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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE
OCTOBER 7, 1996)
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
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COMMISSION FILE NUMBER: 0-19526
GOODY'S FAMILY CLOTHING, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
TENNESSEE 62-0793974
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
400 GOODY'S LANE, KNOXVILLE, TENNESSEE 37922
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (423) 966-2000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of the voting stock held by non-affiliates of the
Registrant as of April 16, 1998: approximately $493,404,000.
Number of shares of Common Stock outstanding as of April 16, 1998:
16,483,690.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Shareholders of Goody's Family
Clothing, Inc. and subsidiaries are incorporated by reference in Part I and Part
II of this Report. Portions of the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on June 17, 1998 are incorporated by
reference into Part III of this Report. Unless the context otherwise indicates,
all references in this Form 10-K to the "Company" or "Goody's" refer to Goody's
Family Clothing, Inc., a Tennessee corporation, and its subsidiaries. The
Company's fiscal year ends on the Saturday nearest the last day of January. The
terms "fiscal 1998," "fiscal 1997," "fiscal 1996," "fiscal 1995," "fiscal 1994"
and "fiscal 1993" refer to the Company's fiscal years ending or ended on January
30, 1999 (52 weeks), January 31, 1998 (52 weeks), February 1, 1997 (52 weeks),
February 3, 1996 (53 weeks), January 28, 1995 (52 weeks) and January 29, 1994
(52 weeks), respectively.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management has
endeavored in its communications, in its Annual Report and in this Form 10-K to
highlight the trends and factors that might have an impact on the Company and
the industry in which the Company competes. Any "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "estimate," "anticipate," "believe," "target," "plan,"
"project" or "continue" or the negatives thereof or other variations thereon or
similar terminology. These statements appear in a number of places in this Form
10-K and include statements regarding the intent, belief or current expectations
of the Company, its directors or its officers with respect to, among other
things: (i) the timely availability of branded and private label merchandise in
sufficient quantities to satisfy customer demand; (ii) customer demand and
trends in the apparel and retail industry and to the acceptance of merchandise
acquired for sale by the Company; (iii) the effectiveness of planned advertising
and promotional events; (iv) the impact of competitors' pricing and store
expansion; (v) the ability to enter into leases for new store locations; (vi)
individual store performance, including new stores; (vii) adverse weather
conditions, employee relations, and the general economic conditions within the
Company's markets; (viii) the timing, magnitude and costs of opening new stores;
(ix) the Company's financing plans; (x) trends affecting the Company's financial
condition or results of operations and (xi) the Company's business and growth
strategies. Readers are cautioned that any such forward-looking statement is not
a guarantee of future performance and involves risks and uncertainties, and that
actual results may differ materially from those projected in the forward-looking
statement as a result of various factors. The Company does not undertake to
publicly update or revise its forward-looking statements even if experience or
future changes make it clear that any projected results expressed or implied
therein will not be realized.
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Authentic GFC, Chandler Hill, Feels Like You, GFC, GFC Trading Co.,
GoodKidz, Goody's Family Clothing and OCI -- Quality Clothing are registered
trademarks of the Company. The Company has applied for registration of the
following trademarks: Bobby G by Ivy Crew, Department Store Brands Department
Store Styles Goody's Low Price, Electro Sport, G (stylized G with arch design),
Intimate Classics, Ivy Crew, Montana Blues Jean Company, Mountain Lake,
OCI-Quality Clothing, Old College Inn and Take a Good Look. The following
trademarks and tradenames used in this Form 10-K are owned by (and in certain
cases registered to) third parties: Adidas, Alfred Dunner, Arrow, Body I.D.,
Braetan, Bugle Boy, Burnes of Boston, Byer, California Concepts, Capezio, Cathy
Daniels, Converse, Counterparts, Cradle Togs, Dawn Joy, Dockers, Drummer Boy,
Esprit, Fila, Fundamental Things, Hanes, Herman Kay, Jantzen, Jessica Howard,
Keds, L.A. Gear, LaBlanca/Sassafras, Lee, Leslie Fay, Levi's, Lovable,
Maidenform, Mickey & Co., My Michelle, Nike, Ocean Pacific, Olga, Plaza South,
Positive Attitude, Reebok, Requirements, Rosetti, Russell, Sag Harbor, Scarlett,
Speedo, Stephanie K by Koret, Trends, Union Bay, Warner's, Winlet, Winnie the
Pooh and Wrapper.
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PART I
ITEM 1. BUSINESS
GENERAL
Incorporated in January 1954, Goody's is a retailer of moderately-priced
apparel for women, men and children, operating 223 stores in 15 Southeastern and
Midwestern states as of January 31, 1998. The Company continually develops and
refines its merchandising strategy to meet the tastes and lifestyles of its
customer base. The Company primarily locates its stores in small to midsize
markets that have demographic characteristics consistent with its targeted
value-conscious customer. Its stores, all of which are leased and which are
generally located in strip shopping centers, average approximately 27,200 gross
square feet. The Company manages its core functions, including purchasing,
pricing, marketing and advertising, distribution, finance and information
systems, from its centrally located corporate office and distribution center in
Knoxville, Tennessee.
The Company's objective is to be the leading retailer of brand name apparel
in each of the markets it serves by providing its customers with a broad
selection of current-season, quality branded apparel at value prices. Key brands
offered by the Company include Adidas, Alfred Dunner, Bugle Boy, Dockers, Lee,
Leslie Fay, Levi's, Nike, Reebok, Requirements and Sag Harbor among many others.
These well-known labels, combined with the Company's outstanding private label
collections, Chandler Hill, Electro Sport, GFC Trading Co., Intimate Classics,
Montana Blues Jean Company and Mountain Lake for women; Authentic GFC, Bobby G
by Ivy Crew, GFC, Ivy Crew, Old College Inn and OCI -- Quality Clothing for men;
and GoodKidz for children, enable the Company to compete effectively with other
retailers operating in its markets.
The Company continues to experience significant growth in the number of its
stores as well as in its sales. During the period from fiscal 1993 through
fiscal 1997, the number of stores increased from 146 to 223 and sales increased
from $505.0 million to $971.9 million. During fiscal 1995, the Company began to
implement important strategic initiatives related to merchandise assortment,
inventory levels and customer focus. The Company believes that its financial
results began significantly improving in the third quarter of fiscal 1996 as a
result of the successful implementation of these strategic initiatives. These
improvements have included comparable store sales increases in each subsequent
quarter. This trend has continued into fiscal 1997 when, compared with fiscal
1996, sales increased 18.7% from $819.1 million to $971.9 million (including a
comparable store sales increase of 8.2%), net earnings increased 93.6% from
$17.2 million to $33.3 million and earnings per share increased 88.6% from $1.05
per share to $1.98 per share.
COMPETITIVE STRATEGY
Central elements of the Company's competitive strategy include the
following:
- Appeal to Value-Conscious Customers. Goody's appeals to value-conscious
customers by offering quality brand name merchandise at prices targeted
to be 10% to 30% lower than those of traditional department stores.
- Offer Broad Range of Merchandise for the Entire Family. Unlike specialty
stores, the Company provides a wide selection of merchandise designed to
fully address the apparel needs of women, men and children. The Company
believes that providing one-stop apparel shopping for its customers in
convenient, accessible locations gives it an advantage over many of its
competitors.
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- Emphasize Current-Season, First-Quality Brands. The Company's stores
offer brands that are not generally available to mass market and
off-price retailers. These brands include Levi's, Lee, Bugle Boy, Sag
Harbor and Nike, among others. Unlike off-price retailers, Goody's offers
only current-season, first-quality merchandise.
- Strategically Use Private Label Merchandise. While the Company is
committed to maintaining a strong line-up of nationally recognized brand
name merchandise, private label programs offer important strategic
advantages. These programs offer shoppers designer looks and quality at
value prices, generate higher gross margins and allow the Company to
maintain consistent in-stock positions on basic merchandise.
- Focus on Small to Midsize Markets. The Company generally locates stores
in small to midsize markets that have demographic characteristics
consistent with its targeted value-conscious customer. Having developed a
flexible store format depending on local demographics, the Company
generally seeks locations that range in size from 20,000 to 35,000 gross
square feet. While the Company operates in the selected metropolitan
markets of Atlanta, Georgia; Birmingham, Alabama; and Charlotte, North
Carolina, smaller market areas offer significant strategic advantages,
including increased opportunities for expansion, lower rent and occupancy
costs and fewer competitors.
- Provide Strong Marketing and Advertising. The Company believes that
communicating frequently with customers is key to maintaining traffic
flow in its stores and creating keen awareness among shoppers. The
Company advertises in newspapers at least once each week, 52 weeks a
year. The Company reinforces its print message with television and radio
campaigns running during portions of approximately 39 weeks each year.
EXPANSION STRATEGY
The Company's expansion strategy is to open new stores in small to midsize
markets generally located within 800 miles of its distribution center in
Knoxville, Tennessee. In addition, the Company considers suburban growth areas
of metropolitan markets for expansion from time to time. The Company believes
that opportunities exist to expand its presence within current markets, new
markets such as Texas and anticipates future expansion into the neighboring
states of Louisiana and Oklahoma. The Company would also consider a
complementary acquisition opportunity should it arise, although the Company has
no understandings, arrangements or agreements with respect to any such
opportunity.
In making its decision to open a new store, the Company typically
evaluates, among other factors, market demographics, competition, location,
consumer traffic, rent and occupancy costs, advertising and other expenses
associated with the opening and operation of a new store.
Goody's plans to increase its gross store square footage by at least 10%
per year in each of the next four fiscal years by opening new stores and
relocating existing stores each year. The Company's current plans for fiscal
1998 are to open a total of 28 new stores, including the Company's first three
stores in the state of Texas, relocate or remodel 10 to 12 stores and close two
stores.
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The following table provides information regarding the number of stores in
operation, new stores opened, stores closed and stores relocated or remodeled
during the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Stores open, beginning of year............................ 203 184 171 146 125
New stores opened during the year......................... 24 20 13 25 23
Stores closed during the year............................. (4) (1) -- -- (2)
--- --- --- --- ---
Stores open, end of year.................................. 223 203 184 171 146
=== === === === ===
Stores relocated or remodeled during the year............. 16 8 7 7 2
=== === === === ===
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MERCHANDISING STRATEGY
The Company's merchandising strategy has been developed to appeal to
value-conscious, quality-oriented customers. The Company offers its merchandise
at prices targeted to be 10% to 30% below those of traditional department
stores. The Company competes (i) with department stores by offering quality,
brand name apparel at value prices, (ii) with specialty stores by offering
apparel for the entire family, (iii) with off-price apparel stores by offering a
wide selection of current-season merchandise at competitive prices and (iv) with
discount stores by offering better brand name merchandise generally unavailable
to discount retailers. The Company does not purchase factory seconds,
out-of-season or irregular merchandise. The Company believes that its broad
selection of current-season, first-quality, brand name merchandise, combined
with its private label merchandise, provides a key competitive advantage. While
nationally recognized brand name merchandise remains the cornerstone of its
merchandising strategy, the Company continues to invest in the development of
its private label brands, which offer customers quality basic and designer look
apparel at value prices. For fiscal 1997 and 1996 private label merchandise
sales accounted for approximately 21% and 15%, respectively, of the Company's
sales.
Generally within each store, specific departments are well signed and have
direct aisleways leading to major departments. Visual merchandising and store
presentation are enhanced by fixtures that showcase merchandise in an open,
accessible and customer-friendly shopping environment. Sale items featured in
the Company's advertising campaigns are highlighted in the stores with
easy-to-read signs that help customers quickly locate items of interest. The
overall merchandise presentation is reorganized four times a year to emphasize
the fashion products for the upcoming season.
A typical store has six divisions that include women's (juniors, misses,
intimate apparel, swimwear and outerwear), denim, men's (sportswear, activewear,
young men's and men's furnishings), children's (infants and toddlers, boys and
girls), accessories (jewelry, handbags, belts and gift items) and shoes (in 185
stores). Goody's carries approximately 12,500 different styles of merchandise,
all of which are electronically tracked in order to provide accurate selling
data to the Company.
MERCHANDISING DIVISIONS
Women's. The broadest merchandise selection offered by the Company is in
the women's division, which contributed 42.1% of total sales in fiscal 1997.
Goody's improved its profitability in the women's division in fiscal 1997 by
emphasizing career fashions, casual weekend wear, plus-size merchandise in the
misses department and cross-over fashions targeted at customers whose tastes
fall between those of the traditional junior and misses customers.
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Women's merchandise categories include juniors, misses, intimate apparel,
swimwear and outerwear. Juniors' merchandise lines include brand names such as
Adidas, Byer, California Concepts, Lee, Levi's, My Michelle, Nike, Reebok, Union
Bay and Wrapper. Misses' merchandise lines include popular brand names such as
Alfred Dunner, Cathy Daniels, Counterparts, Fundamental Things, Lee, Leslie Fay,
Levi's, Requirements, Sag Harbor and Stephanie K by Koret, as well as the
Company's private label brand, Mountain Lake. Fashion dresses are also an
important part of Goody's overall women's product lines and feature popular
brand names such as Dawn Joy, Jessica Howard, Leslie Fay, Plaza South, Positive
Attitude and Scarlett. Brand name undergarments include products from Hanes,
Lovable, Maidenform, Olga and Warner's. Swimwear features labels such as Body
I.D., LaBlanca/Sassafras, Ocean Pacific and Speedo. Outerwear product lines
include the Braetan, Herman Kay and Winlet brand name labels and Mountain Lake
and GFC Trading Co., the Company's private label brands.
Denim. The denim merchandise division is important to the Company's
merchandising concept and contributed 22.9% of total sales in fiscal 1997. The
Company believes that its broad selection and competitive pricing of denim
merchandise appeals to value-conscious families and generates customer traffic
for other higher margin merchandise. The Company utilizes automatic
replenishment programs using electronic data interchange ("EDI") with its major
denim suppliers to alleviate out-of-stock positions for popular styles and sizes
and improve inventory turnover. Primary brand names that are carried in the
denim division include Bugle Boy, Lee, Levi's and Union Bay. The Company's
private label brands for denim are Montana Blues Jean Company for women and
Authentic GFC for men.
