NEW YORK— Steve & Barry's LLC, once a growing force in low-priced fashion retailing, said Wednesday that it filed for Chapter 11 bankruptcy protection, the latest merchant to succumb to a harsh consumer spending climate.

It also announced that it was considering a plan to sell all or some of its assets to repay outstanding debt, and was eliminating 172 corporate and field staff positions immediately. Wendi Kopsick, a spokeswoman for the company, said no decision had been made about how many stores it would close.

The Port Washington, N.Y.-based chain operates 276 locations in 39 states, including Hawai'i, and made a big splash with merchandising endorsements with actress Sarah Jessica Parker, NBA star Stephon Marbury and other celebrities.

The privately held parent company and 63 of its affiliates filed for protection from its creditors in the U.S. bankruptcy court for the Southern District of New York.

It joins home furnishings chain Linen 'n Things Inc., catalog retailer Lillian Vernon Corp. and specialty retailer Sharper Image Corp. in filing for bankruptcy protection this year. Sharper Image, which is now being liquidated, is selling its remaining assets to an investment group for $49 million.

The Steve & Barry's bankruptcy is the latest blow to malls, which are confronting rising vacancies, though at the moment the filings have been limited to smaller retailers, according to Daniel Ansell, a partner at Greenberg Traurig LLP and chairman of its real estate operations division.

Steve & Barry's officials blamed a cash crunch as a result of tighter credit markets and sluggish economic conditions. That hurt its plans to open stores and its ability to borrow money.

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

They also noted that speculation in the marketplace about the company's cash issues in recent weeks became "self-fulfilling prophesies." They said that many suppliers cut off access to services and supplies. They said landlords stopped making "contractually-owed payments for construction and store opening work" the retailer performed.

"As a result of all of this, our loans have gone into default, and we have had no alternative but to file Chapter 11 to enable continued operations," they said.

The bankruptcy filing marks a hard and fast fall for Steve & Barry's, founded in 1985. Its success was built on selling $10 fashions while keeping costs low by using virtually no advertising, manufacturing its own clothes and selling in large volume.

In fact, its low-price fashion formula should have thrived in this environment as shoppers have been trading down to cheaper stores. But the founders conceded that in this climate, marketing prowess and cheap prices just weren't enough.

From a sales perspective, the company's founders said that the chain performed well, with total sales in the first five months of 2008 rising 70 percent; average store sales rose 25 percent and same-store sales, or sales at stores open at least a year, rose 15 percent.

In particular, its exclusive branded lines of merchandise created with Parker and others have performed "exceptionally well." Kopsick noted that the celebrity partnerships are still intact and that Parker and the other stars are working closely with the retailer. She added their support has been "incredible."

Despite what company official describe as strong sales, that wasn't enough given the overall tightening of credit and harsh economic environment. The company noted that high costs of materials and fuel prices have increased the costs of goods and cost of operating. Company founders also noted that its 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."

Steve & Barry's had other problems too — such as thin margins, according to experts. According to published reports, most of Steve & Barry's earnings came from one-time, upfront payments from mall owners, who were using the incentives to lure the retailer to fill in vacancies at the mall. If that's the case, then Steve & Barry's earnings may have been generated from store openings instead of the sales of its products, according to Mintz Levin bankruptcy attorney Stuart Hirshfield.

Ansell said that the filing by Steve & Barry's should serve as a lesson to mall owners.

"Mall owners need to think about how they are going to protect themselves" instead of focusing on incentives to try to bring in retailers that may ultimately prove to be unprofitable, he said.