Goody's Files for Chapter 11 Bankruptcy

By Ashley M. Heher

CHICAGO -- Discount clothing chain Goody's Family Clothing filed for Chapter 11 bankruptcy protection on Tuesday, the retailer's second such petition in less than a year as it struggles with mounting debt and a staggering drop-off in sales.

The privately held company, which announced plans this month to liquidate its 282 stores by the end of March, had $202 million in liabilities and $206 million in assets as of Jan. 3, according to documents filed with the U.S. Bankruptcy Court in Delaware.

The Knoxville, Tenn.-based company, owned by PGDYS Lending LLC, said it had an operating loss of $91 million during the past 11 months after bringing in $786 million in sales. It has up to 50,000 creditors.

Goody's first filed for bankruptcy protection in June, saying 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 first time around, the company closed and liquidated dozens of underperforming stores and 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 closed an associated distribution center in Tennessee.

But that proved 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.

In an affidavit filed with the court, Chief Financial Officer David G. Peek said same-store sales -- an important retail industry metric of sales at sites open at least a year -- slid 19.2% in October, 18.4% in November and 13.6% in December, far more than expected.

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