Goody's Family Clothing, Inc. History

Address:

400 Goody's Lane
Knoxville, Tennessee 37922
U.S.A.

Telephone: (865) 966-2000
Fax: (865) 777-4220

Public Company
Incorporated: 1954
Employees: 10,000
Sales: $1.23 billion (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: GDYS
NAIC: 44814 Family Clothing Stores

Company Perspectives:

Our mission is to be the value-conscious customer's first choice for moderately priced family apparel, known for the best selection, the best customer services, the best value, and the best shopping experience.

Key Dates:

1953:: Mike Goodfriend and his family open a small discount apparel store.
1972:: Robert M. Goodfriend joins the company.
1991:: Goody's goes public.
1993:: By now, the company has doubled its 1990 sales figures and expands to 171 stores.
1995:: The company launches the "Goody's Feels Like You" slogan.
2001:: The Goody's Good Friend Bus Tour is created.
2003:: Goody's acquires the Duck Head brand.

Company History:

Goody's Family Clothing, Inc., is a value-priced chain with over 335 locations in Alabama, Arkansas, Florida, Georgia, Indiana, Illinois, Louisiana, Kentucky, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia. Found mainly in strip malls, Goody's stores offer a variety of apparel and accessories for the women, men, and children. Goody's struggled in the early years of the 21st century, in part due to weak sales and intense competition. A plan to sell the company to a private equity group fell through in 2002.

Origins and Development: 1953-90

The company that would become Goody's started as a 2,000-square-foot small discount apparel store opened in 1953 by Mike Goodfriend and his family. The first "Goodfriend" store, located in Athens, Tennessee, was modest and family-oriented. A big "G" over the door was the simple logo, and the merchandise consisted of irregulars, last year's styles, and closeouts piled on tables and packed onto hanging racks. The lighting was poor, the customer service sketchy, but the lure of good clothes at great prices kept people coming. The bargain store grew slowly over the next 20 years. When outlet and factory stores began to come into their own in the mid-70s, Goodfriend was in a very competitive niche, but stores continued offering seconds and discontinueds at discount prices. The chain had expanded to 12 stores by 1972 and had annual revenue of $12 million. Goodfriend was squeezed by the proliferation of national outlet stores and discounters and knew something had to change to keep his stores in the game. He looked to his son, Bob, for help.

In 1972, Bob--Robert M. Goodfriend--joined the team. With a background in retailing, Bob brought outside experience to the family-run operation. He considered the market and decided to take a middle road, a path different from that of discounters or department stores. He redirected the company to offer well-recognized, fashion names and up-to-the-minute trends at moderate prices. Everything reoriented not around the family seeking a discount but around the average family looking for today's stylish clothes at good prices. The store no longer purchased closeouts, irregulars, last year's goods, or factory seconds.

Acknowledging this adjustment of direction, the store was renamed "Goody's," after a college nickname of Bob's. By 1979, the chain had 21 stores, and Bob took over the reins of leadership completely as president and CEO.

New corporate headquarters were designed in 1990, when the company left the small town of Athens to relocate to Knoxville. Designed by award-winning architectural firm McCarty Holsaple McCarty, Inc., the headquarters not only contained an office complex but a completely customized 344,000-square-foot clothing distribution center. The state-of-the-art center made it possible to receive new fashions in one day and have them on trucks and out to stores the next, making for a minimal time lag in getting the latest fashions to the consumer. The distribution center could process 350,000 garments safely in one day and it was computer-linked to each of the chains. Whatever was happening in the stores--sellouts, poor movers, runs on special items--was reported back to the main office. Acquisition strategy as well as distribution time lines could be adjusted. Clothes sales were also tracked by color and size for a very precise measure of how business was running from day to day.

1990s: Public Offering and Boardroom Battles

By 1991, prospering under a reign of technological advantage, Goody's had seen a decade of meteoric growth. The company closed the year with 91 stores and $273 million in annual sales. It was time to make a public launch. Goody's held its initial public offering in October of that year. It elected a very conservative board of directors and successfully expanded its base of capital.

Three years later, the company had doubled its 1990 sales figures and growth to 171 stores. Goody's was also gradually remodeling its interiors, doing away with tables and updating to clean, brightly lit interiors with wide aisles and clearly marked departments. The image went from discount house to department store, and the prices stayed 10 to 30 percent down from regular department store prices.

