Goody’s Family Clothing Inc., one of the retailers swept up in the recent wave of acquisitions by private-equity companies, is reportedly looking to close nearly a quarter of its more than 370 stores.
Sources told WWD that a creditors’ committee has been put in place and a debtor-in-possession facility is being sought as the company has continued to struggle against difficult business conditions that aren’t expected to improve in light of greater economic uncertainty.
According to one scenario outlined by credit sources, who requested anonymity, the company could file a Chapter 11 bankruptcy petition early next week in order to smooth the way for its exit from about 90 of its stores.
There was no response to requests for comment from Prentice Capital Management LP, which acquired Goody’s two years ago, at which time its sales were $1.2 billion.
The identity of the company or companies negotiating DIP financing couldn’t be ascertained at press time.
However, the sources said buyers were in the markets Tuesday with suppliers placing orders for fall when they were called back to company headquarters in Knoxville, Tenn., for a meeting Thursday morning. It is understood the buyers were informed of the plans for store closures and a possible bankruptcy filing.
In its heyday, Goody’s was a strong retailer with a colorful, controversial chief executive officer, Robert Goodfriend, and stores located in rural areas and other locations where it was the only place to shop when women wanted to buy must-have looks and national brands not available from local merchants. However, just prior to the acquisition by Prentice Capital, Goody’s expanded into suburban and urban areas where it faced more aggressive, and more fashionable, competition from middle-market retailers such as Kohl’s, J.C. Penney and Target.
Goody’s, then publicly held, was acquired in 2006 by affiliates of GMM Capital LLC and Prentice Capital for $327 million, or $9.60 a share, in cash. Prentice, sources said, bought out GMM in February. It has been closing some store locations since the beginning of the year, and the latest anticipated round of closings would bring the store count to around the mid-200s, from a high of 378 at the beginning of the year.
This story first appeared in the June 6, 2008 issue of WWD. Subscribe Today.
In March the retailer hired Paul White as chief executive officer. White, a former May Department Stores Co. and ShopKo executive, succeeded Chuck Turlinski, who left Goody’s after only about a year in the job. The retailer also received a cash infusion of $65 million from Prentice in January. However, one source said its Ashley Judd celebrity apparel line hasn’t fared well because of higher price points.
In 2003, the company paid $4 million in cash to acquire the Duck Head trademark from Tropical Sportswear International Corp. Goody’s envisioned a $40 million business resulting from the purchase and its expansion into numerous product categories. Duck Head, a brand most closely associated with men’s khakis, enjoyed a high level of consumer recognition in the Southeast.
Levi Strauss & Co.’s Dockers brand is a top seller at Goody’s. The sales volume of Levi’s, including Dockers, is said to be high enough that credit sources expect the vendor to be a major creditor in the event of a bankruptcy. Levi’s is believed to be owed around $6 million by the retailer. Other top creditors are expected to include CIT, GMAC and Wells Fargo, sources said.