Men's. The men's division contributed 20.1% of total sales in fiscal 1997
and consists of sportswear, activewear, young men's and men's furnishings
departments. The men's division utilizes a shop concept that features various
brand name merchandise targeted at certain lifestyles. The Company introduced
men's blazers and dress slacks in fiscal 1996 on a limited basis, and this
program was expanded in fiscal 1997. Featured brand names in the men's division
include Adidas, Arrow, Bugle Boy, Dockers, Drummer Boy, Fila, Lee, Levi's, Nike,
Reebok and Russell. The Company's private label brands for men are Authentic
GFC, Bobby G by Ivy Crew, GFC, Ivy Crew, OCI -- Quality Clothing and Old College
Inn.
Children's. The children's division contributed 6.7% of total sales in
fiscal 1997 by offering popular and durable apparel for children of all ages.
Primary brand names carried for children include Adidas, California Concepts,
Cradle Togs, Dockers, Lee, Levi's, Mickey & Co., My Michelle, Nike, Reebok,
Trends, Union Bay and Winnie the Pooh. The Company's private label brand for
children is GoodKidz.
Accessories. The accessories division, which includes items such as
fashion and costume jewelry, handbags, belts, wallets, hair accessories,
sunglasses for women, picture frames, gourmet foods, stationery and gift baskets
contributed 4.4% of total sales in fiscal 1997. Featured brand names include
Burnes of Boston, Capezio, Jantzen and Rosetti.
Shoes. The shoe division contributed 3.4% of total sales in fiscal 1997.
Shoe departments are located in 185 of the Company's stores and are operated by
a third party under an exclusive operating license agreement which expires on
January 29, 2000. In fiscal 1997, 23 of the 24 new stores opened by the Company
included shoe departments. The Company added shoe departments to 25 stores
existing prior to 1997. The shoe departments offer brand names such as Adidas,
Converse, Esprit, Keds and L.A. Gear. During fiscal 1998 the Company plans to
include shoe departments in 25 of the 28 planned new stores and to add shoe
departments to three existing stores operating prior to fiscal 1998.
Tuxedo rentals and service fees. The Company's revenue from tuxedo rentals
and service fees charged on layaways contributed less than 1% of total sales in
each of the last three fiscal years.
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The following table shows a breakdown of the Company's total sales for the
periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996 FISCAL 1995
------------------- ------------------- -------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Women's................. $408,739 42.1% $335,923 41.0% $286,097 41.1%
Denim................... 222,572 22.9 202,263 24.7 175,754 25.2
Men's................... 195,156 20.1 165,438 20.2 144,081 20.7
Children's.............. 64,885 6.7 59,705 7.3 49,229 7.1
Accessories............. 42,467 4.4 24,972 3.0 17,666 2.5
Shoes................... 33,378 3.4 26,827 3.3 21,087 3.0
Tuxedos rentals and
service fees.......... 4,726 0.4 3,928 0.5 2,954 0.4
-------- ----- -------- ----- -------- -----
$971,923 100.0% $819,056 100.0% $696,868 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
PURCHASING
The Company's merchandise purchasing function is centralized at its
corporate headquarters. The Company buys its merchandise from approximately 700
vendors and does not have long-term or exclusive contracts with any manufacturer
or vendor. During fiscal 1997, the Company's purchases from Levi Strauss & Co.,
its largest vendor, represented approximately 20% of its total purchases. No
more than 5% of total purchases were attributable to any one of the Company's
other vendors. The Company intends to maintain strong, partner-type
relationships with its vendors. A significant portion of the Company's
merchandise is prepacked and preticketed by the vendors for each store, reducing
the cost and processing time in the distribution center.
Merchandise associated with the Company's private label brands is largely
imported. The Company employs its own designers and product development teams
who work closely with its merchants to track seasonal fashion trends, analyze
customer feedback and determine accurate order quantities. The Company controls
its private label merchandise from the initial concept to the final sale to the
consumer and monitors product quality, freight costs and other expenses in an
effort to maximize gross margins on such merchandise.
PLANNING AND ALLOCATION
The Company's planning and allocation department works closely with its
merchants, distribution center and store operations personnel to establish an
appropriate flow of merchandise on a store-by-store basis. This flow of
merchandise reflects customer preferences in each market in an effort to reduce
the cost of transferring merchandise among its various stores. The Company also
utilizes automatic replenishment programs using EDI with approximately 63
vendors, which accounted for approximately 25% of total sales in fiscal 1997 and
allows for more efficient replenishment of specific items of merchandise in
particular styles, sizes and colors to minimize out-of-stock positions of basic
merchandise and improve inventory turnover. The Company expects to continue to
invest in automatic replenishment programs using EDI with new and existing
vendors and increase the number of participating vendors.
CENTRALIZED DISTRIBUTION
The Company believes that its 344,000-square-foot distribution center,
located in Knoxville, Tennessee, will be sufficient to process and distribute
merchandise to approximately 350 stores. The distribution center is equipped
with automated merchandise handling equipment that facilitates efficient
distribution of merchandise to the Company's stores and provides for efficient
cross docking of prepacked and preticketed merchandise by store. In order to
improve quality control, all incoming merchandise is received at the
distribution center to allow for inspection before being delivered to the
stores.
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Merchandise for individual stores is typically processed through the
distribution center within 48 hours of its receipt from vendors. Furthermore,
because the distribution center is located adjacent to both a main north-south
and a main east-west interstate highway, the Company can negotiate favorable
shipping terms with its vendors for merchandise delivered to its distribution
center.
The Company has also developed an effective computerized system for
tracking merchandise from the time it arrives at its distribution center until
it is delivered to the stores to ensure that shipments are delivered in an
accurate and timely manner. In delivering merchandise to the stores, the Company
utilizes a third party contract carrier.
MARKETING AND ADVERTISING
The Company's marketing and advertising functions are centralized at its
corporate headquarters. The Company's marketing and promotional strategy is
designed to reinforce its image as a value-priced, family apparel retailer. The
Company believes that its advertisements, which emphasize brand name apparel,
low prices and broad selections for the entire family, have enabled the Company
to communicate a unique look that reinforces its niche in the marketplace.
Using a multi-media approach, Goody's develops and prepares its own
advertising materials for newspapers and internally creates television and radio
spots. The Company's media department researches its market to develop profiles
of shoppers in order to effectively plan the Company's advertising. The Company
frequently uses full-color advertising to portray the depth and selection of its
merchandise. In-store merchandise presentation is coordinated with such
advertising to maximize promotional opportunities. While the exact allocation of
advertising dollars differs from market to market, the Company generally
allocates approximately 67% of its advertising budget to print media and the
remainder to television, radio and other promotional activities. Several of the
Company's key vendors share in the costs of mutually beneficial advertising
campaigns through cooperative advertising programs.
PRICING
The Company's pricing strategy is designed to provide value to its
customers by offering merchandise at prices targeted to be 10% to 30% below
those of traditional department stores. Denim, which is a consumer draw, is
priced very competitively and is generally positioned to increase traffic
throughout the store. All pricing decisions are made at the Company's corporate
headquarters. In order to remain competitive and enhance its sales promotion
efforts, Goody's frequently monitors its competitors' prices. In addition, the
Company's management information systems provide daily and weekly sales and
gross margin reports that, among other things, track sales and gross margins by
stock keeping unit ("SKU") and provide management with the flexibility to adjust
prices as appropriate.
CUSTOMER SERVICE
The Company's customer service program, Customer First, was designed to
educate and train store associates how to develop a customer-friendly mind-set
where customers -- not tasks -- come first in the stores. This initiative begins
with pre-employment screenings that measure job applicants' initial customer
service skills and is supported by ongoing training programs and incentives for
associates who demonstrate outstanding customer service performance. The Company
is also making operational enhancements to improve customers' overall shopping
experiences in its stores. The Company's merchandise return and exchange
policies were developed to ensure positive interactions between store associates
and customers. Additionally, the Company continues to invest in new cash
register systems and technologies to simplify the customer checkout process. To
monitor the success of these new Customer First programs, Goody's is encouraging
customer feedback with in-store survey cards.
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STORE OPERATIONS
Management of store operations is the responsibility of the Executive Vice
President -- Stores, who is assisted by a Vice President -- Store Operations, a
Vice President -- Store Development, three Regional Vice Presidents -- Sales and
27 district managers. Each district manager oversees five to 11 stores and
reports to a Regional Vice President -- Sales.
Each store has a manager and between one and three assistant managers,
depending upon the size of the store. Other positions of responsibility within a
store include four to five department managers, a head cashier and a stockroom
manager. The number of sales staff ranges from 12 in smaller stores to 25 in
average stores to 70 in larger stores. The majority of the sales staff are
employed on a full-time basis, although part-time workers are hired during peak
selling seasons. The Company's stores are generally open from 9:00 a.m. to 9:00
p.m. Monday through Thursday; from 9:00 a.m. to 10:00 p.m. Friday and Saturday;
and from 12:00 p.m. to 6:00 p.m. on Sunday. These hours are extended during
various holiday and peak selling seasons.
STORE LOCATIONS
The Company locates stores predominantly in small to midsize markets in the
Southeast and Midwest that typically have populations of 100,000 or fewer and
demographic characteristics consistent with its targeted value-conscious
customer. However, since 1994, the Company has opened multiple locations within
certain metropolitan markets such as Atlanta, Georgia; Birmingham, Alabama and
Charlotte, North Carolina. Goody's typically enters these metropolitan markets
by opening several stores simultaneously, which increases the Company's image
and awareness throughout the market while leveraging advertising costs which are
generally higher than small to midsize markets. Goody's primarily leases store
space in strip centers, where costs are generally lower than mall locations. The
smallest of the Company's stores has 7,600 gross square feet and the largest
store has approximately 52,600 gross square feet; the average store size is
approximately 27,200 gross square feet.
All of the Company's stores are leased, rather than owned, which has
enabled the Company to grow without incurring indebtedness associated with
acquiring and owning real estate. The Company believes that the flexibility of
leasing its stores provides substantial benefits and avoids the inherent risks
of owning real estate. The Company believes that it has established itself as an
anchor tenant due to its operating performance, the size of its stores, its
advertising contributions in local markets, its financial position and its
history of meeting its lease commitments on a timely basis.
INFORMATION SYSTEMS
The Company maintains fully integrated point-of-sale, inventory and
merchandise systems. The Company's information systems provide management,
buyers, planners and distributors with comprehensive data that helps them
identify emerging sales trends and, accordingly, manage inventories. The
information systems include unit and dollar planning, purchase order management,
open order reporting, open-to-buy, receiving, distribution, EDI, basic stock
replenishment, transfer management and inventory and price management. Daily and
weekly sales reports are used by management to enhance the timeliness and
effectiveness of purchasing and markdown decisions. Merchandise purchases are
based on planned sales and inventories and are frequently revised to reflect
changing sales trends. The Company's stores have point-of-sale systems that are
supported by a back-office in-store computer system. The in-store systems
feature bar coded ticket scanning, automatic price look-up, dial-out credit and
check authorization and nightly transmittal of detailed sales data from stores
to the corporate office.
As part of the Company's strategic plan initiated in 1995, several of the
Company's core business systems have been replaced or are in the process of
being replaced. In fiscal 1996 and 1997, the Company implemented new financial
systems and made various enhancements to its store and other core business
systems. During fiscal 1998 and 1999 the Company plans to replace or enhance its
merchandising and distribution systems.
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YEAR 2000
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions or engage in similar
normal business activities.
A favorable by-product of the replacements or enhancements of the Company's
core business systems, associated with the strategic plan initiated by the
Company in 1995, is the assurance that the systems are or will be Year 2000
compliant. A Year 2000 task force, formed by the Company to address the Year
2000 issue, is evaluating all other programs and systems that may need to be
upgraded or replaced to ensure their Year 2000 compliance.
The Company does not believe the future costs relating to the Year 2000
issues will have a material impact on the Company's consolidated financial
position, results of operations or cash flows. The Company is not yet in a
position to assess whether its vendors and other business partners will attain
Year 2000 compliance in a timely manner or the impact of any such
non-compliance.
TRADEMARKS
The United States Patent and Trademark Office (the "USPTO") has issued to
the Company federal registrations for the following trademarks: Authentic GFC,
Chandler Hill, Feels Like You, GFC, GFC Trading Co., GoodKidz, Goody's Family
Clothing and OCI -- Quality Clothing. The Company has also filed applications
with the USPTO seeking federal registrations for the following trademarks: Bobby
G by Ivy Crew, Department Store Brands Department Store Styles Goody's Low
Price, Electro Sport, G (stylized G with arch design), Intimate Classics, Ivy
Crew, Montana Blues Jean Company, Mountain Lake, Old College Inn and Take a Good
Look. The Company's private label programs represented approximately 21% of the
Company's total sales for fiscal 1997.
In April 1994, the Company filed an application with the USPTO to register
the trademark Ivy Crew. Two parties have filed separate notices of opposition to
the registration. The Company believes that it has meritorious defenses to these
oppositions, but does not anticipate a determination by the USPTO on any of the
oppositions until 1999.
The Company filed a trademark application with the USPTO on March 27, 1995,
as supplemented on March 28, 1995, for the trademark Montana Blues Jean Company.
Such application has been refused and suspended by the USPTO pending action on
previously filed trademark applications by others.
The Company received a federal registration to the trademarks GFC Trading
Co., GFC and Authentic GFC on January 23, 1996, August 20, 1996 and July 20,
1997, respectively. In September 1996, the Company filed an action in federal
court in the Eastern District of Tennessee seeking a declaratory judgment
against a third party who had alleged common law trademark rights to the
trademark GFC. In February 1997, such party commenced a separate action against
the Company in federal court in the Southern District of New York seeking
injunctive relief and unspecified monetary damages. In February 1998, the New
York court issued an order transferring this case to the Eastern District of
Tennessee. The Company believes that it has meritorious defenses to the claims
against it.
There can be no assurance that the Company will prevail in any of these
disputes or that the USPTO will register the trademarks for which the Company
has applied. An unfavorable outcome in any one or more of these matters could
require the Company to abandon the applicable trademark, which could adversely
affect the Company's sales. It is also possible that damages could be awarded
against the Company.
