Goody's liquidates remaining U.S. stores

Posted January 6, 2009 7:57 p.m. EST
Updated January 9, 2009 2:14 p.m. EST

— Discount clothing chain Goody's Family Clothing will begin liquidating its stores on Friday as the retailer becomes one of the year's first victims of the worsening economy.

The move, which comes less than four months after the privately held retailer emerged from Chapter 11 bankruptcy protection, affects the Knoxville, Tenn.-based chain's 287 stores scattered throughout 20 Midwestern and Southern states, said Cathy Hershcopf, a partner at Cooley Godward Kronish LLP.

The firm is working with Goody's vendors and its parent, PGDYS Lending LLC.

It's uncertain what will happen to the company's 9,800 workers after the liquidation – being handled by a joint venture between Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC – is completed by the end of March. But without a last minute buyer or an investor to purchase high-performing stores, their job outlook is grim.

"I think every retailer experienced a great deal of pressure this holiday season because of the lack of consumer confidence," Hershcopf said. "But undercapitalized companies like Goody's experienced more pressure from their lenders and from their vendors."

The company had 35 stores in North Carolina, including locations in Clinton, Smithfield, Dunn, Goldsboro, Wilson, Sanford, Rocky Mount and Roanoke Rapids. The store in Fayetteville closed after Thanksgiving.

Goody's filed for bankruptcy protection in June, saying at the time that the move would help it address "pressures from tightening credit markets, strain on merchandise flow and a sizable but isolated number of underperforming stores in the chain."

As part of its reorganization plan, the company closed and liquidated dozens of underperforming stores, shuttered a distribution center in Arkansas and a corporate office in New York. It also cut operating and corporate costs, ended its e-commerce business and an associated distribution center in Tennessee.

But that proved to be inadequate as shoppers tightened their belts amid the ongoing recession, causing a downright dismal holiday shopping period for retailers that usually bank on the Christmas spending to boost profits.

The 59-year-old retailer has now sought bankruptcy protection for a second time and executives with the company are speaking with competitors about whether they would like to purchase some of the chain's stores.

Goody's is owned by PGDYS Lending, which is managed by Prentice Capital Management.