Fledgling Brands May Take the Fall With Steve & Barry’s

July 7, 2008 at 6:49 pm Leave a comment

Retailer’s Cash Crunch Imperils Low-Priced Clothing Lines From Sarah Jessica Parker, Venus Williams

Advertising Age

By Natalie Zmuda

Published: July 07, 2008

NEW YORK (AdAge.com) — Steve & Barry’s fall from grace could take several boldface names along for the ride.

The retailer, which has built its reputation on offering $15 Stephon Marbury sneakers and $9 dresses from Sarah Jessica Parker, is in a serious cash crunch. Bankruptcy is widely considered to be an option, leaving the fate of the retailer’s hundreds of exclusive celebrity lines and licensing deals in question. Steve & Barry’s operates about 275 stores in 40 states.

Exclusive deals: Stephon Marbury is one of many with a line at the chain.

In addition to holding a vast number of licenses — more than 350, according to the company’s website — Steve & Barry’s has exclusive deals with well-known figures such as Ms. Parker, Mr. Marbury and Venus Williams. But it’s the names with less-broad-based consumer recognition, such as golfer Bubba Watson, actress Amanda Bynes, surfer Laird Hamilton and basketball star Ben Wallace, that stand to take a hit if Steve & Barry’s collapses.

Bad news for new faces

“The newer names that are still getting established, being formed and creating an image in the consumer mind — this is pretty tough for them,” said Tom Agan, executive director-head of consulting for Interbrand, New York. “It’s not that consumers are saying it’s a bad brand because of the retailer’s problems. It’s more about the stage in their development. … They’re trying to get visibility in the marketplace.”

Indeed, Mr. Watson — who has yet to claim his first PGA Tour victory — is just beginning to emerge as one of golf’s more marketable figures, with his pink-shafted driver and reputation as the longest hitter on the tour. Similarly, Ms. Bynes is quickly becoming a Hollywood fixture, but her Dear collection for Steve & Barry’s represents her first major foray into branding.

For a fledgling brand, any hiccups involving availability would prove problematic, as would steep discounts, in the case of a potential liquidation. But the retailer’s woes could provide early exit strategies, depending on how the licensing deals were structured, experts said.

“A lot of times, it does give the celebrities the opportunity to bail out, if they want to, prematurely,” said Marshal Cohen, chief industry analyst for NPD Group. “In almost every case, you would likely see them transition to another low-priced retail partner.”

But finding another partner could prove tricky, as the retailer’s financial troubles, in part, are being blamed on slim margins.

Little wiggle room

“Because of the margin problems in retail, in general, the idea of paying additional fees for licenses is pretty tough to justify,” said Mr. Agan. “[The brands] will have to help [other retailers] understand that their brand has value and should be supported and given placement.”

A Steve & Barry’s spokeswoman declined to comment on the terms of its licensing deals or the company’s financial state. The retailer does not have an agency of record.

Beyond the high-profile celebrity endorsements, a slew of consumer-products companies and universities also license their brands to the retailer. Any impact on those brands would be less pronounced, experts said, given their established nature. CBS Consumer Products, Marvel Comics, General Motors, Ford, Kellogg, Hershey and Coors all have agreements with Steve & Barry’s. And as recently as last month, the retailer continued to add other major companies, including Pepsi, to its roster.

The biggest impact on those well-established brands likely will be the loss of a retailer that, in a tough economy, attracted plenty of cash-strapped shoppers. The chain’s core consumers, teens and young adults, are being hit particularly hard.

“Teens right now are looking to stretch their dollar in any way possible,” said Gary Rudman, president of GTR Consulting. “They’re looking for retailers that can provide cool brands and hip clothing at decent prices. If that disappears, it definitely leaves some sort of void.”

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Entry filed under: Press.

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