Hilo Hattie files for bankruptcy

The company said the filing will enable it to move forward with plans to open a new flagship store in Waikiki, as well as to strengthen and stabilize the company.

"We're not closing. We're staying in business. We see this as a fresh start," Chief Executive Ted Nelson said. "It's a tough economy, but that just requires us to be better business people and better merchants."

The filing came less than five months after the chain with seven stores in Hawaii and two in Southern California was purchased by TOC Inc., which operates Hilo Hattie as Pomare Ltd.

"The rapidly deteriorating economy, historic oil price levels, and the weakening of Hawaii's tourist-driven economy has hit all local companies, including Hilo Hattie, hard," Nelson said.

He said none of Hilo Hattie's 256 employees will be affected.

The company is trying to sell its large flagship store in an industrial area near downtown Honolulu, where hundreds of tourists are bussed in every day. Having a new store in Waikiki would eliminate the need to transport the tourists and allow for many more visits per day.

"There's literally 20,000 people on the sidewalk right at our door every day," Nelson said.

Despite its reorganization, the overall tightening of credit and available capital and the company's struggles, Nelson said he is confident the company can secure a Waikiki lease with Royal Hawaiian Center, which is owned by Kamehameha Schools.

Nelson said the company has also been changing its product line in recent months to jump-start sales, offering a more authentic Hawaiiana and high-quality product.