Just when things were looking their best, the conservative board of directors began to clash with Goody's management, which wanted to pursue a more aggressive purchasing policy and keep the stores more up to date and better stocked. In a bitter feud, chief operating officer Henry Call and merchandising executive Tom Kelly left the store in 1992. Bob Goodfriend, despite the fact that his dream had developed much of what Goody's had become and that he was one of the members of the original family who started the chain, was forcibly ousted from the board. His absence lasted for three months, during which he sued the company and eventually won $1.24 million in legal settlement and fees. The store's margin of pre-tax earnings dropped from 5.6 percent of sales. Although Henry Call and Tom Kelly came back on board in 1995 as president and executive vice-president, respectively, and Goodfriend was accepted back on the board as chairman, the store has not yet returned to its pre-schism profitability margin. In 1996, it stood at only 3.4 percent. Climbing back up to 5.6 percent profitability is a continuing goal for the company and is reiterated in much of its internal literature.

Part of Goody's strategy to improve that profit percentage began in 1993, when it was decided to create Goody's own private label merchandise. Establishing a private label was seen to give Goody's long-range control over its inventory. Brand name fashions manufactured by other companies were always "outside" variables. However, by developing its own fashions, Goody's management felt that it could more directly please and serve its customers. The first of these private labels was Ivy Crew for men, a stylish, golf-inspired collection that became a popular suite of apparel for the store. Estimates in the late 1990s saw that the Ivy Crew label accounted for 18 percent of the total sales in the men's department.

New Help and a New Slogan for 1995

Contracting year by year with overseas manufacturers in Southeast Asia and Central America, Goody's has expanded its private labels into all of its clothing departments. It hired John Okvath in 1995, an old hand in the Asian rag market, to oversee product development. It also hired people away from The Limited and BIKE Athletic who were well-seasoned in overseas garment development. The expansion of the private label program was viewed by senior management as Goody's "ace in the hole" for future profit creation. While maintaining a commitment to national brand name fashions, Goody's was encouraging in its customers a taste for its own house labels.

One of the recurring elements in the story of Goody's is the store's striving to keep a friendly, family look and compete with the slick finish-outs of its department store competitors. As a part of this effort to stay in tune with its market, in the spring of 1995 Goody's came out with a new slogan--"Goody's feels like you." The logo was redesigned and the whole atmosphere of the stores was redone in shades of upbeat, feel-good, country casual. An in-house brochure recapped the marketing policy as follows: "Customers like the prices, and they like the selection. But most important, they feel good about themselves when they wear the clothing they buy at Goody's." The "Customer First" training initiative helped to carry out the theme by teaching store associates to smile and respond to customers immediately. Goody's also followed up on its progress by bringing people from the sales floor to headquarters periodically for "roundtable" meetings that debriefed associates on the customer experience and gathered grass-roots comments about improvement.

In 1995, the company opened 13 new stores and saw gross sales of $696.7 million. With better sales, aggressive promotion, remodeled looks, and Goodfriend, Call, and Kelly firmly back on board, Goody's stock rose 150 percent.

Enjoying a calmer political atmosphere, Goody's headed into 1996, a year when the company opened 20 new stores and closed only one. Now with a newly picked management team, the corporation redirected its policies away from slashing prices quickly on slow-moving apparel and more towards holding a stable, mid-priced lineup. The company also began to invest more heavily in inventory. The new corporate policy also encouraged a move out of the "country"--the suburbs where many of the chains were located--and into metropolitan areas. In 1996, Goody's opened six stores in Atlanta and three in Charlotte. Sales were up 17 percent over 1995, to $819.1 million, and the stores ended the year with no long-term debt.

Goody's business was seasonal in nature, with the peak seasons being traditional family-oriented times. Goody's made its money during the periods before Christmas, Easter, and the reopening of school in September--these weeks accounting for 35 percent of the company's annual sales from 1993 to 1996, a trend expected to continue. In late 1996, the company also took a new direction by offering gifts and accessories, an approach which was evaluated as profitable and successful.

With the addition of non-clothing items, Goody's standard merchandise fit in nine carefully tracked categories, and the labels in each category fluctuated slightly from year to year as the corporation determined which popular brands would fit into its pricing structure.

In 1997, Goody's planned to improve its profit margin by reducing dependence on denim, a low-cost leader for the store that brought in almost a quarter of all sales across all departments, and increasing its stock of house-label merchandise and high-margin garments, such as women's career clothing. It also continued to lease, not own or build, its stores, in order to avoid long-term debt. Goody's looked for a very specific sort of location--nice strip centers with popular anchor stores in areas where its customers, the $30,000 to $50,000 annual income families, lived. It planned a minimum of 20 new stores to open in 1997, and its goal was to reach $1 billion in sales by the close of 1998.