10
<PAGE> 11
ASSOCIATES
As of January 31, 1998, the Company had approximately 8,800 full and
part-time associates. Store managers and assistant store managers are
compensated on a salaried basis and are eligible to receive additional
compensation based on the Company's profitability as well as meeting certain
objective goals at their respective stores such as sales growth, control of
expenses and inventory shrinkage. All other store associates are compensated on
an hourly basis. All of the Company's associates are non-union employees, with
the exception of the associates employed at its distribution center in
Knoxville, Tennessee, who are represented by the Union of Needletrades,
Industrial and Textile Employees. The Company's incentive bonus program for
certain key corporate associates is based on achieving certain profitability
goals and could potentially provide a significant portion of the associates'
total annual compensation.
The Company also grants stock options to certain key corporate and store
associates. These options are designed to align associates' interests with those
of the Company's shareholders and allow the Company to provide long-term
incentives to its associates.
The Company maintained a profit sharing plan through December 31, 1997 for
full-time associates. This plan provided for discretionary contributions by the
Company which were approved by its Board of Directors. The Company's
contributions to the profit sharing plan were $750,000, $525,000 and $350,000
for fiscal 1997, 1996 and 1995, respectively.
On January 1, 1998, the Company amended and restated its profit sharing
plan by adopting the Goody's Family Clothing, Inc. 401(k) Retirement Plan with a
salary deferral feature for all eligible associates. All the assets of the
profit sharing plan were transferred to the 401(k) plan. Under the terms of the
401(k) plan, eligible associates may contribute between 3% and 15% of their
annual compensation on a pretax basis (with certain limitations imposed by the
Internal Revenue Service) to the plan. The Company provides matching
contributions to the 401(k) plan which are discretionary, vest over time
pursuant to a vesting schedule contained in the plan and are based upon a
percent of the associates' elected contributions. These matching contributions
amounted to $35,000 for fiscal 1997.
The Company also has an Employee Payroll Investment Plan that allows
eligible associates to purchase the Company's common stock at fair market value
through regular payroll deductions.
SEASONALITY AND INFLATION
The Company's business is seasonal by nature. The Christmas season
(beginning the Sunday before Thanksgiving and ending on the first Saturday after
Christmas), the back-to-school season (beginning approximately the first week of
August and continuing through the first week of September) and the Easter season
(beginning approximately two weeks before Easter Sunday and ending on the
Saturday preceding Easter) collectively accounted for approximately 34.5% of the
Company's annual sales based on the Company's last three fiscal years ended
January 31, 1998. In general, sales volume varies directly with customer
traffic, which is heaviest during the third and fourth quarters of a fiscal
year. Because of the seasonality of the Company's business, results for any
quarter are not necessarily indicative of the results that may be achieved for
the full year.
Inflation can affect the costs incurred by the Company in the purchase of
its merchandise, the leasing of its stores and certain components of its
selling, general and administrative expenses. During the last three fiscal years
ended January 31, 1998, inflation has not adversely affected the Company's
business, although there can be no assurance that inflation will not have a
material adverse effect in the future.
COMPETITION
The retail apparel business is highly competitive, with price, selection,
fashion, quality, location, store environment and service being the principal
competitive factors. The Company believes that it is well positioned to compete
on the basis of each of these factors. The Company competes primarily with
department stores, specialty stores, off-price apparel stores and discount
stores. Many competitors are large national chains with substantially greater
financial and other resources than those available to the Company; there is no
assurance that the Company will continue to be able to compete successfully with
any of them in the future.
11
<PAGE> 12
ITEM 2. PROPERTIES
The Company owns its corporate headquarters and distribution center located
at 400 Goody's Lane, Knoxville, Tennessee. The distribution center is a
one-story, 344,000-square-foot facility with 43 loading docks and a mezzanine
level that has an additional 14,000 square feet currently used as office space.
The corporate headquarters building is adjacent to the distribution center and
comprises approximately 140,000 square feet.
The Company currently leases all of its stores. Lease terms generally
contain renewal options and provide for a fixed minimum rent, an additional rent
based on a percent of sales in excess of stipulated amounts and a share of
taxes, insurance and common area maintenance costs.
As of January 31, 1998 the following table reflects (i) the number of
leases that will expire in each indicated fiscal year if the Company does not
exercise any of its renewal options and (ii) the number of leases that will
expire in each indicated fiscal year if the Company exercises all of its renewal
options. The table does not reflect six leases having month-to-month terms, but
does include 20 leases executed as of January 31, 1998 for stores to be opened
or relocated in fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF LEASES NUMBER OF LEASES
EXPIRING EACH YEAR IF EXPIRING EACH YEAR IF
NO RENEWALS ALL RENEWALS
FISCAL YEAR EXERCISED EXERCISED
- ----------- --------------------- -------------------------
<S> <C> <C>
1998................................................. 30 7
1999................................................. 25 4
2000................................................. 16 2
2001................................................. 11 2
2002................................................. 23 5
2003 and thereafter.................................. 132 217
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of the Company's business, it is from time to time a
party to certain legal proceedings arising in the ordinary course of its
business. The Company is not currently a party to any legal proceeding that, in
the judgment of management, would have a material adverse effect on its
operations or financial condition, if adversely determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the
information on page 33 of the Registrant's 1997 Annual Report under the captions
"Common Stock Information" and "Dividend Policy."
ITEM 6. SELECTED FINANCIAL DATA
The information required by this is incorporated by reference to the
information on page 15 of the Registrant's 1997 Annual Report under the caption
"Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information required by this item is incorporated by reference to the
information on pages 16-20 of the Registrant's 1997 Annual Report under the
caption "Management's Discussion and Analysis."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no material investments or risks in market risk sensitive
instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the
information on pages 21-31 of the Registrant's 1997 Annual Report and in the
tables for fiscal 1997 and fiscal 1996 on page 20 under the caption "Selected
Quarterly Data."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
13
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated by reference to
information under the captions "Election of Directors -- Director, Director
Nominee and Executive Officer Information" and "Election of Directors -- Section
16(a) Beneficial Ownership Reporting Compliance" in the Registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on June 17, 1998.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
information under the caption "Executive Compensation and Other Information" in
the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held on June 17, 1998, but does not include the information under the captions
"Compensation Committee Report" and "Performance Graph."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
information under the caption "Voting Rights and Principal Shareholders" in the
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held
on June 17, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
information under the caption "Certain Transactions" in the Registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on June 17, 1998.
14
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
The Registrant's 1997 Annual Report, a copy of which appears as Exhibit 13
to this Annual Report on Form 10-K, contains the following financial statements
and the Registrant's independent auditors' report thereon, which are
incorporated herein by reference.
- Independent Auditors' Report.
- Consolidated Statements of Operations for each of the three fiscal years
in the period ended January 31, 1998.
- Consolidated Balance Sheets as of January 31, 1998 and February 1, 1997.
- Consolidated Statements of Cash Flows for each of the three fiscal years
in the period ended January 31, 1998.
- Consolidated Statements of Shareholders' Equity for each of the three
fiscal years in the period ended January 31, 1998.
- Notes to Consolidated Financial Statements for the three fiscal years in
the period ended January 31, 1998.
2. Financial Statement Schedules
All financial statement schedules are omitted as the required information
is inapplicable.
3. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REF. DESCRIPTION
- ------- ---- -----------
<C> <C> <C> <S>
1.1 a -- Form of Underwriting Agreement
3.1 b -- Amended and Restated Charter of the Registrant
3.2 c -- Amended and Restated Bylaws of the Registrant
4.1 -- See Exhibits 3.1 and 3.2 for provisions of the Amended and
Restated Charter and Amended and Restated Bylaws of the
Registrant defining rights of holders of Common Stock of the
Registrant
10.1 d -- Goody's Family Clothing, Inc. Profit Sharing Plan
10.2 e -- Goody's Family Clothing, Inc. 1991 Stock Incentive Plan
10.4 f -- Goody's Family Clothing, Inc. 1993 Stock Option Plan
10.5 g -- Goody's Family Clothing, Inc. Discounted Stock Option Plan
for Directors, as amended
10.18 h -- Settlement agreement dated January 5, 1995
10.29 i -- Benefit Protection Trust Agreement
10.30 j -- Employment agreement between the Registrant and Marcus H.
Smith, Jr.
10.31 j -- Employment agreement between the Registrant and Thomas R.
Kelly, Jr.
10.32 j -- Credit agreement between the Registrant, Lenders as
identified therein and First Tennessee Bank National
Association as Administrative Agent
10.33 k -- Master transport agreement between the Registrant and Star
Transportation, Inc. dated July 10, 1995
10.34 l -- Goody's Family Clothing, Inc. Employee Payroll Investment
Plan
10.35 m -- Employment letter from the Registrant to Jay D. Scussel
10.36 m -- Indemnification agreement between the Registrant and Robert
M. Goodfriend
10.37 m -- Indemnification agreement between the Registrant and Harry
M. Call
10.38 m -- Indemnification agreement between the Registrant and James
L. Clayton
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REF. DESCRIPTION
- ------- ---- -----------
<C> <C> <C> <S>
10.39 m -- Indemnification agreement between the Registrant and Samuel
J. Furrow
10.40 m -- Indemnification agreement between the Registrant and Robert
F. Koppel
10.41 m -- Indemnification agreement between the Registrant and Cheryl
L. Turnbull
10.42 n -- Amended Credit Agreement between the Registrant, Lenders as
identified therein and First Tennessee Bank National
Association as Administrative Agent
10.44 o -- Indemnification agreement between the Registrant and Irwin
L. Lowenstein
10.45 p -- Amended Agreement dated May 16, 1997 between the Registrant,
GOODY'S MS, L.P., and GOODY'S IN, L.P. as borrowers, TREBOR
of TN, Inc., SYDOOG, Inc. and GOFAMCLO, Inc. as guarantors,
Lenders as identified therein and First Tennessee National
Bank Association as Administrative Agent
10.46 q -- Deferred Compensation Agreement between the Registrant and
Robert M. Goodfriend
10.47 q -- Employment letter from the Registrant to Stanley B. Latacha
10.48 a -- Agreement dated August 25, 1997 among the Registrant, Robert
M. Goodfriend, Harry M. Call and Edward R. Carlin
10.50 r -- Amendment to the Goody's Family Clothing, Inc. Employee
Payroll Investment Plan
11 -- Statement re computation of per share earnings
13 -- Registrant's 1997 Annual Report (only those portions
specifically incorporated by reference into this Report are
to be deemed "filed" with the Securities and Exchange
Commission)
21 -- Subsidiaries of the Registrant
23 -- Consent of Deloitte & Touche LLP
27.1 -- Financial Data Schedule for the fiscal year ended January
31, 1998 (for SEC use only)
27.2 -- Restated Financial Data Schedule for the fiscal year ended
February 1, 1997, which is hereby restated pursuant to SFAS
No. 128, "Earnings per Share" (for SEC use only)
27.3 -- Restated Financial Data Schedule for the thirty-nine weeks
ended November 1, 1997, which is hereby restated pursuant to
SFAS No. 128, "Earnings per Share" (for SEC use only)
27.4 -- Restated Financial Data Schedule for the twenty-six weeks
ended August 2, 1997, which is hereby restated pursuant to
SFAS No. 128, "Earnings per Share" (for SEC use only)
27.5 -- Restated Financial Data Schedule for the thirteen weeks
ended May 3, 1997, which is hereby restated pursuant to SFAS
No. 128, "Earnings per Share" (for SEC use only)
27.6 -- Restated Financial Data Schedule for the thirty-nine weeks
ended November 2, 1996, which is hereby restated pursuant to
SFAS No. 128, "Earnings per Share" (for SEC use only)
27.7 -- Restated Financial Data Schedule for the twenty-six weeks
ended August 3, 1996, which is hereby restated pursuant to
SFAS No. 128, "Earnings per Share" (for SEC use only)
27.8 -- Restated Financial Data Schedule for the thirteen weeks
ended May 4, 1996, which is hereby restated pursuant to SFAS
</TABLE> No. 128, "Earnings per Share" (for SEC use only)
- ---------------
a Incorporated herein by reference to exhibit of the same number in Registrant's
Registration Statement on Form S-3 (Registration No. 333-32409) filed on
August 18, 1997 and amended on August 25, 1997 and September 3, 1997.
b Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 29, 1995 (File No.
019526).
c Incorporated herein by reference exhibit of the same number in Registrant's
Annual Report on Form 10-K for the year ended January 28, 1995 (File No.
019526).
d Incorporated herein by reference to exhibit of the same number in Registrant's
Registration Statement on Form S-1 (Registration No. 33-42738) originally
filed on September 13, 1991.
e Incorporated herein by reference to exhibit of the same number in Registrant's
Annual Report on Form 10-K for the year ended January 30, 1993 (File No.
019526).
16
<PAGE> 17
f Incorporated herein by reference to the Registrant's Proxy Statement for the
Annual Meeting of Shareholders held on June 24, 1993.
g Incorporated herein by reference to exhibit 4.1 in Registrant's Registration
Statement on Form S-8 (Registration No. 333-09595) filed on August 5, 1996.
h Incorporated herein by reference to exhibit 10.1 in Registrant's Current
Report on Form 8-K dated January 5, 1995 (File No. 019526).
i Incorporated herein by reference to exhibit of the same number in Registrant's
Annual Report on Form 10-K for the year ended January 28, 1995 (File No.
019526).
j Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended April 29, 1995 (File No.
019526).
k Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended July 29, 1995 (File No.
019526).
l Incorporated herein by reference to exhibit 4 in Registrant's Registration
Statement on Form S-8 (Registration No. 333-00052) originally filed on January
4, 1996.
m Incorporated herein by reference to exhibit of the same number in Registrant's
Annual Report on Form 10-K for the year ended February 3, 1996 (File No.
019526).
n Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 4, 1996 (File No.
019526).
o Incorporated herein by reference to exhibit of the same number in Registrant's
Annual Report on Form 10-K for the year ended February 1, 1997 (File No.
019526).
p Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended May 3, 1997 (File No.
019526).
q Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended August 2, 1997 (File No.
019526).
r Incorporated herein by reference to exhibit of the same number in Registrant's
Quarterly Report on Form 10-Q for the quarter ended November 1, 1997 (File No.
019526).
(b) Forms 8-K:
None
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GOODY'S FAMILY CLOTHING, INC.
