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Steve & Barry's on the brink of bankruptcy?

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This one really caught me off-guard: Steve & Barry's, the college-town apparel retailer known for selling decent-quality, reasonably fashionable apparel, all at prices under $10, is said to be on the brink of bankruptcy, searching desperately for $30 million to keep the company going through 2008.

It's surprising because, in the past month alone, the discounter has opened nine new stores, bringing the total up to 270. According to The Wall Street Journal (subscription required), the company had been booking a large chunk of its profits from one-time, up-front payments made by mall operators seeking to fill vacant big-box spaces. After those payments, many of the stores are only marginally profitable.

Steve & Barry's had established a niche with ultra low-priced goods, many of which bear the endorsements of celebrities including Sarah Jessica Parker and Amanda Bynes, and athletes like Bubba Watson, Venus Williams, and Stephon Marbury.

Its cash crisis aside, I'll be shocked -- and disappointed -- if Steve & Barry's disappears anytime soon. It would seem to be a strong strategic acquisition target for a number of companies, especially anyone looking to reach out to cash-strapped consumers struggling with high gas prices. $8.88 NBA-player endorsed basketball shoes would seem to be pretty recession-proof. Wal-Mart (NYSE: WMT) could probably do great things with the company. Raising cash through an initial public offering also can't be ruled out.

Steve & Barry's appears to be (yet another) victim of overly aggressive expansion and hubris, but the concept remains strong, and I think it will be around for a long time.

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Last updated: July 04, 2009: 10:19 AM

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