Part of the strategy to increase sales was sharp advertising. Goody's slogans "take a good look" and "Goody's feels like you" were splashed across all of their materials. Goody's advertising was headed by Mary Beth Fox, who joined the company in 1992 as a graphic designer. The company's point-of-sale, signs, print ads, and other sales materials were all designed and distributed in-house.

Not only did Goody's aggressively promote itself through ads in the local paper and direct mail, but the company also had strong corporate giving and community service programs. Local stores were often the drop-off points for canned goods and clothing to benefit the needy. Goody's also supported the Children's Miracle Network and mobile medical clinics in its communities. The store strived to foster a friendly, family image.

"We're in a position today not to keep pace, but to set the pace for our competitors," said chairman of the board Bob Goodfriend in 1997. "We have the right products, we have a great group of associates, and we have good locations. If we stay focused on our customers and concentrate hard on the day-to-day basics of the business, it's a winning combination."

Goody's rising stock figures seemed to suggest that analysts agreed. The stock was purchased by several large brokers to season mutual fund markets. Nevertheless, Goody's was in keen competition with a host of rivals that were larger and more established. Department store chains and factory outlet stores provided ongoing competition for the mid-priced family apparel chain.

Overcoming Challenges in the Late 1990s and Beyond

Goody's fortunes took a turn for the worse in 1998. Even though it achieved its $1 billion sales goal, expanded into Texas, and launched several new private-label offerings, profits began to show signs of weakness. Warm weather in the third and forth quarters forced profits down by 17 percent in 1998 and earnings continued to fall the following year.

During 2000, comparable stores sales--sales from locations open for at least a year--dropped by 4.8 percent. Call resigned that year, leaving Bob Goodfriend at the helm with president Lana Cain Krauter. During this period, Goody's management team launched a restructuring of the company in order to shore up sales. Faith Popcorn, a trend consultant, was hired to revamp Goody's image. A June 2001 Knoxville News-Sentinel article printed part of Goodfriend's speech at the annual shareholders meeting that summed up the company's strategic direction. "As most of you know," Goodfriend claimed, "we are repositioning Goody's. Changes are being made virtually in all areas of our company. The goal of our restructuring is two-fold. First and foremost, of course, is to encourage shoppers, women in particular, to see Goody's as their first and best option for buying clothing for themselves and their families." Goodfriend also addressed the issue of competition. "There's no question that this battle for our target female consumer is a pretty difficult one. Our competition is equally interested in winning that same battle."

While the company worked to recover sales and profits, its operating environment remained extremely challenging. The terrorist attacks in 2001 depressed an already weak economy and unseasonable weather was wreaking havoc on sales and inventory levels. Goodfriend launched the Goody's Good Friend Bus Tour that year. He traveled by bus to stores around the country in order to talk to employees and customers about changes they would like to see at Goody's. Despite company efforts, Goody's reported a loss of $20.2 million in 2001--the worst financial performance in its history.

As a result, expansion was scaled back from 18 new store openings in 2001 to just two in 2002. A series of job cuts were launched and six stores were closed. Krauter resigned in 2002, one month after Goody's revealed that a private equity group had offered to buy the company for $6.50 to $7.50 per share. Several shareholders opposed the deal, claiming the buyout undervalued the company and that management had failed to negotiate a higher price. In November, Goody's announced that negotiations had ended and that it had terminated its plans to sell the company.

Goody's management remained optimistic despite sluggish sales. Profits rebounded in 2002 and continued to climb in 2003. The company faced a minor setback that year when it was forced to pay $11 million in damages to Tommy Hilfiger after a judge ruled that Goody's had sold counterfeit Hilfiger T-shirts and was guilty of trademark infringement.

Goody's acquired the Duck Head brand for $4 million in 2003. The brand was expected to bring in over $60 million in sales in its first year. It also began eyeing Iowa, Pennsylvania, and Kansas as potential expansion areas. Along with women's fashions, it focused on increasing its lines of expanded sizes for both men and women. Goody's continued to face intense competition while it worked to bolster comparable store sales. With a solid strategy in place, it appeared to be well positioned to battle future challenges.

Principal Subsidiaries: SYDOOG, Inc.; GOFAMCLO, Inc.; GFCFS, LLC; Trebor of TN, Inc.; GOODY'S MS, LP; GOODY'S IN, LP; GFCTX, LP; GFCGA, LP; GFCTN, LP; Goody's Giftco, LLC.

Principal Competitors: J.C. Penney Company Inc.; Target Corporation; The TJX Companies Inc.

Goody's Family Clothing, Inc. History

Company Perspectives:

Key Dates:

Company History:

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