Hip apparel retailer Steve & Barry’s, whose US footprint skyrocketed from 31 stores in 2003 to more than 270 in 2008, has gone bust. The chain filed for bankruptcy in July, listing assets of US$693.5 million and liabilities of US$638 million. At press time, the company was still operating stores and paying employees, anticipating a mid-August auction to sell off its holdings. In the meantime, several news outlets have reported that the retailer may soon be sold to Sears or the Gap.

Best-known for its super-low price-points and hot celebrity-designed private labels, Steve & Barry’s holds a number of high-profile kids entertainment licenses, the fate of which is now in question. The company has a long-standing deal with Marvel, and last year it entered into a direct-to-retail agreement with Hasbro to launch an extensive apparel line encompassing vintage toy properties like Mr. Potato Head, My Little Pony, G.I. Joe and Transformers. (It was the largest slate of properties the toyco had ever granted to a single licensee.) Earlier this year, Classic Media and Chorion also jumped on the Steve & Barry’s bandwagon with Rocky & Bullwinkle and Mr. Men apparel lines.

A statement on the Steve & Barry’s website blames the bankruptcy on the overall economic downturn and difficult credit markets. A recent feature in the Wall Street Journal reported that the retailer was profiting from tenant-improvement payments offered by malls to fill vacant department store spaces that generate traffic and keep smaller storefront rentals at a premium when occupied. From 2004 to 2007, the company reportedly received US$380 million in tenant-improvement payments, according to the WSJ. With the recent credit crisis, upfront payments from mall owners have dried up, putting the kybosh on 50 scheduled openings of new Steve & Barry’s locations, and leaving the company saddled with huge stockpiles of pre-ordered inventory.