Business

GOODY’S IN UTTER TATTERS

Sluggish consumer spending is about to claim another fashion victim.

Goody’s Family Clothing – a regional discount chain of more than 350 stores spanning about 20 states across the Southeast and Midwest – is preparing to file for bankruptcy protection, The Post has learned.

Having logged $1.4 billion in annual sales when it was taken private in 2006, the retailer has since suffered a business downturn that has forced management changes and drastic cost cuts, including layoffs and store closings earlier this year.

A Chapter 11 filing has faced delays during the past week as the cash-strapped retailer seeks debtor-in-possession financing, sources said. Still, a filing is expected by early next week, and could come as soon as today, sources said.

With payments from Goody’s spotty for more than a month now, most suppliers have stopped shipping merchandise to stores, sources said.

The troubles at Knoxville, Tenn.-based Goody’s are a black eye for New York-based Prentice Capital Management, which led a team of investment firms that agreed to buy the retailer for $327 million in October 2005.

Founded by a pair of traders with funding from hedge-fund tycoon Steven A. Cohen, Prentice has also taken big stakes in retailers like Wet Seal and KB Toys.

Officials at Goody’s and Prentice couldn’t be reached for comment yesterday.

A Goody’s bankruptcy would follow a Chapter 11 filing last month by Linens ‘n Things, which was taken private in 2005 by billionaire Leon Black’s Apollo Management.

Like Linens ‘n Things, Goody’s has been stung by competition with bigger, better-financed rivals including Wal-Mart, said Britt Beemer, president of retail consultant America’s Research Group.

“It’s just another example of a secondary store not being able to weather the storm,” Beemer said. “Smaller regional players that can’t buy merchandise as well or advertise as well are going to struggle.”

Early last year, executives at Goody’s and Prentice were optimistic about a turnaround as they cleared clutter from stores and cut costs.

Last fall, Goody’s introduced a proprietary clothing line from Ashley Judd, with plans to add OshKosh and Carter’s to its children’s brands, as well as Ralph Lauren’s Chaps this year.

But after suffering a 4 percent same-store sales decline in December, the cash-strapped company laid off 5 percent of employees at its headquarters in late January, and was forced to take a $65 million cash infusion from Prentice as it sought to renegotiate a $235 million bank loan.

Two weeks later, in February, CEO Chuck Turlinski resigned after just a year on the job. Having formerly served as CEO of The Limited, Turlinski admitted that 2007 was “a challenging year.”

In April Goody’s closed about 20 stores under its new CEO, Paul White.

james.covert@nypost.com