Update: What’s Next for Steve & Barry’s?

So a bankruptcy court approved the $163-million sale of Steve & Barry’s to Bay Harbour Management.

Apparently, Bay Harbour plans to run the business as a “going concern,” but the New York City-based firm is planning on closing some of its 276 stores. Management expects to announce how many will be shut in the next week.

One report has the new management keeping 150 of the stores open. They also plan to stick with the sportswear chain’s strategy of selling most items for under $10.

“The customer still wants to shop but they must get value, and this company offers better value than I’ve seen anywhere,” says Bay Harbour managing principal Douglas Teitelbaum.

Wasn’t Steve & Barry’s value strategy what got it into trouble in the first place, or did the chain just expand too fast?

5 Responses to “Update: What’s Next for Steve & Barry’s?”

  1. 1 TeenyTiny August 20, 2008 at 11:06 am

    Certainly, all of the mall reit landlords want this “going concern” in question, to work. The last thing GGP, Simon, Westfield et al need is to have to take back the worst locations in large spaces in their malls. That would be a feeding frenzy for rent reductions from all of the other tenant retailers. Perhaps the landlords can get together and start buying up Bay Harbor Management stock to subsidize the situation. It’s throwing good money after bad, but sometimes in life, that’s the best option.

  2. 2 Dealmaker August 21, 2008 at 8:03 am

    The only thing that worked here was the concept of opening stores on developers money. that only worked while money was cheap and overly available. None (maybe a few) of these stores ever performed as envisioned. Who thinks Bay Harbour is buying leases at wholesale just to flip them?

  3. 3 Brad August 21, 2008 at 10:03 am

    Good luck to all. Margins need to grow.
    Perhaps they’ll consider raising the Starbury’s price to $19.99?
    Still a bargain at that price.

  4. 4 MikeF August 21, 2008 at 10:29 am

    The strategy is what worked in the beginning for Steve and Barry’s. What went awry is when they moved away from that strategy to focus on celebrity lines. The $8.98 for everything in the store was what got them to the dance and made them popular. There was a very significant decline in their sales and stature once they started Starbury at $14.98 and it was differently priced then everything else, and then there wasn’t a price point that they could hinge on. The singular price point is the key, no matter what it is $9.98, $11.98, $14.98. It’s the strongest and most meaningful consumer message out there as long as it doesn’t get crazy like $24.99 or something. They can still have Bitten and Starbury but make it consistent and value oriented and they will become successful again.

  5. 5 Robert Reilly August 21, 2008 at 10:41 am

    The House of Cards has fallen. I used to think private equity groups were brilliant, but then TA Associates purchase an interest in and cashed out Steve & Barry to the tune of $160M in 06′, then Bay Harbour thinks they have a better idea and is shelling out $183M. Wish there was a way to bet on this.

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