HONOLULU -- Hilo Hattie on Thursday announced it will file for Chapter 11 bankruptcy to keep the store operating.

The company has nine stores in the islands and California and employs 256 people.

TOC Inc. bought the popular chain of stores that focuses on Hawaiian apparel and gifts.

The company blames the sinking economy and decline in visitor arrivals for Hilo Hattie's struggles.

"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," TOC Inc. Chief Executive Officer Ted Nelson said in a written statement.

Company officials said they have been making progress in restructuring its finances. They said none of the employees will be affected.

Hilo Hattie's new CEO said the company has been able to get a $5 million line of credit to help with its cash flow for now.

"It's one thing for the company to meet its day-to-day obligations. It's another thing to pay for those day to day obligations and pay for its past history," Nelson said.

The reorganization will not stop the company's progress in opening a flagship store in the Royal Hawaiian Center, officials said.

The company has seen business drop by 20 percent over the past few months, and those tourists who are coming in are buying less.

"The average purchase is a little bit less It seems that the customers have less to spend than in previous times," Nelson said.

To help pay off its debt Hilo Hattie will eventually give up its 85,000-square foot retail and office space.

Hilo Hattie started in 1963.