- The Washington Times - Friday, May 22, 2009

S&K; Famous Brands Inc., which operates 105 discount menswear stores in 26 states, is liquidating its suits and shoes and closing its doors - the latest retail victim of the economic downturn.

The Richmond company, founded in 1967, employs about 750 workers and owns nearly two dozen locations in Maryland and Virginia.

“It became a death spiral of low inventory equaled lower sales equaled making it harder to get inventory,” said Jonathon Tibus, who has been managing the privately held company since his law firm, Alvarez and Marsal, was hired last fall to help S&K; find a buyer. Mr. Tibus said he could not find a buyer or financing for the company, so bankruptcy became the only option.

“We had an asset base where we thought we could pay off our senior secured debt and set the stage for a potential recovery,” Mr. Tibus said. “But we ran out of money, ran out of time to find a buyer.”

Jeffrey N. Pomerantz, an attorney representing a court-designated committee of S&K;’s unsecured creditors, thinks the company ran into the same problems retailers are encountering across the country.

“Because of the restraints that have been put up by lenders, they couldn’t get debt or equity financing,” Mr. Pomerantz said. “The company was profitable until the mid-2000s, but it’s no secret what’s happening. There is a lot of retail bankruptcy.”

Mark Millman, president of an executive search firm that finds managers for retailers, said a failure like S&K;’s is not surprising.

“Any kind of apparel is not good to be in right now,” he said. “People are putting disposable income toward rent, mortgages, fuel.”

Mr. Millman said the economic downturn could have long-term effects on consumer spending habits, causing 20- to 30-year-olds who are witnessing their first major recession to curtail spending on items like clothing.

“Their practices could change, so spending could stay down even if we’re not technically in a recession,” he said. “But we’ll see retail spending as a whole down for at least another year.”

Frank Morton, a managing director at Gordon Brothers Group, which will administrate the liquidation, said S&K; stores will sell off inventory “in weeks rather than months.”

Gordon Brothers will disburse any recovered debts to creditors after selling warehouses and unwinding its lease agreements. Most of the company’s employees will lose their jobs after the liquidation sales, but a skeleton crew of accountants and administrators will be kept on to close the books, Mr. Morton said.

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