NEW YORK – A sluggish economy and tight credit were blamed by Steve & Barry’s, the low-price mass retailer that recently opened at the Auburn Mall, in its bankruptcy filing Wednesday.

The retailer, which has 265 stores across the country, tried unsuccessfully to arrange rescue financing this week to tide it over a cash crunch.

“The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords and to our company,” said Steve Shore and Barry Prevor, co-founders and co-CEOs in a statement. “It has become increasingly difficult for us to continue operating normally under these circumstances.”

The retailer, which offers trendy family apparel geared to the under-35 crowd, sells everything for $20 or less. The Auburn store, which opened in late December, has everything priced at $9.98, part of its on-going grand-opening promotion.

George Schott, owner of the mall, said he doesn’t know yet what the news means for the Auburn location – the first Steve & Barry’s in northern New England. He said the store seems to be performing well, drawing in plenty of shoppers.

“We’ll just have to see,” he said.

Steve & Barry’s officials said they are considering a plan to sell all or some of its assets to repay outstanding debt. The generally poor economy makes it harder to borrow money and open new stores, plus speculation about their cash crunch created “self-fulfilling” problems with suppliers and landlords.

“As a result of this, our loans have gone into default, and we have had no alternative but to file Chapter 11 to enable continued operations,” according to the statement.

The retailer has a history of extracting favorable lease arrangements in ailing malls, promising in return to bring in high volumes of young shoppers. It recently made the International Council of Shopping Centers’ hottest new retailers list. The Auburn store occupies about 60,000 square feet in what was once the anchor spot held by Porteous department store, which closed in 2002.

Schott said he hopes the Auburn store’s performance will ensure its survival in the face of store closings. He noted a new store recently opened in Massachusetts, where there are eight locations already. There are none in New Hampshire or Vermont.

If Steve & Barry’s did leave the Auburn Mall, he would at least be in a better spot to lease the space than before it arrived. To prepare for their tenancy, Steve & Barry’s installed a new ceiling, walls, flooring and interior lighting.

“It would be much easier to get another tenant in there, if necessary,” Schott said. “The space is prime.”

A call to Steve & Barry’s press office wasn’t returned by deadline.

The bankruptcy petition was filed in the U.S. bankruptcy court for the Southern District of New York.


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