 billion.

One of the major issues to be determined in any liquidation or bankruptcy proceeding is what will become of the license agreements with various celebrities and athletes, such as Ben Wallace, Laird Hamilton, Amanda Bynes and as mentioned Venus Williams. It's not known if there are clauses in the agreements allowing for their termination in the event of liquidation or if a bankruptcy court will permit the celebrities to terminate them should they so desire.

Full post as published by Sports Biz on July 01, 2008 (boomark / email).