Hilo Hattie files for bankruptcy

Hilo Hattie had sales of about $56 million last year, a 19 percent decline from the previous year. Nelson said 2008 will be "meaningfully" lower that last year.

Hilo Hattie, which was founded by Jim Romig on Kauai in 1963, listed both its assets and liabilities at between $10 million and $50 million on its filing.

The company said it had between 1,000 and 5,000 creditors, with Maui Divers of Hawaii as its largest unsecured creditor at $1.25 million. Some Maui Divers operations are in Hilo Hattie stores.

"We've made good progress in the past few months to restructure the company's financial affairs and to set it on a positive course," Nelson said. "Unfortunately, the sudden drop in visitors to Hawaii and the sharp economic downturn statewide has left us no choice but to seek Chapter 11 relief."

The store was named after Calra Haili, who died in 1979 after a long career in music and hula dance. Haili, who performed Hawaiian music and dance across the country, legally adopted the name Hilo Hattie after her comic performance of the song "When Hilo Hattie Does the Hilo Hop" became popular in the 1930s.