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Goody’s was able to leverage bankruptcy to liquidate 69 stores after entering bankruptcy with 287. I liked the quote from the article where they talk about eliminating “excessive corporate spending”. That’s quite a vague line, were the Executives spending too much money on failed marketing programs? Was there money wasted on R&D (not sure what R&D a retail store would do in the first place)? Was there too much overhead? A little elaboration on this point would be useful for any future investors.

Here is part of the story excerpted from MarketWatch (click here for the original):

KNOXVILLE, Tenn., Oct 20, 2008 /PRNewswire via COMTEX/ — KNOXVILLE, Tenn., Oct. 20 /PRNewswire/ — Goody’s Family Clothing, Inc. (Goody’s), a moderately priced family apparel retailer operating in small to midsize markets primarily throughout the Southeast, announced that the Company’s Second Amended Plan of Reorganization proposed by Goody’s Family Clothing, Inc., its Subsidiary Debtors and the Official Committee of Unsecured Creditors (the “Plan”) became effective today, marking the Company’s emergence from Chapter 11 bankruptcy. The Plan was confirmed by order of the United States Bankruptcy Court for the District of Delaware on October 7, 2008.

During the Chapter 11 bankruptcy, Goody’s streamlined and reorganized its operations to improve the business model, significantly reduced operating costs, and maximized the value of core assets. This included the closure and liquidation of 69 underperforming retail locations in 18 states, the closing of a distribution center in Arkansas and a corporate office in New York, and the elimination of excessive corporate spending. In addition, Goody’s eliminated the Company’s e-commerce business, as well as an associated distribution center in Tennessee.

Paul White, Goody’s Chief Executive Officer, stated, “We believe we have significantly strengthened both our business and capital structure and this will allow Goody’s to continue to build on its 55-year heritage. Our Plan has enabled us to eliminate considerable costs from our business and we now have a profitable store base that is more efficient and productive. Importantly, this was all done while continuing to manage our stores without interruption and successfully serve our customers.

Reports are coming out today that Circuit City may consider shutting at least 150 stores and cut jobs to avoid filing for bankrutpcy. This move by Circuit City is not surprising as retail sales fell 1.2% in September and I bet that when October numbers come out retail sales willl probably be off closer to 2%. Retailers all over (except maybe WalMart & Costco) are going to have an extremely tough stretch coming up over the next 6 months as consumers ratchet back their spending and focus on the bare essentials.

Here is part of the story excerpted from MarketWatch (click here for the original):

Circuit City has hired Skadden, Arps, Slate, Meagher & Flom LLP, which oversaw Kmart’s Chapter 11 reorganization, as its bankruptcy counsel. The company also has retained FTI Consulting Inc. to develop a turnaround plan and investment bank Rothschild Inc. to guide talks with banks and secure emergency financing, the Journal reported. See related MarketWatch First Take commentary.

“While we would appreciate [Circuit City] for its attempt to stay solvent, we remain highly pessimistic on holiday sales and on consumer spending in 2009,” said Standard & Poor’s analyst Michael Souers.
A filing from Circuit City would make it the largest retailer to enter bankruptcy protection in several years, the paper reported. Retailers that have filed for bankruptcy protection this year include Linens ‘n Things, Mervyn’s and Sharper Image.

“We’re not going to speculate on rumors and comment beyond our original statement,” said Circuit City spokesman Jim Babb in a response to emailed questions.

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