another story of "excessive debt and overly rapid expansion"

from Wallet Pop... but I think the original story is from the Wall Street Journal:

Steve & Barry's set to throw in the towel

Posted Nov 18th 2008 7:15AM by Zac Bissonnette
Filed under: Deals, Bad news

After a meteoric rise followed by a swift decent into bankruptcy, Steve & Barry's caught a lifeline when Bay Harbour Management LLC agreed to purchase the company's assets back in August. Bay Harbour hoped to keep 150 of the company's 276 store open. But the sagging economy appears to have dashed those plans.

The Wall Street Journal reports (subscription required) the company "is set to announce this week it will go out of business, according to two people familiar with the situation." All 5,000 employees will be let go after the liquidation, and the company's brand will probably be sold for next to nothing and live on in a much reduced capacity. For example, I could see Wal-Mart (NYSE: WMT) acquiring the brand to bolster its value-oriented fashion proposition.

What's disappointing is that the Steve & Barry's concept -- reasonably fashionable apparel at ridiculously low prices -- resonated with consumers and was delivering strong sales growth in an extremely difficulty retail environment. With a less ambitious expansion strategy, the company might well have survived and had a bright future.

For now, it's a case study in the dangers of excessive debt and overly rapid expansion.



this is a sad day for fans of S.J.Parker's 'Bitten' line, which was cute and super cheap. does she sell out of another store? anyway, it caught my eye, because of the last few lines. Steve & Barry's was doing well... they just had a lot of debt and had grown too fast to ride out this rocky time. which brings me to my comments/question: I get that the gov wants to prop up certain sectors to keep the economy going, keep people employed, and boost consumer confidence. however, it stands to reason that businesses need to re-evalute what has apparently become The Way to do things. as unsexy as it sounds, why don't we try Growing Slower. Keeping Enough Capital At The Ready. Not Building Our Lives On Credit. I've read and listened to people poo-poo such ideas, saying that such business practices would slow things down horribly. but honestly, do I want to grow my business fast, or well? do you trade steady, sustained progress for the stress of all of your profits going to debt payments while you finance employee paychecks? I understand that banks need to be able to lend, both to consumers and to businesses, but the largest lesson from this whole debaucle is that people across the board were carrying too much debt, without the funds to back it. it seems as though Those Who Are Spending Our Money To Fix This are so... well, fixated on trying to create credit streams and encouraging people to rush back into using them that they're skipping the part where we acknowledge that rampant credit use is part of what took us down to begin with. and THAT omission, in my opinion, has as much to do with current consumer confidence as anything. it's hard to have confidence in these guys... even now, Mr. Paulson and Mr. Bernanke are defending what they've done so far to Congress. people are befuddled. meanwhile, as the media continues to try to scare the fire out of all of us about everything 'plunging!', I choose to believe there's a bright side. maybe consumer numbers are down simply because people realize they don't need as much, maybe they're choosing where to put their money more carefully. in short, maybe Americans are acting wiser than the Fed. which gives me hope that there may actually be good fiscal change in this rough time.

I'll close with a real display of my ignorance. I am completely perplexed about the recent stories of Houston's looming economic troubles due to a dwindling 'energy cushion'. were energy companies not make record profits just two months ago? are their bottom lines THAT affected by monthly trends? when companies are that large, is the concept of 'laying aside excess, or building a huge emergency fund for a rainy day so you can have some stability, run your business and pay your employees in the event of 6 months of rockiness' just a ridiculous idea that doesn't translate when you're dealing with markets and billions of dollars?