By: /s/ ROBERT M. GOODFRIEND
------------------------------------
Robert M. Goodfriend
Chairman of the Board and
Chief Executive Officer
April 23, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
By: /s/ ROBERT M. GOODFRIEND Chairman of the Board and Chief April 23, 1998
------------------------------------------------ Executive Officer
Robert M. Goodfriend
By: /s/ HARRY M. CALL Director, President and Chief April 23, 1998
------------------------------------------------ Operating officer
Harry M. Call
By: /s/ EDWARD R. CARLIN Executive Vice President, Chief April 23, 1998
------------------------------------------------ Financial Officer and
Edward R. Carlin Secretary (Principal Financial
Officer)
By: /s/ DAVID G. PEEK Vice President, Controller and April 23, 1998
------------------------------------------------ Chief Accounting Officer
David G. Peek (Principal Accounting Officer)
By: /s/ SAMUEL J. FURROW Director April 23, 1998
------------------------------------------------
Samuel J. Furrow
By: /s/ ROBERT F. KOPPEL Director April 23, 1998
------------------------------------------------
Robert F. Koppel
By: /s/ IRWIN L. LOWENSTEIN Director April 23, 1998
------------------------------------------------
Irwin L. Lowenstein
By: /s/ CHERYL L. TURNBULL Director April 23, 1998
------------------------------------------------
Cheryl L. Turnbull
</TABLE>
18
<PAGE> 1
EXHIBIT 11
GOODY'S FAMILY CLOTHING, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings for the year........................... $33,286,000 $17,151,000 $10,464,000
----------- ----------- -----------
Weighted average common shares outstanding.......... 16,274,000 16,132,000 16,123,000
Common equivalent shares for outstanding stock
options........................................... 563,000 152,000 161,000
----------- ----------- -----------
Weighted average common and common equivalent shares
outstanding....................................... 16,837,000 16,284,000 16,284,000
----------- ----------- -----------
Earnings per common share
Basic............................................. $ 2.05 $ 1.06 $ 0.65
=========== =========== ===========
Diluted........................................... 1.98 1.05 0.64
=========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 13
SAG HARBOR(R) IVY CREW
BLAZER SHIRT
Goody's
Family Clothing(R)
1997 Annual Report
UNION BAY(R) DOCKERS(R)
PANTS PANTS
<PAGE> 2
Financial Highlights
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------
1997 1996 1995
-----------------------------------
<S> <C> <C> <C>
Sales $971,923 $819,056 $696,868
Gross profit 265,157 209,372 170,717
Earnings before income taxes 53,386 27,442 16,527
Net earnings 33,286 17,151 10,464
Earnings per common share 1.98 1.05 0.64
Stores open at year end 223 203 184
</TABLE>
<TABLE>
<CAPTION>
Sales Earnings per Common Share
(In millions)
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C>
$696.9 $819.1 $971.9 $0.64 $1.05 $1.98
</TABLE>
<TABLE>
<CAPTION>
Shareholders' Equity Number of Stores
(In millions)
1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C>
$105.9 $123.6 $160.1 184 203 223
</TABLE>
<PAGE> 3
STORE FRONT
<PAGE> 4
1 9 9 7
Goody's Family Clothing
Annual Report
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Company Profile 2
To Our Shareholders 3
Real Estate 6
Merchandising 8
Product Development 9
Store Operations 12
Financial Review 15
Board of Directors and Officers 32
Shareholder and Investor Information 33
</TABLE>
<PAGE> 5
COMPANY
PROFILE
Goody's Family Clothing, Inc., headquartered in Knoxville, Tennessee, is a
retailer of moderately priced apparel for women, men and children. As of January
31, 1998, the Company operated 223 stores in Alabama, Arkansas, Florida,
Georgia, Illinois, Indiana, Kentucky, Mississippi, Missouri, North Carolina,
Ohio, South Carolina, Tennessee, Virginia and West Virginia.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Company. Management has
endeavored in its communications, in this Annual Report and in its Form 10-K to
highlight the trends and factors that might have an impact on the Company and
the industry in which the Company competes. Any "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "estimate," "anticipate," "believe," "target," "plan,"
"project" or "continue" or the negatives thereof or other variations thereon or
similar terminology. These statements appear in the letter "To Our Shareholders"
and elsewhere in this Annual Report and include statements regarding the intent,
belief or current expectations of the Company, its directors or its officers
with respect to, among other things: (i) the timely availability of branded and
private label merchandise in sufficient quantities to satisfy customer demand;
(ii) customer demand and trends in the apparel and retail industry and to the
acceptance of merchandise acquired for sale by the Company; (iii) the
effectiveness of planned advertising and promotional events; (iv) the impact of
competitors' pricing and store expansion; (v) the ability to enter into leases
for new store locations; (vi) individual store performance, including new
stores; (vii) adverse weather conditions, employee relations, and the general
economic conditions within the Company's markets; (viii) the timing, magnitude
and costs of opening new stores; (ix) the Company's financing plans; (x) trends
affecting the Company's financial condition or results of operations and (xi)
the Company's business and growth strategies. Readers are cautioned that any
such forward-looking statement is not a guarantee of future performance and
involves risks and uncertainties, and that actual results may differ materially
from those projected in the forward-looking statement as a result of various
factors. The Company does not undertake to publicly update or revise its
forward-looking statements even if experience or future changes make it clear
that any projected results expressed or implied therein will not be realized.
2
<PAGE> 6
BOB GOODFRIEND
Robert M. Goodfriend
Chairman of the Board and
Chief Executive Officer
HARRY CALL
Harry M. Call
President and
Chief Operating Officer
TO OUR SHAREHOLDERS
1997 was an extraordinary year for Goody's Family Clothing. As part of our
strategic plan, which we outlined in our report last year, we set aggressive
goals for improving the profitability of our Company. We are proud to report
that we not only met our goals for 1997 but we substantially exceeded them.
Record sales of $971.9 million surpassed 1996 sales of $819.1 million by 18.7
percent, and comparable store sales increased an impressive 8.2 percent. More
important, however, net earnings increased 93.6 percent to $33.3 million from
$17.2 million in 1996; and earnings per share increased 88.6 percent to $1.98
from $1.05 in 1996. We believe the key to our success in achieving greater
profitability during 1997 was a series of merchandising and operational
initiatives begun in 1995. These initiatives included the following:
INCREASING sales through comparable store sales growth and new store
expansion.
IMPROVING merchandise margins by increasing our emphasis on higher margin
merchandise, reducing our dependence on denim and carefully managing our
inventories.
EXPANDING inventories in certain categories, particularly basic items, and
broadening our private label programs, which allow for higher merchandise
margins and provide our customers with exceptional value.
MANAGING expenses and gaining expense leverage through planned sales
growth.
Growth will always be an important element of our business strategy. We
opened 24 new stores in 1997, expanding our store base by 10 percent and our
presence in new and existing markets
3
<PAGE> 7
TO OUR SHAREHOLDERS, (continued)
SHIRT
PANTS
such as Lexington, Kentucky; Hot Springs, Arkansas; New Bern, North
Carolina; Montgomery, Alabama; St. Clairsville, Ohio and Atlanta, Georgia. In
our hometown, Knoxville, Tennessee, we added a new 40,000-square-foot prototype
store.
Beginning in early 1996 we began to modify our merchandise mix with the
objective of improving our gross margins. For example, we increased our emphasis
on higher margin women's merchandise and reduced the focus of our marketing on
basic denim, which generates lower margins for the Company. As a result, 1997
sales in the women's division increased to 42.1 percent of our total sales from
41.0 percent in 1996. Conversely, sales in the denim division decreased as a
percent of total sales to 22.9 percent in 1997 from 24.7 percent the prior year.
WE NOW BELIEVE THAT OUR COMPANY CAN ACHIEVE A MINIMUM OF 7 PERCENT PRETAX
EARNINGS BY THE YEAR 2001.
To further strengthen our merchandise margins, we aggressively expanded our
private label programs to approximately 21 percent of total sales in 1997 from
approximately 15 percent in 1996. Private label programs not only allow us to
offer shoppers quality basic and designer look apparel at exceptional prices
but they also provide the Company with higher margins than branded merchandise.
As a result of these efforts, gross profit increased 170 basis points to 27.3
percent of sales in 1997 compared with 25.6 percent in 1996.
And finally, we continue to aggressively manage our expenses, gaining
leverage through comparable store and new store sales growth. Last year selling,
general and administrative expenses decreased 40 basis points to 21.9 percent of
sales from 22.3 percent in 1996.
SWEATER
SHORTS
While we are aggressively focused on improving the bottom line of our
business, we have not lost sight of the importance of investing in our Company.
Last year we spent $21.2 million in capital expenditures primarily for the
opening of new stores as well as relocating and remodeling existing ones. To
ensure consistency in the look and feel of our stores, we also partially or
fully refixtured 140 stores using the exciting new presentation formats we
introduced in early 1996.
MONTANA BLUES JEAN COMPANY LABEL
During 1998 we will continue building on the exciting momentum we have
achieved with
4
<PAGE> 8
our Company. Our business plan calls for comparable store sales to grow a
minimum of 3 percent and gross store square footage to grow at least 10 percent.
Capital expenditures for the year are planned at $30 million, most of which is
allocated to the opening of 28 new stores and the relocation or remodeling of
approximately 10 to 12 stores. A portion of our capital expenditures budget will
be directed to further technology enhancements, including new merchandise
systems, improvements in our distribution center and for general corporate
purposes.
SHIRT
PANTS
We had a great 1997 and we are very excited about the opportunities that lie
ahead. The clearest indicator of the Company's success and potential is our
dramatically improving pretax earnings, which increased 210 basis points to 5.5
percent of sales compared with 3.4 percent of sales in 1996. Two years ago
Goody's targeted goal was to achieve 6 percent pretax earnings by fiscal 2000.
We now believe that our Company can achieve a minimum of 7 percent pretax
earnings by the year 2001.
With our solid financial performance and strong balance sheet, which is
virtually debt-free at year-end, our Company is well positioned to meet the
challenges ahead.
MOUNTAIN LAKE LABEL
We are committed to providing exceptional value to our customers and our
shareholders. To each of these groups, value means something different. For our
customers it means outstanding merchandise selection and quality, low prices,
great customer service and a pleasant shopping environment. For our shareholders
it's something else again: steady growth, consistent financial performance and a
solid long-term business strategy. In the following pages, we hope you will see
that at Goody's we are working hard to meet all of these expectations.
As always we appreciate and look forward to your continued interest in
Goody's Family Clothing.
OLD COLLEGE INN LABEL
Sincerely,
/s/ Robert M. Goodfriend
Robert M. Goodfriend
Chairman of the Board and
Chief Executive Officer
/s/ Harry M. Call
Harry M. Call
President and
Chief Operating Officer
5
<PAGE> 9
REAL ESTATE
A PROVEN REAL ESTATE STRATEGY
[MAP OF GOODY'S LOCATIONS]
As of January 31, 1998, the Company operated 223 stores in 15 states.
<TABLE>
<S> <C> <C>
ALABAMA (27) - Princeton - New Boston
- - Alexander City - Richmond - St. Clairsville
- - Athens - Seymour - Steubenville
- - Bessemer - Shelbyville - Zanesville
- - Birmingham (7) - Vincennes
- - Cullman SOUTH CAROLINA (12)
- - Dothan KENTUCKY (23) - Aiken
- - Florence - Bowling Green - Camden
- - Fort Payne - Corbin - Conway
- - Gadsden - Danville - Florence
- - Huntsville - Elizabethtown - Greenville (2)
- - Jasper - Frankfort - Greenwood
- - Montgomery - Glasgow - Myrtle Beach
- - Opelika - Hazard - North Augusta
- - Prattville - Henderson - Spartanburg (2)
- - Scottsboro - Lexington - Sumter
- - Selma - London
- - Sylacauga - Mt. Sterling TENNESSEE (41)
- - Talladega - Madisonville - Athens
- - Troy - Maysville - Chattanooga (3)
- - Tuscaloosa (2) - Middlesboro - Clarksville
- Morehead - Cleveland
ARKANSAS (5) - Nicholasville - Columbia
- - Benton - Owensboro - Cookeville
- - Ft. Smith - Paducah - Crossville
- - Hot Springs - Pikeville - Dayton
- - Jonesboro - Richmond - Dickson
- - Searcy - Shelbyville - Dyersburg
- Somerset - Farragut
FLORIDA (7) - Winchester - Franklin
- - Ft.Walton Beach - Gallatin
- - Gainesville (2) MISSISSIPPI (7) - Greeneville
- - Lake City - Columbus - Jackson
- - Palatka - Corinth - Johnson City
- - Panama City - Hattiesburg - Kimball
- - Tallahassee - Meridian - Kingsport
- Oxford - Knoxville (5)
GEORGIA (38) - Pascagoula - LaFollette
- - Albany - Tupelo - Lebanon
- - Alpharetta - Martin
- - Athens MISSOURI (1) - Maryville
- - Atlanta (6) - Cape Girardeau - McMinnville
- - Augusta (2) - Morristown
- - Bainbridge NORTH CAROLINA (33) - Murfreesboro
- - Blue Ridge - Albemarle - Newport
- - Brunswick - Asheville (2) - Oak Ridge
- - Carrollton - Boone - Rockwood
- - Cartersville - Burlington - Rogersville
- - Centerville - Charlotte (3) - Sevierville
- - Conyers - Greenville - Springfield
- - Cordele - Henderson - Sweetwater
- - Covington - Hickory - Tullahoma
- - Cumming - High Point - Union City
- - Dalton - Jacksonville
- - Dublin - Kinston VIRGINIA (10)
- - Douglasville - Laurinburg - Bristol
- - Gainesville - Lexington - Charlottesville
- - Griffin - Morganton - Christiansburg
- - Hinesville - Mt. Airy - Lynchburg
- - LaFayette - Murphy - Martinsville
- - LaGrange - New Bern - Norton
- - Milledgeville - Roanoke Rapids - Roanoke (2)
- - Newnan - Rocky Mount - Staunton
- - Rome - Salisbury - Wytheville
- - Statesboro - Sanford
- - Swainesboro - Shelby WEST VIRGINIA (4)
- - Thomasville - Southern Pines - Beckley
- - Tifton - Spindale - Clarksburg
- - Valdosta - Statesville - Logan
- - Waycross - Sylva - Parkersburg
- Waynesville
ILLINOIS (1) - Wilkesboro
- - Carbondale - Wilmington
- Wilson
INDIANA (8)
- - Bedford OHIO (6)
- - Jasper - Athens
- - New Castle - Chillicothe
</TABLE>
6
<PAGE> 10
Goody's continues to pursue a steady pace of top line growth. In 1997 we
opened 24 new stores and closed four stores, bringing our total gross retail
space to 6.1 million square feet at year-end 1997. For the next four years we
expect to increase our store base by at least 10 percent each year.
