Published: July 14, 2008 10:50 pm            

Steve & Barry’s still operating

Steve & Barry’s is still open at The Galleria in Richland Township but it’s anybody’s guess for how much longer.

The discount retailer last week filed for Chapter 11 bankruptcy protection. The company said in a statement that it has no plans to close any stores and does intend to reorganize.

But The Wall Street Journal reported Monday that people involved in the case have said the Chapter 11 filing is likely to lead to liquidation.

The report cited multiple anonymous sources who said the company’s growth has been deceiving. They noted that although the number of stores jumped by about 250 during the past five years and sales volume has increased by about 300 percent, losses have climbed into the tens of millions of dollars.

“I don’t think anyone knows, except the folks at Steve & Barry’s, whether or not they’re going to be able to reorganize,” said Joe Anthony, executive vice president with Zamias Services, which manages The Galleria. “I have been told by the folks there that they are still looking into it.”

Steve & Barry’s opened at The Galleria in November. At the time, Zamias leadership hailed the store as a “mini-anchor” for the mall – a store that would draw shoppers from a wide geographic area.

Like every mall making a deal with Steve & Barry’s, The Galleria made an investment called a tenant-improvement payment to entice the Port Washington, N.Y., retailer to locate there. It’s a common tactic used in the industry to draw hub stores that increase mall traffic.

The money is intended to be used to cover construction costs associated with opening a new store. The Wall Street Journal report showed the company had come to depend upon those payments as its main stream of profit.

“You’re always concerned about recouping your investment,” Anthony said. “A lot of that investment goes to the build-out of the space.

“So part of that investment is recouped initially. But the rest will be recouped over time or through the next tenant we would bring in. One way or another, I think we will recoup the investment that we made in Steve & Barry’s.”

Anthony said that when rumors began to circulate that the company was in trouble, many in the retail development industry were stunned. He said he has friends in the industry who have development deals with Steve & Barry’s.

It’s not like other bankruptcies Anthony said he has witnessed in the past. He said when Hills, Ames and American Outfitters were heading toward liquidation, the signs were visible.

“I was just at their store at The Galleria and it is going gangbusters,” Anthony said.

“It’s well inventoried.

“I have seen bad times for retailers before. I remember walking into Ames in Westwood and they only had about 35 percent of their shelves filled. These guys have full inventory and have new product on the way.”

Anthony said from a mall management perspective, Zamias would like to see Steve & Barry’s survive. If it doesn’t, the mall will move on and he believes the space left behind can be filled quickly.

He noted that tough losses such as American Outfitters have led to opportunities such as adding Hollister, one of the country’s hottest stores, to the mall’s lineup.

“The good news in Johnstown is where the store is located is a very marketable space next to a high-traffic store like Boscov’s,” Anthony said.

“So I see no reason why we would have any trouble filling that space if it came to that.”

        

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