Steve & Barry's® Initiates Chapter 11 Case

Business Wire,  July 9, 2008  

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Steve & Barry's Stores Open and Serving Customers as Usual

Taking Steps to Reduce Operating Expenses

PORT WASHINGTON, N.Y. -- Steve & Barry's LLC and 63 of its affiliates announced today that they have initiated cases under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York, to address the Company's financial challenges.

Steve & Barry's stores and operations across the nation, including its 276 retail locations, are open today and conducting business as usual. The Company's gift cards and store credits will continue to be honored as always, and its return policies will remain in place.

The Company said that the commencement of Chapter 11 cases was based on a combination of factors, including a liquidity shortfall as a result of credit market volatility and general economic conditions, which, in turn, have impacted the Company's store opening plans and borrowing capacity. The Company has performed very well from a sales perspective, with total sales in the first five months of 2008 up 70%, average store sales up 25%, and comparable store sales up 15%. In particular, its exclusive branded lines of merchandise created with high-profile entertainers and athletes have performed exceptionally well.

As part of the Chapter 11 process, the Company is moving forward with operational improvements in tandem with exploring a potential sale of the Company and/or its assets, to repay outstanding debt.

The operational improvements include taking immediate steps to reduce expenses through staff reductions, office consolidations, and other actions. Steve & Barry's began this initiative today with the reduction of 172 corporate and field staff positions.

The Company also filed customary "First Day" motions to support its employees, customers and suppliers by providing for the Company's corporate and field associates to continue to be paid in the usual manner, and for their medical, dental, life insurance, disability and other benefits to continue without disruption. Suppliers will be paid under normal terms for goods and services provided after the filing date of July 9, 2008. The Company has obtained an agreement from its secured lenders to use cash collateral for its operating needs.

Steve & Barry's Founders and co-CEOs Steve Shore and Barry Prevor commented, "Steve & Barry's opened its first store 23 years ago with the mission of providing affordable, quality clothing to everyone. This mission has grown beyond our wildest dreams, providing our customers with 80 million units of affordable clothing and accessories during the past year alone - including products designed and endorsed by celebrities who have believed in our vision. Every one of these lines has met with great success. BITTEN[TM], by Sarah Jessica Parker, transformed our stores overnight into a destination for women shoppers and has grown at an unprecedented pace since its launch in June 2007.

"Unfortunately, in the current credit and economic environment, this has not been enough. High costs of materials and fuel prices have increased our cost of goods and cost of operating. Our customers are feeling the pain of high food and gas prices and declining home values, and many of them are being forced to shop closer to their homes and cut back on discretionary purchases. The generally poor environment for apparel retailers has reduced funding to our suppliers, landlords, and to our Company. It has become increasingly difficult for us to continue operating normally under these circumstances.

"Every member of our management team has been devastated by these events and is deeply sorry to all of our employees and partners who have been affected by the Chapter 11 filing."

A more detailed statement from Steve Shore and Barry Prevor, Founders and co-CEOs of Steve & Barry's, is attached.

About Steve & Barry's

New York-based Steve & Barry's is a leading national casual apparel retailer that offers high quality merchandise at astonishing low prices for men, women and children. Founded in 1985, the company operates 276 anchor and junior anchor shopping center and mall-based locations throughout the U.S. At STEVE & BARRY'S([R]) stores, shoppers will find brands they can't find anywhere else, including the BITTEN[TM] collection, the first-ever apparel line created by actress and global fashion icon Sarah Jessica Parker, and the STARBURY[TM] collection of athletic and lifestyle apparel and sneakers created with NBA([R]) star Stephon Marbury. Steve & Barry's is also the exclusive home of the DEAR[TM] collection by Amanda Bynes, the BIG BEN WALLACE[TM] collection , the ELEVEN BY VENUS WILLIAMS[TM] collection, the BUBBAGOLF[TM] collection by professional golfer Bubba Watson, and the WONDERWALL[TM] collection by surfer Laird Hamilton. Additional information and store locations can be found at www.steveandbarrys.com.

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Statement from Steve Shore and Barry Prevor, Founders and co-CEOs of Steve & Barry's