FOR THE NEXT FOUR YEARS WE EXPECT TO INCREASE OUR STORE BASE BY AT LEAST 10
PERCENT EACH YEAR.
Most of our growth has been in existing markets. In Arkansas, for example,
we began 1997 with only one store, in Jonesboro. By the end of the year we had
added four new stores, one each in Benton, Fort Smith, Hot Springs and Searcy.
This year we plan to continue our expansion into Arkansas adding four new
stores, one each in Fayetteville, Paragould, Rogers and Russellville.
In Alabama, Georgia, Kentucky, North Carolina and Tennessee, where Goody's
has a greater concentration of stores, we continued to fill in markets and
aggressively take advantage of promising real estate opportunities. Achieving
stronger penetration in these markets not only makes Goody's more accessible to
our middle income customers but also allows us to leverage our advertising and
other operational expenses against a larger store base.
Looking to the future, our plans not only call for continued expansion in
the Southeast and Midwest, but we are also seeking additional growth
opportunities outside our traditional boundaries. During 1998 we expect to open
a total of 28 new stores, including our first three in Texas. We also anticipate
future expansion into the neighboring states of Louisiana and Oklahoma as real
estate opportunities become available.
CHILDRENS ENTERTAINMENT CENTER
MEN'S DEPARTMENT
Remodeling and relocating stores is also an important component of our
growth strategy. Our plans call for the remodeling or relocating of 10 to 12
stores each year to ensure that all of Goody's stores meet current standards for
merchandise presentation and customer service requirements. In 1997 we relocated
nine stores and remodeled seven including three stores in our hometown,
Knoxville, Tennessee.
7
<PAGE> 11
MERCHANDISING
A WINNING MERCHANDISE MIX
MONTANA BLUES JEAN COMPANY LOGO
BUGLE BOY LOGO
DOCKERS LOGO
UNIONBAY LOGO
IVY CREW LOGO
NIKE LOGO
LESLIE FAY LOGO
LEE LOGO
REEBOK LOGO
GFC TRADING CO. LOGO
ADIDAS LOGO
LEVI'S LOGO
OLD COLLEGE INN LOGO
At Goody's we understand that product and price are the driving factors
behind the success of our business. We believe our enduring relationship with
customers is built on a long-standing commitment to offering them quality
brand name products at outstanding prices.
Over the last three years our merchandise mix has evolved as the Company's
merchants have sharpened their focus on what our customers really want to buy
and culled from the mix merchandise that was not generating much excitement.
During the last year, in fact, we have carefully evaluated all of our vendors on
the basis of their performance in our stores. As a result of this assessment, we
invested more in resources that have consistently produced strong sales, and we
have eliminated marginal vendors. In addition to improving the overall sales
performance of our stores, this strategy of buying more merchandise from fewer
vendors is allowing us to achieve visible efficiencies of scale.
SHOES
Today Goody's offers shoppers an excellent selection of popular brand name
apparel in six divisions: women's, denim, men's, children's, accessories and
shoes. Women's apparel represents the largest and most profitable of these
business segments.
PIE CHART OF DIVISION SALES
During 1996 we increased the emphasis on the women's area of our business,
expanding the assortment of career and casual weekend wear, increasing the
quality and selection of apparel for our plus-sized customers, and adding
crossover fashions for shoppers whose tastes fall between those of traditional
juniors and misses customers. Our customers have responded well to these
changes. In 1997 sales in the women's division increased to 42.1 percent of the
Company's total sales volume from 41.0 percent in 1996.
CANDLES
Supplying shoppers with the merchandise they want at the prices they expect
is critical to keeping Goody's stores competitive. We understand our customers'
desire for value and selection as well as their need for the convenience of
one-stop shopping. Our unique combination of popular brand name apparel and
high-quality private label brands, great prices, and convenient locations has
made Goody's one of middle America's top choices for family apparel.
8
<PAGE> 12
PRODUCT DEVELOPMENT
AN UNPARALLELED PRIVATE LABEL PROGRAM
BABY TOGS
PRODUCT DEVELOPMENT DEPARTMENT
PRODUCT DEVELOPMENT CREATIVE TEAM [FROM LEFT] BOBBY FOX, TINA ANAS AND SARAH
SHOCKLEY REVIEW PRODUCT SAMPLES.
As the Goody's chain has grown and evolved, we have refined our business
strategies to enable us to compete successfully with a host of apparel retailers
in our Southeastern and Midwestern markets. In doing so, we recognized the need
to differentiate ourselves in some way from our competitors. Why? Many of the
retailers vying for the attention of middle American consumers offer the same
nationally recognized brands that we carry in our stores--and in a few cases, at
similar prices. Through our product development efforts, we have created
something shoppers cannot get anywhere else but Goody's: Authentic GFC, Bobby G
by Ivy Crew, Chandler Hill, Electro Sport, GFC, GFC Trading Co., GoodKidz,
Intimate Classics, Ivy Crew, Montana Blues Jean Company, Mountain Lake, OCI -
Quality Clothing and Old College Inn.
WE HAVE CREATED SOMETHING SHOPPERS CANNOT GET ANYWHERE ELSE BUT GOODY'S.
JOHN OKVATH
John Okvath
Senior Vice President
Product Development
Since the introduction of our first collection in 1993, Ivy Crew for men,
private label programs have become an integral part of our merchandise
selection. Gaining recognition and acceptance from customers, these exclusive
brands have
OLD COLLEGE INN LABEL
9
<PAGE> 13
PRODUCT DEVELOPMENT (continued)
SHIRT DRAWING
MOUNTAIN LAKE LABEL
HOWARD HOBBS
PRODUCT DEVELOPMENT QUALITY CONTROL ANALYST, HOWARD HOBBS, EXAMINES A NEW
SHIPMENT OF OLD COLLEGE INN MENSWEAR.
grown from approximately 3 percent of the Company's total sales volume in 1993
to approximately 21 percent of sales in 1997.
Obviously, the staff and systems to support this incredible private label
expansion is also growing. In just five years, our product development division
has increased from three people to a team of nearly 30 associates dedicated to
creating high-quality collections that represent the tastes and lifestyles of
our value-minded shoppers.
WOMAN IN CASUAL CLOTHING
John Okvath, who joined the Company in 1995, oversees the development of new
products as well as the evolution of existing programs. Under his direction
nearly every function of product development is now managed internally, from
establishing and maintaining relationships with global manufacturers, to
instituting fit and quality standards and monitoring compliance with those
standards, to designing seasonal color palettes, hang tags and special
merchandise packaging. Okvath's team even manages the movement of our goods from
the country in which they are produced, through customs, and to their eventual
delivery to Goody's distribution center. The Company's hands-on approach to
managing product development allows us to maximize gross margins on our private
label merchandise.
SHIRT PANTS
10
<PAGE> 14
SHIRT SKIRT
The success of our private label collections rests with a collaboration
between the Company's merchants and Okvath's product development directors, who
monitor the fashion marketplace--and specifically Goody's shoppers--to determine
what clothing styles, colors and fabrics are likely to be popular each season.
The sharing of information between these two departments helps us to ensure the
consistency and quality of private label programs across all merchandise
divisions in our stores.
MAN IN CASUAL CLOTHING
Each of our collections is designed and measured against strict protocols,
which were developed internally by the Company's product development team.
Products are delivered to our stores only when they have been tested and met our
stringent specifications for size, fabric weight, stitching and color stability.
In fact, our private label merchandise is designed and produced to meet or
exceed the quality of apparel offered in specialty and department stores.
Since the inception of our first private label program, we have developed
strategic relationships with global manufacturers. Dealing directly with these
manufacturers gives us greater control over the quality and consistency of the
merchandise we offer customers and enables us to manage inventories in response
to changing consumer needs and preferences.
Today our stores offer distinctive private label collections that we expect
will represent 24 to 25 percent of total 1998 sales volume: Authentic GFC and
GFC Trading Co., basic commodity apparel collections available in the women's,
men's and children's departments; Ivy Crew, lines of traditional men's apparel
including sportswear, career wear and furnishings; Old College Inn, contemporary
collegiate styles for young men; Bobby G by Ivy Crew, a spring collection of
upscale golf-inspired sportswear for men; Mountain Lake, classic sportswear for
women; Montana Blues Jean Company, denim and twill based casual apparel for
juniors and girls; and GoodKidz, sturdy playwear for children.
WOMAN IN CASUAL CLOTHING
Goody's will always be committed to offering a large selection of quality
brand name merchandise to our shoppers. But private label products offer the
Company distinct advantages: greater control of the merchandise in our stores
and quality basic and designer-look apparel that we can offer at exceptional
prices and higher profit margins. Since 1995 these important programs have had
tremendous impact on the Company's merchandise margins and will be critical to
our on-going efforts to improve the long-term profitability of our business.
MONTANA BLUES JEAN COMPANY LABEL
SHIRT DRAWING
11
<PAGE> 15
STORE OPERATIONS
A DYNAMIC STORES ORGANIZATION
Consumers today have more shopping choices than ever before. To remain our
customers' first choice for moderately priced family apparel, we regularly
upgrade our stores to create more compelling shopping environments. We
accomplish this by continually building our selection of the brands that are
popular with our target consumers and by maintaining updated and visually
appealing store formats that inspire customers to buy clothing.
Goody's stores have changed dramatically in the last two years. This
exciting transformation, which began with the introduction of an updated,
contemporary store format in all new, relocated and remodeled stores in 1996,
was furthered with the partial or full refixturing of 140 stores during 1997.
SHOPPERS ARE MORE SATISFIED THAN EVER BEFORE WITH THE LEVEL OF SERVICE THEY
RECEIVE.
In 1996 we successfully tested Levi's Dockers merchandise in nine
Birmingham area stores in Alabama. Last year we incorporated Dockers shops in
all new, relocated and remodeled stores and added them to 114 existing stores.
We completed the Dockers roll-out to the chain in early 1998. And with the help
of our vendor partners, last year we added or upgraded vendor shops in existing
stores throughout our chain. These initiatives included the following:
- - Bugle Boy shop upgrades were tested in 10 stores and will be added to 150
additional stores in 1998.
- - Lee shops were upgraded in 94 stores with enhancements planned for 60
additional stores in 1998.
- - Gift shops were established in 37 stores.
- - Greeting card displays were added in 36 stores and are expected to be
placed in all remaining stores during 1998.
- - Kikomo shops were upgraded in 210 stores.
- - Levi's shops were enhanced in 56 stores and will be improved in 32 stores in
1998.
- - Union Bay shops were upgraded in 45 stores and are expected to be enhanced
in 75 stores in 1998.
- - Shoe departments were added to 25 stores.
In addition to merchandising upgrades, we installed Muzak satellite systems
chain-wide, and to speed customer check-out times we reconfigured the
check-out stations in 15 stores and upgraded check and credit card processing
technology in our stores.
An integral part of our store improvement efforts is customer service. As
we hire and train store associates we focus intensively on the importance of
friendliness and product knowledge. Our customers have noticed the change too.
Recent Company surveys have indicated that shoppers are more satisfied than ever
before with the level of service they receive when they visit a Goody's store.
CHECK OUT STATIONS
Redesigned check-out stations reduce the time it takes for shoppers to check
out of Goody's stores.
12
<PAGE> 16
WOMAN IN MAN IN
CASUAL CLOTHES CASUAL CLOTHES
MAN IN WOMAN IN
CASUAL CLOTHES CASUAL CLOTHES
13
<PAGE> 17
COUPLE IN CHILDREN IN
CASUAL CLOTHES CASUAL CLOTHES
CHILDREN IN WOMEN IN
CASUAL CLOTHES CASUAL CLOTHES
14
<PAGE> 18
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share
amounts and sales per gross square foot)
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------------------------
1997 1996 1995(1) 1994 1993
-----------------------------------------------------------
INCOME STATEMENT DATA
<S> <C> <C> <C> <C> <C>
Sales $971,923 $819,056 $696,868 $613,664 $504,964
Cost of sales and occupancy expenses 706,766 609,684 526,151 458,857 374,559
-----------------------------------------------------------
Gross profit 265,157 209,372 170,717 154,807 130,405
Selling, general and administrative expenses 213,060 182,628 154,901 142,755 110,906
-----------------------------------------------------------
Earnings from operations 52,097 26,744 15,816 12,052 19,499
Interest expense 542 762 608 1,163 1,488
Investment income (loss) 1,831 1,460 1,319 (117) 3,189
-----------------------------------------------------------
Earnings before income taxes 53,386 27,442 16,527 10,772 21,200
Provision for income taxes 20,100 10,291 6,063 3,900 7,385
-----------------------------------------------------------
Net earnings $ 33,286 $ 17,151 $ 10,464 $ 6,872 $ 13,815
===========================================================
Earnings per common share(2)
Basic $ 2.05 $ 1.06 $ 0.65 $ 0.43 $ 0.86
===========================================================
Diluted 1.98 1.05 0.64 0.42 0.85
===========================================================
Weighted average common shares
outstanding (in thousands)(2)
Basic 16,274 16,132 16,123 16,097 16,130
===========================================================
Diluted 16,837 16,284 16,284 16,257 16,161
===========================================================
SELECTED OPERATING DATA
(At year end)
Stores open 223 203 184 171 146
Gross store square footage (in thousands) 6,071 5,498 4,913 4,505 3,695
Comparable store sales increase (decrease)(3) 8.2% 6.9% 1.3% 3.4% (1.2)%
Sales per gross square foot(4) $ 165 $ 156 $ 150 $ 150 $ 148
Average sales per store(5) 4,504 4,090 3,922 3,741 3,766
Capital expenditures 21,231 16,070 10,632 39,388 15,077
Depreciation and amortization 11,571 10,595 9,141 6,185 5,594
BALANCE SHEET DATA
Working capital $ 73,553 $ 44,016 $ 27,786 $ 16,707 $ 40,204
Total assets 328,316 254,347 208,443 185,744 163,803
Long-term debt 608 871 1,110 1,327 1,525
Shareholders' equity 160,057 123,576 105,875 95,365 88,370
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consists of 53 weeks.
