Going-out-business sales to begin today at S&K

After a humble start from the back of a station wagon more than 40 years ago, S&K Famous Brands Inc. will begin winding down its operations today.

A U.S. bankruptcy court judge gave the Henrico County-based discount menswear retailer permission to close its 105 remaining stores and liquidate its assets. Going-out-of-business sales are expected to begin today.

"This is a very difficult time for me and everyone associated with S&K," said Stuart C. Siegel, S&K's chairman and former chief executive officer who joined the budding retailer in 1968, 11 months after his father and uncle started the company.

"I am proud of our people and all that we've accomplished," he said.

U.S. Bankruptcy Judge Kevin R. Huennekens yesterday approved having the liquidation sales conducted by Gordon Brothers Retail Partners LLC, which won the right to sell off the chain's merchandise and fixtures at an auction held in Richmond on Tuesday.

"It's sad that you weren't able to find a buyer" to keep the chain operating, Huennekens said. "Such is the economy today."

Gordon Brothers' bid on the company came after another liquidator set the minimum bid May 9. The original bid guaranteed S&K $7.9 million for its inventory.

But that bid was based on higher estimated inventory levels. By the start of the auction, the value of the merchandise had dropped to $5.6 million.

Gordon Brothers' winning bid guarantees $7.3 million to S&K's estate, all of which will go to pay off debts.

The Boston-based liquidation firm will augment inventory at S&K stores to make up for holes in sizes and styles. Gordon Brothers will have until Aug. 31 to finish selling off the inventory at the stores.

Employees at S&K's corporate offices were told about the chain's fate at an afternoon meeting.

The retailer employs about 750 people, down from more than 1,000 just a couple of months ago. Most of them will lose their jobs over the next couple of months.

About 40 workers at the company's headquarters in western Henrico lost their jobs yesterday. Store employees will stay on until their stores are closed.

Jonathan M. Tibus, S&K's chief restructuring officer, said that a team of mostly finance employees would stay on to wind down the company's business affairs.

Tibus said economic factors combined with the pressure to stay afloat were too much for the company that it couldn't properly stock its stores. The drop in inventory forced them into an untenable position.

"The fundamental reality is that it was tough to get the financing," he said. "We had success paying off the debts, but without cash we couldn't stock the stores. It's frustrating and it's sad."

The recession, among other factors, hurt the retailer, Siegel said.

"This is a convergence of a bank in trouble, a slow retail environment, and the worst economy in our 40-plus-year history," Siegel said. "In any other time, this would be a temporary slowdown in business. We have been through recessions before and survived them, but the combination of those factors made this an impossible task."

S&K was created in 1967 by I.J. "Hip" Siegel and his brother-in-law, Abe Kaminsky, who bought end-of-the-season men's suits from retailers and sold the clothing from the back of the family station wagon.

The pair quickly opened a store on West Main Street in downtown Richmond, which became the cornerstone for a chain of discount men's clothing stores that eventually operated more than 230 stores in 26 states.

The retailer filed for bankruptcy protection in February. S&K had closed 78 stores since last summer and continued shuttering 30 locations since the filing.

Early in the bankruptcy case, the company had some successes. It was able to sell off its corporate headquarters building, store and distribution center off West Broad Street for $5.8 million. In March, it paid off most of its debts.

At the time, some experts believed S&K could survive.

S&K is the second major area retailer to fail in the past six months. Circuit City Stores Inc., once the nation's second largest consumer-electronics retailer, closed its last stores in March.

"Every time the Richmond region loses one of these homegrown big names, the region suffers somewhat. These local firms have been big supporters of charities, the arts and local events, financially and otherwise," said David Urban, a professor of marketing at Virginia Commonwealth University.

For instance, VCU's Stuart C. Siegel Center at the northwest corner of Broad and Harrison streets was named after Siegel in 1994 because of the millions of dollars in investments he donated to the university. Siegel also was then -- and is now -- a member of VCU's governing board.

Joseph A. Oliver III, who became S&K's president and CEO in 2007 but was let go last month, said yesterday that he regretted that the company wasn't able to pull off a comeback.

"I feel sorry that I wasn't able to do more," he said. "And I'm sorry for the employees who worked very hard [to make this work]."

Tibus echoed the sentiment.

"The management team, advisers, the board and all the employees went above and beyond the call of duty," he said. "This is very, very frustrating and a bad outcome for everyone."

Contact Louis Llovio at (804) 649-6348 or .

Deputy Business Editor Gregory J. Gilligan contributed to this report.

S&K's demise