Blog: Bad news for Goody’s
Leonie Barrie | 9 June 2008
A statement today from Paul White, the CEO of Goody’s Family Clothing, suggests the retailer will emerge “stronger and healthier” from its bankruptcy filing. The question on many lips, though, is whether it can actually find a way to survive at all.
By its own admission, the firm has been dragged down by tightening credit markets, a strain on merchandise flow, and a sizable but isolated number of underperforming stores in the chain. Some media reports also suggest most of its suppliers have stopped shipping merchandise to the company's stores because of patchy payments, and that Levi Strauss & Co and Lee are among the unsecured creditors.
Goody’s, which targets cost-conscious shoppers in smaller towns, has also been caught between rising costs and competition from the likes of Wal-Mart. These discounters can offer a range of cheap merchandise under one roof, not just clothing, and make a more appealing shopping destination for consumers concerned about fuel prices.
But the retailer’s problems have been while in the making. At the beginning of this year Goody’s said it was cutting 5% of its corporate workforce as part of a reorganisation following a US$65m cash injection from investors. This, it said at the time, would provide adequate capital to execute its business strategies for the foreseeable future.
Things were obviously worse than management thought, and it now has just a month to file a reorganisation plan outlining its roadmap for the future.
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