(2) Refer to Note 1 to the Notes to Consolidated Financial Statements regarding
"Earnings per common share."
(3) Comparable store sales for fiscal 1996 and thereafter are based on stores
which operated throughout the fiscal year (including relocated, remodeled
and expanded stores) and which were in operation for the entire previous
fiscal year (computed on comparable 52-week periods). Prior to fiscal 1996,
new stores were included in such calculation beginning the first full month
following the anniversary of their opening.
(4) Sales per gross square foot is calculated by dividing (i) sales from stores
which operated throughout the fiscal year (including relocated, remodeled
and expanded stores) and which were in operation for the entire previous
fiscal year (computed on comparable 52-week periods), by (ii) the gross
square footage related to those stores.
(5) Average sales per store is calculated by dividing (i) total sales
during such fiscal year less sales attributable to new stores opened and
stores closed during the fiscal year, by (ii) the number of stores open at
the end of the fiscal year less new stores opened during the fiscal year.
15
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS - FOURTH QUARTER FISCAL 1997 COMPARED WITH FOURTH
QUARTER FISCAL 1996
The following table sets forth the Company's unaudited results of operations
for the periods indicated (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FOURTH QUARTER 1997 FOURTH QUARTER 1996
----------------------------------------------
<S> <C> <C> <C> <C>
Sales $334,752 100.0% $273,499 100.0%
Cost of sales and occupancy expenses 244,776 73.1 204,192 74.7
----------------------------------------------
Gross profit 89,976 26.9 69,307 25.3
Selling, general and administrative expenses 62,680 18.7 53,318 19.5
----------------------------------------------
Earnings from operations 27,296 8.2 15,989 5.8
Interest expense 172 0.1 249 0.1
Investment income 645 0.2 524 0.2
----------------------------------------------
Earnings before income taxes 27,769 8.3 16,264 5.9
Provision for income taxes 10,494 3.1 6,043 2.2
----------------------------------------------
Net earnings $ 17,275 5.2% $ 10,221 3.7%
==============================================
Earnings per common share(1)
Basic $ 1.06 $ 0.63
========= ========
Diluted $ 1.02 $ 0.62
========= ========
Weighted average common shares outstanding (1)
Basic 16,348 16,143
========= ========
Diluted 16,967 16,521
========= ========
</TABLE>
(1) Refer to Note 1 to the Notes to Consolidated Financial Statements regarding
"Earning per common share."
OVERVIEW In the fourth quarter of fiscal 1997, the Company opened five new
stores, relocated one store and remodeled five stores, bringing the total
number of stores in operation at January 31, 1998 to 223, compared with 203
at February 1, 1997. In the fourth quarter of fiscal 1996, six new stores
were opened and two stores were relocated. Net earnings were $17,275,000,
or 5.2% of sales, in the fourth quarter of fiscal 1997, compared with
$10,221,000, or 3.7% of sales, in the fourth quarter of fiscal 1996.
SALES Sales for the fourth quarter of fiscal 1997 were $334,752,000, a 22.4%
increase over the $273,499,000 for the fourth quarter of fiscal 1996. This
increase of $61,253,000 consisted of (i) a 10.1% increase in comparable
store sales of $24,423,000 from the corresponding period of the previous
fiscal year and (ii) additional sales from new and transition stores of
$36,830,000. Sales for the fourth quarter of fiscal 1997 were positively
impacted by (i) favorable customer reaction to the Company's private label
merchandise, particularly in the women's division, (ii) strong sales gains
achieved in the women's, men's and children's divisions with the
introduction of Dockers from Levi Strauss & Co. and (iii) strong sales
gains realized in the accessories division resulting from expanded product
lines.
GROSS PROFIT Gross profit for the fourth quarter of fiscal 1997 was
$89,976,000, or 26.9% of sales, a $20,669,000 increase over the
$69,307,000, or 25.3% of sales, in gross profit generated for the fourth
quarter of the previous fiscal year. The 1.6% increase in gross profit, as
a percent of sales, in the fourth quarter of fiscal 1997 compared with the
fourth quarter of fiscal 1996 resulted primarily from customer acceptance
of certain key merchandise items during the Christmas holiday season and
favorable customer reaction to the Company's private label merchandise that
positively impacted gross margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for the fourth quarter of fiscal 1997 were
$62,680,000, or 18.7% of sales, an increase of $9,362,000 from
$53,318,000, or 19.5% of sales, for the fourth quarter of fiscal 1996. The
0.8% decrease in selling, general and administrative expenses, as a percent
of sales, in the fourth quarter of fiscal 1997 compared with the fourth
quarter of fiscal 1996 resulted primarily from a decrease of (i) 0.4% in
payroll expenses, (ii) 0.2% in advertising and promotional expenses, (iii)
0.1% in depreciation and amortization expenses and (iv) 0.1% in other
selling, general and administrative expenses. Selling, general and
administrative expenses for the fourth quarter of fiscal 1996 included a
charge of $741,000 resulting from the impairment of certain stores'
property and equipment pursuant to the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
INTEREST EXPENSE Interest expense for the fourth quarter of fiscal 1997
decreased by $77,000 compared with the fourth quarter of fiscal 1996
primarily as a result of lower borrowings during the fourth quarter of
fiscal 1997.
INVESTMENT INCOME Investment income for the fourth quarter of fiscal 1997
increased by $121,000 compared with the fourth quarter of fiscal 1996
primarily as a result of an increase in invested funds during the fourth
quarter of fiscal 1997.
16
<PAGE> 20
RESULTS OF OPERATIONS - FISCAL 1997, 1996 AND 1995
The following table sets forth the Company's audited results of operations as a
percent of sales for the fiscal years indicated:
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------
1997 1996 1995(1)
--------------------------
<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of sales and occupancy expenses 72.7 74.4 75.5
--------------------------
Gross profit 27.3 25.6 24.5
Selling, general and administrative expenses 21.9 22.3 22.2
--------------------------
Earnings from operations 5.4 3.3 2.3
Interest expense 0.1 0.1 0.1
Investment income 0.2 0.2 0.2
--------------------------
Earnings before income taxes 5.5 3.4 2.4
Provision for income taxes 2.1 1.3 0.9
--------------------------
Net earnings 3.4% 2.1% 1.5%
==========================
</TABLE>
(1) Consists of 53 weeks.
FISCAL 1997 COMPARED WITH FISCAL 1996
OVERVIEW In fiscal 1997, the Company opened 24 new stores, relocated nine
stores, remodeled seven stores and closed four stores. This brought the
total number of stores in operation at January 31, 1998 to 223, compared
with 203 at February 1, 1997. In fiscal 1996, 20 new stores were opened,
seven stores were relocated, one store was remodeled and one store was
closed. Net earnings were $33,286,000, or 3.4% of sales, in fiscal 1997,
compared with net earnings of $17,151,000, or 2.1% of sales, in fiscal
1996.
SALES Sales for fiscal 1997 were $971,923,000, an 18.7% increase over the
$819,056,000 for fiscal 1996. This increase of $152,867,000 consisted of
(i) an 8.2% increase in comparable store sales of $61,286,000 from the
corresponding period of the previous fiscal year and (ii) additional sales
from new and transition stores of $91,581,000. Sales were positively
impacted by favorable customer reaction to the Company's private label
merchandise, particularly in the women's division. Strong sales gains were
also achieved in the women's, men's and children's divisions with the
introduction of Dockers from Levi Strauss & Co. to approximately 70% of the
chain; plans are to distribute Dockers products to the entire chain in
fiscal 1998. The accessories division also realized strong sales gains
resulting from expanded product lines.
GROSS PROFIT Gross profit for fiscal 1997 was $265,157,000, or 27.3% of sales,
a $55,785,000 increase over the $209,372,000, or 25.6% of sales, in gross
profit generated for the previous fiscal year. The 1.7% increase in gross
profit, as a percent of sales, resulted primarily from the continuation of
the merchandising strategies implemented during 1995 and 1996. These
strategies include, among other things, improved merchandise selection and
quality, stringent inventory management and control, and a higher sales mix
of certain key merchandise items, including private label merchandise,
which generally have a higher gross margin rate.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for fiscal 1997 were $213,060,000, or 21.9% of
sales, an increase of $30,432,000 from $182,628,000, or 22.3% of sales, for
fiscal 1996. The 0.4% decrease in selling, general and administrative
expenses, as a percent of sales, in fiscal 1997 compared with fiscal 1996
resulted primarily from a decrease of 0.2% in advertising and promotional
expenses and a net decrease of 0.2% in all other selling, general and
administrative expenses. Selling, general and administrative expenses for
fiscal 1996 included a provision of $691,000 in connection with the early
termination of a lease of one of the Company's stores which closed in
August 1996 and $741,000 for the impairment of certain stores' property and
equipment pursuant to the provisions of SFAS No. 121.
INTEREST EXPENSE Interest expense for fiscal 1997 decreased by $220,000
compared with fiscal 1996 primarily as a result of lower borrowings during
fiscal 1997.
INVESTMENT INCOME Investment income for fiscal 1997 increased by $371,000
compared with fiscal 1996 primarily as a result of an increase in invested
funds during fiscal 1997.
INCOME TAXES The provision for income taxes for fiscal 1997 was $20,100,000,
for an effective tax rate of 37.7% of earnings before income taxes,
compared with $10,291,000, for an effective tax rate of 37.5% of earnings
before income taxes, for fiscal 1996. The increase in the effective tax
rate was primarily due to a decrease in tax-exempt investment income and an
increase in other non-deductible expenses, which were offset by a modest
decrease in the effective state income tax rates.
17
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
FISCAL 1996 COMPARED WITH FISCAL 1995
OVERVIEW In fiscal 1996, the Company opened 20 new stores, relocated seven
stores, remodeled one store and closed one store. This brought the total
number of stores in operation at February 1, 1997 to 203, compared with 184
at February 3, 1996. In fiscal 1995, 13 new stores were opened, six stores
were relocated and one store was remodeled. Net earnings were $17,151,000,
or 2.1% of sales, in fiscal 1996, compared with net earnings of $10,464,000,
or 1.5% of sales, in fiscal 1995.
SALES Sales for fiscal 1996 (52 weeks) were $819,056,000, a 17.5% increase over
the $696,868,000 for fiscal 1995 (53 weeks). This increase of $122,188,000
consisted of (i) a 6.9% increase in comparable store sales of $42,780,000
from the corresponding 52-week period of the previous fiscal year, (ii)
additional sales from new and transition stores of $85,613,000, which were
offset by (iii) $6,205,000 from the additional last week of sales included
in the 53-week fiscal 1995. Significant factors which contributed to the
increase in comparable store sales included (i) favorable customer reaction
to certain brand name and private label merchandise, (ii) a strategic
build-up of inventory implemented during the second quarter of fiscal 1996
in an effort to be in-stock for most basic items everyday and (iii) strong
promotions which emphasized the price-value relationship of the Company's
merchandise and a reinforced customer awareness of Goody's presence in the
markets served.
GROSS PROFIT Gross profit for fiscal 1996 was $209,372,000, or 25.6% of sales,
a $38,655,000 increase over the $170,717,000, or 24.5% of sales, in gross
profit generated for the previous fiscal year. The 1.1% increase in gross
profit, as a percent of sales, resulted primarily from changes in the
Company's merchandising strategies, including improved merchandise selection
and quality, and inventory management. Customer acceptance of the Company's
private label merchandise during fiscal 1996 positively impacted gross
margins.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses for fiscal 1996 were $182,628,000, or 22.3% of
sales, an increase of $27,727,000 from $154,901,000, or 22.2% of sales, for
fiscal 1995. The 0.1% increase in selling, general and administrative
expenses, as a percent of sales, in fiscal 1996 compared with fiscal 1995
resulted primarily from increases in payroll expenses. Selling, general and
administrative expenses for fiscal 1996 included a provision of $691,000 in
connection with the early termination of a lease of one of the Company's
stores which closed in August 1996 and $741,000 for the impairment of
certain stores' property and equipment pursuant to the provisions of SFAS
No. 121.
INTEREST EXPENSE Interest expense for fiscal 1996 increased by $154,000
compared with fiscal 1995 primarily as a result of increased borrowings
during fiscal 1996.
INVESTMENT INCOME Investment income for fiscal 1996 increased by $141,000
compared with fiscal 1995 primarily as a result of an increase in invested
funds during fiscal 1996.
INCOME TAXES The provision for income taxes for fiscal 1996 was $10,291,000,
for an effective tax rate of 37.5% of earnings before income taxes, compared
with $6,063,000, for an effective tax rate of 36.7% of earnings before
income taxes, for fiscal 1995. The increase in the effective tax rate was
primarily due to a decrease in tax-exempt investment income and the
expiration of the Targeted Jobs Tax Credit program in June 1995, which were
offset by a decrease in the effective state income tax rates.
18
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL POSITION The Company's primary sources of liquidity are cash flows
from operations, including credit terms from vendors, and borrowings under
its credit agreement (see below). The Company's working capital was
$73,553,000 at January 31, 1998, compared with $44,016,000 at February 1,
1997 and $27,786,000 at February 3, 1996.
At January 31, 1998, the Company had an unsecured revolving line of credit
from a consortium of banks, which provides for both cash borrowings for
general corporate purposes and the issuance of letters of credit of up to an
aggregate of $120,000,000 which expires on May 31, 1999. The terms of this
credit agreement require, among other things, maintenance of minimum levels
of shareholders' equity, compliance with certain financial ratios and Mr.
Robert M. Goodfriend remaining as Chairman of the Board or Chief Executive
Officer of the Company, and place restrictions on additional indebtedness,
asset disposals, investments, capital expenditures and the payment of
dividends. At January 31, 1998, the Company had no cash borrowings and
$41,238,000 was outstanding for letters of credit compared with no cash
borrowings and $28,005,000 outstanding for letters of credit at February 1,
1997. Cash borrowings averaged $2,374,000 during fiscal 1997 compared with
$5,206,000 during fiscal 1996, with the highest balance of $25,000,000 in
October and November 1997 compared with $37,000,000 in November 1996.
Letters of credit outstanding averaged $53,442,000 during fiscal 1997
compared with $29,189,000 during fiscal 1996. The highest balance of letters
of credit outstanding was $71,937,000 during fiscal 1997 (in June 1997)
compared with $39,929,000 during fiscal 1996 (in August 1996). The weighted
average interest rates on cash borrowings in fiscal 1997, 1996 and 1995 were
6.4%, 6.5% and 7.1%, respectively.
