WWD.com/business-news/business/goodys-said-liquidating-1909536/
government-trade
government-trade

Goody’s Said Liquidating

Firm nears auction of inventory.

The retail graveyard appears to have claimed its first victim of 2009: Goody’s, the moderately priced family apparel retail chain operating primarily in the Southeastern U.S. Sources told WWD on Monday that the company has decided to liquidate.

The Knoxville, Tenn.-based chain emerged from bankruptcy Oct. 20, but in early December was said to have exhausted its cash, credit and restructuring resources.

In the days leading up to Christmas and New Year’s, the company had circulated a plan to try to save the chain, but credit sources said creditors nixed the proposal. One source said the feeling among some creditors was that “Goody’s should never have come out of bankruptcy.”

Sources said vendors were told in a conference call Monday morning that the company decided to liquidate. The sources also said the company was expected to conduct an auction of its inventory as early as Monday afternoon with potential liquidators.

A spokeswoman for Goody’s declined comment.

Founded in 1953, Goody’s was known as Goody’s Family Clothing Inc. The chain targets value-conscious consumers with an average annual household income of $55,000. It became privately held in January 2006, and when it exited bankruptcy proceedings last year began operating as Goody’s LLC.

Goody’s key national brands include Adidas, Levi’s, Dockers, Chaps, Reebok, Lee and Alfred Dunner. The chain’s private label brands include Ivy Crew, Mountain Lake, Duck Head Jeans Co., and Kid Crew. The company also offers exclusive fashion brands such as Ashley Judd.

Also losing out from the anticipated closure of Goody’s is the local community outreach programs. Goody’s provided $500,000 annually to schools through its Good Deeds for Schools grant program. Proceeds from the Ashley Judd apparel line also help benefit the grant program. Its stores and corporate office together raise more than $1 million for Children’s Miracle Network and affiliate hospitals each year, according to Goody’s.

“Unfortunately, Goody’s was highly leveraged and lost its merchandising focus. The customers didn’t understand it anymore,” said Walter Loeb, a retail consultant.

When the chain emerged from bankruptcy, it closed on a $175 million revolving exit credit facility provided by GE Corporate Lending and Bank of America. The company also secured $10 million and $35 million exit term loans from GB Merchant Partners LLC and PGDYS Lending LLC, respectively. PGDYS Lending, which owns Goody’s, is managed by private equity firm Prentice Capital Management LP.

Compounding the timing of its exit was that consumers had pulled back even further on their spending after the financial crisis. One credit source said the sales gains Goody’s had planned on never materialized. When Goody’s exited Chapter 11, its total store count was 287 sites in 20 states, with an annual revenue of over $800 million.

Like many retailers combating soft sales this holiday, the company has recently promoted heavily. Its Web site had been offering a 25 percent off coupon; an extra 15 percent off for customers age 55 and over; a 30-day layaway plan, and 90 days of no payment and no interest for customers spending $100 or more on their Goody’s credit cards. The Web site currently features $17.99 denim for young men and juniors, and noted new price reductions were taken, bringing savings of up to between 60 and 80 percent off original prices.

Goody’s woes heightened even as retail shares broke rank with the market overall on Monday, rising 1.3 percent on what was generally a down day. However, some firms, such as Saks Inc., saw declines after coming under the microscope of Wall Street.

The Standard & Poor’s Retail Index increased 3.75 points to 294.75, as the Dow Jones Industrial Average slipped 0.9 percent, or 81.80 points, to 8,952.89.

Despite the boost to start off the week, there is still plenty of trepidation about what will be revealed when retailers report December comparable-store sales on Thursday, which will show just how dismal the holiday season truly was.

Better than expected traffic at Saks stores prompted Barclays Capital equity analyst Robert Drbul to adjust his estimate for the firm’s December comps to a 7 to 9 percent drop, compared with the 10 to 12 percent decline previously expected.

“While we believe sales came in above expectations for the 2008 holiday season, we believe that significant promotional activity more than offset the sales benefit,” Drbul said in a research note.

The analyst cut his 2008 projection for Saks to a loss of 50 cents, from the previously expected 45 cent deficit. In a separate report, Drbul lowered his 2008 earnings projections for Target Corp., to $2.90 a share from $2.95, and Macy’s Inc., to $1.25 from $1.30.

Shares of Saks closed down 12.9 percent to $4.40, but Target’s stock was up 4.4 percent to $36.14, and Macy’s rose 6.2 percent to $11.66.

The analyst predicted December comps at broadline retailers would fall 0.9 percent, compared with the 0.5 percent he previously penciled in.

Among specialty stores, FBR Capital Markets analyst Adrienne Tennant said the post-Christmas sales surge was likely “too little too late.”

“We continue to see the most risk to [fourth-quarter] earnings for the misses’ sector and higher-end retailers,” Tennant said in a research note, singling out AnnTaylor Stores Corp., J. Crew Group, The Talbots Inc. and Urban Outfitters Inc.

All four of those stocks declined, with Talbots down 10.3 percent to $2.34; J. Crew, 5.8 percent to $12.79; Urban Outfitters, 3.9 percent to $15.19, and Ann Taylor, 3.1 percent to $6.01.

Talbots Inc. said after the markets closed that it has entered into revolving credit agreements with Mizuho Corporate Bank Ltd.; Sumitomo Mitsui Banking Corp. and The Norinchukin Bank to convert each of their existing uncommitted working capital lines of $75 million, $50 million and $25 million, respectively, to committed lines, effective immediately.

Including Talbots’ existing $50 million committed facility with Aeon (U.S.A.) Inc., a wholly owned subsidiary of Aeon Co. Ltd., and the majority shareholder of Talbots, the specialty chain has secured $200 million of its $215 million total working capital borrowing capacity as committed facilities.

Talbots also said it is in discussions with a fourth lending bank to convert the remaining $15 million uncommitted facility to a committed facility.

Meanwhile, Charming Shoppes Inc., which was down 7.2 percent to close at $2.18 in over-the-counter trading, named MaryEllen MacDowell president of Charming Outlets. The company said she succeeded Jeffrey A. Elliott, who left the company to pursue other opportunities, the retailer said.

“Consumers will be bargain hunting for the foreseeable future, and retailers are likely to oblige with increased promotions,” Tennant said.

The gainers on Monday included Zale Corp., up 20.7 percent to $4.84; Dillard’s Inc., 14.8 percent to $4.90; Pacific Sunwear of California Inc., 6.9 percent to $1.86; American Eagle Outfitters Inc., 5.2 percent to $10.42, and Nordstrom Inc., 4.5 percent to $15.20.