By JEFFREY MCCRACKEN and PETER LATTMAN
With cash running short for retailer Steve & Barry's LLC, the company is readying plans to close more than 100 of its stores, and is contemplating a full liquidation should it not find emergency financing, people familiar with the company say.
The Port Washington, N.Y.-based chain is seeking a tentative plan for about $40 million in debtor-in-possession financing if it must file for bankruptcy protection, several people familiar with the company say.
Whatever the final plan, a reorganization would be a stunning fall for a retailer that a few months ago was hailed as one of the few bright spots in the ailing retail sector, opening stores at a breakneck pace behind the weight of celebrity-endorsed clothing lines.
A spokesman for Steve & Barry's declined to comment on the matter.
Last weekend, Steve & Barry's bankruptcy counsel, Weil Gotshal & Manges LLP, prepared for a potential bankruptcy filing as soon as this week, these people said. Veteran bankruptcy attorney Harvey Miller is handling the case. Steve & Barry's has another long-time bankruptcy attorney, Paul Traub, advising it on potential liquidation strategy, and is being advised by the New York restructuring firm Conway Del Genio Gries & Co.
Steve & Barry's and its various advisers and lenders are also reaching out to retailers such as Wal-Mart Stores Inc., Gap Inc. and Sears Holding Corp. co-owner Eddie Lampert to see if they have any interest in investing. So far, those retailers have shown little interest.
Steve & Barry's lead lender, the commercial-lending unit at General Electric Co., has also explored whether the retailer could exist as solely a wholesaler on the strength of its brand name.
"Everything is on the table. Anything can happen," one person familiar with the matter said. This person noted that the company's earnings value came in opening stores, not in operating them.
People close to the company's finances say most of the retailer's earnings came in the form of one-time payments from landlords, often for $2 million to $3 million, each time it opened a Steve & Barry's. There are currently about 275 stores, located in 40 states. Profit from ongoing operations was scant, if any. The new stores usually opened strongly, these people said, but could not keep pace after a few quarters.
Steve & Barry's margins totaled approximately $20 million to $30 million on annual sales of about $1 billion, or roughly 1% to 3%.
One challenge in assessing the value of Steve & Barry's is that many of the stores have been open only a short time, turnaround experts said. The company opened nine stores in the past few weeks alone.
"They have a lot of young and immature stores that have only been around maybe one Christmas season. It's tough to distinguish which ones to keep and which ones really don't work," said Michael Imber, who does restructuring work for the financial-advisory firm of Grant Thornton LLP. He said roughly a third of the company's stores had been open just one holiday season.
An open question is what would happen to the slew of celebrity clothing lines developed in partnership with such boldfaced names as tennis star Venus Williams, surfer Laird Hamilton and actress Amanda Bynes.
Professional basketball player Ben Wallace struck a deal with Steve & Barry's last year. He sells a clothing line and a shoe, "The Big Ben," exclusively through Steve & Barry's, earning royalties on the sales of those items. Brenda Lundberg-Casey, a marketing agent based in Seattle who handled Mr. Wallace's deal with the chain, says that Mr. Wallace's partnership with Steve & Barry's has been successful and the company has made all of its payments.
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