CASH FLOWS Operating activities provided cash of $36,558,000 in fiscal 1997
compared with $22,493,000 in fiscal 1996 and $22,607,000 in fiscal 1995.
Cash used in operating activities in fiscal 1997 and 1996 was primarily for
increased inventory of $44,172,000 and $29,228,000, respectively, resulting
from (i) additional inventory for new stores, (ii) the strategic build-up of
certain new classifications of basic inventory items in all stores and (iii)
for fiscal 1997, the Company's decision to take early receipt of spring
1998 imported merchandise. Cash used in operating activities in fiscal 1995
was primarily for inventory increases of $13,859,000 related primarily to
inventory for new stores. Accounts payable provided cash of $24,038,000,
$7,081,000 and $18,928,000 in fiscal 1997, 1996 and 1995, respectively.
Other assets and liabilities provided cash of $10,416,000 and $9,672,000 in
fiscal 1997 and 1996, respectively, and used cash of $1,755,000 in fiscal
1995. Depreciation and amortization expenses were $11,571,000, $10,595,000
and $9,141,000 in fiscal 1997, 1996 and 1995, respectively.
Cash flows from investing activities reflected a $21,219,000, $15,800,000
and $10,235,000 net use of cash for fiscal 1997, 1996 and 1995,
respectively. Cash was used primarily to fund capital expenditures for new,
relocated and remodeled stores and included the expansion of the corporate
headquarters and distribution center in fiscal 1995.
Cash provided by financing activities for fiscal 1997 and 1996 was
$5,519,000 and $3,636,000, respectively compared with cash used of
$2,516,000 for fiscal 1995. Cash management programs maintained by the
Company provided cash of $4,050,000, $3,506,000 and $7,642,000 during fiscal
1997, 1996 and 1995, respectively. The Company received $1,708,000, $347,000
and $201,000 from the issuance of common stock on the exercise of stock
options in fiscal 1997, 1996 and 1995, respectively. Net payment on notes
payable amounted to $10,000,000 in fiscal 1995.
OUTLOOK The Company plans to open a total of 28 new stores, relocate or remodel
10 to 12 stores and close two stores during fiscal 1998. Management
estimates that capital expenditures will total approximately $30,000,000 in
fiscal 1998 primarily for opening new stores, upgrading existing stores and
purchasing computer systems and equipment as well as for other capital
assets.
The Company's primary needs for capital resources are for the purchase of
store inventories, capital expenditures and for normal operating purposes.
Management believes that cash flows from operations, including credit terms
from vendors, and the borrowings available under the credit agreement will
be sufficient to meet the Company's operating and capital expenditure
requirements.
19
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
YEAR 2000
The Year 2000 issue is the result of computer programs written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions
or engage in similar normal business activities.
A favorable by-product of the replacements or enhancements of the Company's
core business systems, associated with a strategic plan initiated by the
Company in 1995, is the assurance that the systems are or will be year 2000
complaint. A Year 2000 task force, formed by the Company to address the year
2000 issue, is evaluating all other programs and systems that may need to be
upgraded or replaced to ensure their Year 2000 compliance.
The Company does not believe the future costs relating to the Year 2000
issues will have a material impact on the Company's consolidated financial
position, results of operations or cash flows. The Company is not yet in a
position to assess whether its vendors and other business partners will
attain Year 2000 compliance in a timely manner or the impact of any such
non-compliance.
SEASONALITY AND INFLATION The Company's business is seasonal by nature. The
Christmas season (beginning the Sunday before Thanksgiving and ending on the
first Saturday after Christmas), the back-to-school season (beginning
approximately the first week of August and continuing through the first week
of September) and the Easter season (beginning approximately two weeks
before Easter Sunday and ending on the Saturday preceding Easter)
collectively accounted for approximately 34.5% of the Company's annual sales
based on the Company's last three fiscal years ended January 31, 1998. In
general, sales volume varies directly with customer traffic, which is
heaviest during the third and fourth quarters of a fiscal year. Because of
the seasonality of the Company's business, results for any quarter are not
necessarily indicative of the results that may be achieved for the full
year.
Inflation can affect the costs incurred by the Company in the purchase of
its merchandise, the leasing of its stores and certain components of its
selling, general and administrative expenses. During the last three fiscal
years ended January 31, 1998, inflation has not adversely affected the
Company's business, although there can be no assurance that inflation will
not have a material adverse effect in the future.
SELECTED QUARTERLY DATA (UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
--------------------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL 1997
-----------
Sales $190,057 $212,206 $234,908 $334,752
Gross profit 54,977 58,170 62,034 89,976
Net earnings 5,058 5,418 5,535 17,275
Earnings per common share(1)
Basic 0.31 0.33 0.34 1.06
Diluted 0.30 0.32 0.33 1.02
FISCAL 1996
-----------
Sales $150,766 $183,411 $211,380 $273,499
Gross profit 42,645 45,237 52,183 69,307
Net earnings 2,204 1,362 3,364 10,221
Earnings per common share(1)
Basic 0.14 0.08 0.21 0.63
Diluted 0.14 0.08 0.21 0.62
</TABLE>
(1) Refer to Note 1 to the Notes to Consolidated Financial Statements regarding
"Earnings per common share."
20
<PAGE> 24
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for the integrity and objectivity of all financial
information presented in this Annual Report. The consolidated financial
statements included herein have been prepared in accordance with generally
accepted accounting principles and include, where necessary, the best
estimates and judgments of management.
In fulfilling its responsibility for the reliability of financial
information, management has developed and maintains accounting systems and
procedures appropriately supported by internal accounting controls. Such
controls include the selection and training of qualified personnel, an
organizational structure providing for appropriate division of
responsibility, communication of approved accounting, control and business
practices and a program of internal audit. Although no system of internal
accounting controls can ensure that all errors or irregularities have been
eliminated, management believes that the controls in place provide
reasonable assurance, at reasonable cost, that assets are safeguarded
against loss from unauthorized use or disposition, that transactions are
executed in accordance with management's authorization, and that the
financial records are reliable for preparing financial statements. The
consolidated financial statements of the Company have been audited by
Deloitte & Touche LLP, the Company's independent auditors. Their report,
which appears below, is based on their audits conducted in accordance with
generally accepted auditing standards.
The Audit Committee of the Board of Directors, consisting solely of outside
directors, serves in an oversight role to assure the integrity and
objectivity of the Company's financial reporting process. The Audit
Committee is responsible for recommending to the Board of Directors the
selection of independent auditors. It also meets periodically with
management and the independent and internal auditors to assure that they are
carrying out their responsibilities. The independent and internal auditors
have full and free access to the Audit Committee and meet with it
periodically with and without management's presence.
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF GOODY'S FAMILY CLOTHING, INC.
We have audited the accompanying consolidated balance sheets of Goody's
Family Clothing, Inc. and subsidiaries as of January 31, 1998 and February
1, 1997 and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three fiscal years in the period
ended January 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the consolidated financial position of Goody's Family Clothing,
Inc. and subsidiaries as of January 31, 1998 and February 1, 1997 and the
consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended January 31, 1998 in conformity
with generally accepted accounting principles.
Atlanta, Georgia
March 18, 1998
21
<PAGE> 25
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------
1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Sales $971,923 $819,056 $696,868
Cost of sales and occupancy expenses 706,766 609,684 526,151
--------------------------------
Gross profit 265,157 209,372 170,717
Selling, general and administrative expenses 213,060 182,628 154,901
--------------------------------
Earnings from operations 52,097 26,744 15,816
Interest expense 542 762 608
Investment income 1,831 1,460 1,319
--------------------------------
Earnings before income taxes 53,386 27,442 16,527
Provision for income taxes 20,100 10,291 6,063
--------------------------------
Net earnings $ 33,286 $ 17,151 $ 10,464
================================
Earnings per common share
Basic $ 2.05 $ 1.06 $ 0.65
================================
Diluted $ 1.98 $ 1.05 $ 0.64
================================
Weighted average common shares outstanding
Basic 16,274 16,132 16,123
================================
Diluted 16,837 16,284 16,284
================================
</TABLE>
See accompanying notes to consolidated financial statements
22
<PAGE> 26
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
JANUARY 31, FEBRUARY 1,
1998 1997
-----------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 64,174 $ 43,316
Investments 1,555 1,453
Inventories 151,667 107,495
Accounts receivable and other current assets 10,519 9,689
-----------------------
Total current assets 227,915 161,953
Property and equipment, net 97,468 88,955
Other assets 2,933 3,439
-----------------------
Total assets $328,316 $254,347
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $105,231 $ 75,900
Accrued expenses 42,194 34,841
Income taxes payable 6,674 6,957
Current portion of long-term debt 263 239
-----------------------
Total current liabilities 154,362 117,937
Long-term debt 608 871
Other long-term liabilities 3,023 2,578
Deferred income taxes 10,266 9,385
-----------------------
Total liabilities 168,259 130,771
-----------------------
Commitments and Contingencies
Shareholders' Equity
Preferred stock, par value $1 per share;
Authorized - 2,000,000 shares; issued and outstanding-none
Class B Common stock, no par value;
Authorized - 50,000,000 shares; issued and outstanding-none
Common stock, no par value;
Authorized - 50,000,000 shares;
issued - 16,551,858 and 16,364,832 shares, respectively;
outstanding -16,351,858 and 16,164,832 shares, respectively 28,199 26,466
Paid-in capital 4,721 3,259
Retained earnings 130,239 96,953
Treasury stock, at cost - 200,000 shares (3,102) (3,102)
-----------------------
Total shareholders' equity 160,057 123,576
-----------------------
Total liabilities and shareholders' equity $328,316 $254,347
=======================
</TABLE>
See accompanying notes to consolidated financial statements
23
<PAGE> 27
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------
1997 1996 1995
----------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 33,286 $ 17,151 $ 10,464
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 11,571 10,595 9,141
Net loss (gain) on asset disposals and write-down 1,135 1,965 (22)
Changes in assets and liabilities:
Inventories (44,172) (29,228) (13,859)
Accounts payable 24,038 7,081 18,928
Income tax accounts 284 5,257 (290)
Other assets and liabilities 10,416 9,672 (1,755)
----------------------------------
Cash provided by operating activities 36,558 22,493 22,607
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and equipment (21,231) (16,070) (10,632)
Proceeds from sale of property and equipment 12 270 397
----------------------------------
Cash used in investing activities (21,219) (15,800) (10,235)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on notes payable -- -- (10,000)
Repayment of long-term debt (239) (217) (198)
Exercise of stock options 1,708 347 201
Redemption of preferred stock purchase rights -- -- (161)
Changes in cash management accounts 4,050 3,506 7,642
----------------------------------
Cash provided by (used in) financing activities 5,519 3,636 (2,516)
Net increase in cash and cash equivalents 20,858 10,329 9,856
Cash and cash equivalents, beginning of year 43,316 32,987 23,131
----------------------------------
Cash and cash equivalents, end of year $ 64,174 $ 43,316 $ 32,987
==================================
Supplemental Disclosures
Interest payments $ 534 $ 745 $ 665
Income tax payments, net of refunds received 20,336 5,294 7,062
</TABLE>
See accompanying notes to consolidated financial statements
24
<PAGE> 28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
----------------- PAID-IN RETAINED ----------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 28, 1995 16,302 $25,833 $3,296 $ 69,338 (200) $(3,102) $ 95,365
Net earnings -- -- -- 10,464 -- -- 10,464
Exercise of stock options 23 207 -- -- -- -- 207
Redemption of preferred
stock purchase rights -- -- (161) -- -- -- (161)
---------------------------------------------------------------------------
BALANCE, FEBRUARY 3, 1996 16,325 26,040 3,135 79,802 (200) (3,102) 105,875
Net earnings -- -- -- 17,151 -- -- 17,151
Exercise of stock options 40 426 124 -- -- -- 550
---------------------------------------------------------------------------
BALANCE, FEBRUARY 1, 1997 16,365 26,466 3,259 96,953 (200) (3,102) 123,576
Net earnings -- -- -- 33,286 -- -- 33,286
Exercise of stock options 187 1,733 1,462 -- -- -- 3,195
---------------------------------------------------------------------------
BALANCE, JANUARY 31, 1998 16,552 $28,199 $4,721 $130,239 (200) $(3,102) $160,057
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
25
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended January 31, 1998, February 1, 1997 and February 3, 1996
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
At January 31, 1998, Goody's Family Clothing, Inc. and subsidiaries (the
"Company") was principally engaged in the retailing of moderately priced
apparel for women, men and children in 223 retail stores located in 15
states. Its significant accounting policies are as follows:
FISCAL YEAR-END The Company's fiscal year ends on the Saturday nearest the
last day of January. Fiscal 1997, 1996 and 1995 refer to the Company's
fiscal years ended January 31, 1998 (52 weeks), February 1, 1997 (52 weeks)
and February 3, 1996 (53 weeks), respectively.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include
the accounts of Goody's Family Clothing, Inc. and its subsidiaries, all of
which are wholly-owned. All significant intercompany balances and
transactions have been eliminated.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid
investments, such as money market accounts, deposit accounts, government
backed securities and overnight repurchase agreements, each with a maturity
of less than three months. The cost of these investments approximate their
fair market value.
Amounts due banks upon the clearance of certain checks under the Company's
cash management programs included in both accounts payable and accrued
expenses at January 31, 1998 and February 1, 1997 amounted to $18,547,000
and $14,497,000, respectively.
INVESTMENTS Investments are held by a bank, as trustee, to fund certain
potential future severance payments in respect of which no liability exists
at January 31, 1998. The Company is restricted from using these funds for
its operating activities until April 1998.
INVENTORIES Inventories are stated at the lower of moving weighted average
cost or market.
PROPERTY AND EQUIPMENT Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is computed by using
the straight-line method over the estimated useful lives of the assets,
which are 40 years for buildings and up to 10 years for other assets.
Leasehold improvements are amortized by the straight-line method over the
lesser of the useful lives of the improvements or the related lease terms.
STORE OPENING AND CLOSING COSTS Non-capital expenditures for new or
relocated stores are expensed as incurred. The net book value of leasehold
improvements and abandoned fixtures as well as any future rents payable for
stores, for which a decision has been made to close or relocate the stores,
are charged against current earnings.
ADVERTISING The Company expenses all advertising expenditures as incurred.
Advertising expenses for fiscal 1997, 1996 and 1995 were $38,179,000,
$34,431,000 and $29,853,000, respectively.
INCOME TAXES Deferred income taxes are recognized for the tax consequences
of temporary differences between the tax and financial reporting basis of
the Company's assets and liabilities based upon enacted tax laws and
statutory tax rates applicable to the future years in which the differences
are expected to affect taxable income.
SALES Sales include $33,379,000, $26,827,000 and $21,087,000 of leased shoe
department sales for fiscal 1997, 1996 and 1995, respectively.
EARNINGS PER COMMON SHARE The Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" as required in the fourth
quarter of fiscal 1997. Accordingly, all previously reported earnings per
share and related data have been restated to conform to this new standard.
Weighted average diluted shares outstanding differs from weighted average
basic shares outstanding solely from the effect of stock options. Stock
options to purchase 24,161, 436,257 and 401,500 shares of common stock in
fiscal 1997, 1996 and 1995, respectively, were not included in the
computation of weighted average diluted shares outstanding because they
would have been antidilutive.
RECLASSIFICATIONS Certain reclassifications have been made to the financial
statements of prior periods to conform to the current period presentation.
26
<PAGE> 30
2 PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
January 31, February 1,
1998 1997
-----------------------
<S> <C> <C>
Land $ 3,512 $ 3,512
Buildings 25,704 25,631
Leasehold improvements 20,056 17,720
Furniture and equipment 94,765 79,647
Transportation equipment 6,181 5,762
-----------------------
150,218 132,272
Less accumulated depreciation and amortization 52,750 43,317
-----------------------
Property and equipment, net $ 97,468 $ 88,955
=======================
</TABLE>
The Company continually evaluates its investment in long-lived assets
(principally property and equipment) used in operations on an individual
store basis. During the fourth quarter of 1996, the Company determined
that, based upon the recent operating results and updated operating
projections at that time, the property and equipment at certain stores was
impaired. As a result, the Company recorded a pretax charge in fiscal 1996
of approximately $741,000, or $0.03 per share, to write-down the carrying
value of the property and equipment to their estimated fair value pursuant
to the provisions of SFAS No. 121. No impairment charge was necessary for
fiscal 1997 and 1995 based upon the results of similar analyses performed.
3 CREDIT ARRANGEMENTS
The Company has a credit agreement with a consortium of banks for an
unsecured revolving line of credit which provides for both cash borrowings
for general corporate purposes and the issuance of letters of credit of up
to an aggregate of $120,000,000 which expires on May 31, 1999. The Company
is committed to pay (i) interest on the cash borrowings at a fluctuating
base rate or LIBOR plus an applicable margin, (ii) letter of credit fees
based on the number of days a letter of credit is outstanding times an
applicable fee and (iii) an annual commitment fee payable quarterly in
advance. The terms of this credit agreement require, among other things,
maintenance of minimum levels of shareholders' equity, compliance with
certain financial ratios and Mr. Robert M. Goodfriend remaining as Chairman
of the Board or Chief Executive Officer of the Company, and place
restrictions on additional indebtedness, asset disposals, investments,
capital expenditures and the payment of dividends.
At January 31, 1998 and February 1, 1997, the Company had no cash
borrowings under this credit agreement and letters of credit issued and
outstanding amounted to $41,238,000 and $28,005,000, respectively. Cash
borrowings under the Company's line of credit averaged $2,374,000,
$5,206,000 and $3,481,000 during fiscal 1997, 1996 and 1995, respectively.
The highest balances of cash borrowings were $25,000,000 in October and
November 1997, $37,000,000 in November 1996 and $18,000,000 in October
1995. The weighted average interest rates on cash borrowings in fiscal
1997, 1996 and 1995 were 6.4%, 6.5% and 7.1%, respectively.
4 LONG-TERM DEBT
Long-term debt represents a promissory note payable to the Company's
founder and former chairman, M.D. Goodfriend, and his wife, who are the
parents of the Company's current Chairman of the Board and Chief Executive
Officer. The debt is unsecured and is payable in annual installments of
$350,000, including interest at 10%, through January 26, 2001. Interest
paid on this debt was $111,000, $133,000 and $152,000 during fiscal 1997,
1996 and 1995, respectively. Based on borrowing rates currently available
to the Company for bank loans with similar terms and maturities, the fair
value of such long-term debt was not significantly different than its
carrying amount.
27
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5 INCOME TAXES
The provision for income taxes for the years indicated consisted of the
following (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------
1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Current
Federal $18,833 $ 9,173 $3,626
State 2,163 1,280 705
--------------------------------
Total current 20,996 10,453 4,331
--------------------------------
Deferred
Federal (726) (84) 1,451
State (170) (78) 281
--------------------------------
Total deferred (896) (162) 1,732
--------------------------------
Provision for income taxes $20,100 $10,291 $6,063
================================
</TABLE>
The provision for income taxes differed from the amounts computed by
applying the federal statutory rate to earnings before income taxes as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Tax expense at statutory rate $18,685 $ 9,605 $5,783
State taxes, net of federal benefit 1,319 745 726
Effect of tax-exempt income (97) (89) (125)
Effect of other items 193 30 (321)
---------------------------------
Provision for income taxes $20,100 $10,291 $6,063
=================================
</TABLE>
The tax effects of temporary differences were as follows (in thousands):
<TABLE>
<CAPTION>
January 31, February 1,
1998 1997
-----------------------
<S> <C> <C>
Current
Inventory carrying cost $ 2,074 $ 887
Net operating loss carryforward -- 171
Capital loss carryforward -- 108
Accrued expenses and other 3,381 2,512
----------------------
Current deferred tax asset $ 5,455 $3,678
======================
Deferred
Depreciation $10,787 $9,934
Other (521) (549)
----------------------
Long-term deferred tax liability $10,266 $9,385
======================
</TABLE>
28
<PAGE> 32
6 STOCK OPTIONS
The Company currently has four stock option plans: the Goody's Family
Clothing, Inc. 1991 Stock Incentive Plan (the "1991 Plan"), the Goody's
Family Clothing, Inc. 1993 Stock Option Plan (the "1993 Plan"), the Goody's
Family Clothing, Inc. 1997 Stock Option Plan (the "1997 Plan") and the
Discounted Stock Option Plan for Directors (the "Directors' Plan").
The 1991 Plan, 1993 Plan and 1997 Plan provide for the grant of
nonqualified and incentive stock options to key associates and formula
options to non-associate directors. The Compensation Committee of the Board
of Directors determines the exercise price (not to be less than fair market
value of the Company's common stock for incentive options or formula
options on the date of grant) and the vesting and exercise periods. The
options generally vest in equal installments over five years from the date
of grant and are generally exercisable up to 10 years from the date of
grant. The Company is authorized to issue 2,825,000 shares of Common Stock
under the 1991 Plan, 1993 Plan and 1997 Plan.
Under the Directors' Plan, non-associate directors may elect to receive
options to purchase common stock at an exercise price equal to 50% of the
fair market value of the common stock on the date of grant in lieu of cash
for their director fees. These options vest one year from the date of grant
and are exercisable up to 20 years from the date of grant. The expense
recorded in connection with stock options issued under this plan has been
immaterial. The Company is authorized to issue 150,000 shares of common
stock under the Directors' Plan.
A summary of the stock option activity and the related weighted average
exercise prices for the various plans is as follows:
<TABLE>
<CAPTION>
Reserved Outstanding Weighted Average
Shares Options Exercise Price
------------------------------------------
<S> <C> <C> <C>
Outstanding at January 28, 1995 768,759 1,004,671 $13.32
Granted (781,466) 781,466 9.56
Exercised -- (23,700) 8.50
Forfeited 615,250 (615,250) 15.99
-----------------------------------------
Outstanding at February 3, 1996 602,543 1,147,187 9.43
Reserved 100,000 -- --
Granted (564,698) 564,698 13.97
Exercised -- (39,620) 8.75
Forfeited 80,480 (80,480) 9.28
-----------------------------------------
Outstanding at February 1, 1997 218,325 1,591,785 11.06
Reserved 1,000,000 -- --
Granted (539,765) 539,765 23.15
Exercised -- (187,026) 9.13
Forfeited 107,022 (107,022) 11.80
-----------------------------------------
Outstanding at January 31, 1998 785,582 1,837,502 $14.77
=========================================
</TABLE>
The following table summarizes information about stock options outstanding
at January 31, 1998:
<TABLE>
<CAPTION>
Outstanding Options Exercisable Options
---------------------------------------------- ------------------------------
Weighted
Average Weighted Weighted
Options Remaining Average Options Average
Range of Outstanding at Contractual Exercise Exercisable at Exercise
Exercise Prices January 31, 1998 Life (Years) Price January 31, 1998 Price
--------------- ---------------------------------------------- ------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.82 to $ 5.69 36,389 18.0 $ 5.16 36,389 $ 5.16
7.38 to 11.00 771,825 6.8 8.88 427,355 8.66
11.25 to 15.00 194,338 7.7 12.39 91,450 12.42
15.25 to 22.00 436,200 5.3 18.04 321,000 17.44
22.38 to 28.50 349,250 9.4 23.53 -- --
31.00 to 35.59 49,500 9.8 32.33 -- --
----------- ------------
1,837,502 876,194
=========== ============
</TABLE>
29
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6 STOCK OPTIONS (CONTINUED)
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to adopt the disclosure-only
provisions of SFAS No. 123 and to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
and its related interpretations. Accordingly, no compensation cost has been
recognized for the stock options granted under the various stock option
plans to associates. Had compensation cost for the Company's stock option
plans been determined based on the fair value on the date of grant for
awards in fiscal 1997, 1996 and 1995 consistent with the provisions of SFAS
No. 123, the Company's net earnings and earnings per common share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1996 Fiscal 1995
------------------------ ------------------------ -----------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
------------------------ ------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
Net earnings (in thousands) $33,286 $32,211 $17,151 $15,157 $10,464 $9,679
Earnings per common share
Basic 2.05 1.98 1.06 0.94 0.65 0.60
Diluted 1.98 1.91 1.05 0.93 0.64 0.59
</TABLE>
The fair value of the options granted under the Company's various stock
option plans during fiscal 1997, 1996 and 1995 was estimated on their date
of grant using the Black-Scholes option-pricing model with the following
weighted average assumptions: no dividend yield; expected volatility of 56%,
49% and 47%, respectively; risk free interest rates of 6.5%, 6.4% and 6.8%,
respectively; and expected lives of 7.0, 4.7 and 7.0 years, respectively.
The weighted average fair value of options granted was $14.78, $6.44 and
$5.93 for fiscal years 1997, 1996 and 1995, respectively.
7 BENEFIT PLANS
The Company maintained a profit sharing plan through December 31, 1997 for
full-time associates. This plan provided for discretionary contributions by
the Company which were approved by its Board of Directors. The Company's
contributions to the profit sharing plan were $750,000, $525,000 and
$350,000 for fiscal 1997, 1996 and 1995, respectively.
On January 1, 1998, the Company amended and restated its profit sharing plan
by adopting the Goody's Family Clothing, Inc. 401(k) Retirement Plan with a
salary deferral feature for all eligible associates. All the assets of the
profit sharing plan were transferred to the 401(k) plan. Under the terms of
the 401(k) plan, eligible associates may contribute between 3% and 15% of
their annual compensation on a pretax basis (with certain limitations
imposed by the Internal Revenue Service) to the plan. The Company provides
matching contributions to the 401(k) plan which are discretionary, vest over
time pursuant to a vesting schedule contained in the plan and are based upon
a percent of the associates' elected contributions. These matching
contributions amounted to $35,000 for fiscal 1997.
The Company also has an Employee Payroll Investment Plan that allows
eligible associates to purchase the Company's common stock at fair market
value through regular payroll deductions.
30
<PAGE> 34
8 LEASE OBLIGATIONS
The Company leases its stores under operating leases, the majority of which
expire at various times during the next 10 years. The Company can, at its
option, renew most of these leases at rents which are fixed based at their
then current fair rental value. Payments under store leases consist of a
fixed minimum rent, additional rent based on a percent of sales in excess of
stipulated amounts and a share of taxes, insurance and common area
maintenance costs. The Company also leases certain data processing
and store systems equipment.
The future minimum rental payments under operating leases having initial or
remaining non-cancelable lease terms in excess of one year at January 31,
1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1998 $ 40,779
1999 36,959
2000 33,498
2001 31,814
2002 29,629
Thereafter 128,897
--------
Total $301,576
========
</TABLE>
Included in future operating lease payments above is $32,714,000 for stores
that will open during the year ending January 30, 1999. Total rental
expense for operating leases for fiscal 1997, 1996 and 1995 were
$47,234,000, $41,299,000 and $36,319,000, respectively, including
percentage rent of $632,000, $451,000 and $481,000, respectively.
9 RELATED PARTY TRANSACTIONS
The Company has entered into various related party transactions with Mr.
Robert M. Goodfriend (the Company's Chairman of the Board and Chief
Executive Officer and beneficial owner of approximately 42.4% of the
Company's common stock) as described below.
The Company paid premiums of $54,000 in each of fiscal 1997, 1996 and 1995
for split-dollar life insurance policies insuring the life of Mr.
Goodfriend. The beneficiary of these policies is a trust established for
Mr. Goodfriend's children. The trust has assigned to the Company an
interest in the cash value of the life insurance policies to the extent of
cumulative premiums paid by the Company. Included in "Other Assets" at
January 31, 1998 and February 1, 1997 are $1,930,000 and $2,041,000,
respectively, related to these policies.
The Company paid rent and taxes amounting to $442,000, $442,000 and
$443,000 for fiscal 1997, 1996 and 1995, respectively, for a store leased
from another trust benefiting Mr. Goodfriend's children. Future commitments
at January 31, 1998 under this related party lease are $368,000.
In March 1995 the Company purchased property contiguous to the corporate
headquarters and distribution center from Mr. Goodfriend at its fair market
value, as determined by a third party appraiser, for $519,000. The Company
also paid, in fiscal 1995, $21,000 to Mr. Goodfriend for the use of this
property prior to acquisition and certain other property used by the Company
in connection with the expansion of the Company's corporate headquarters and
distribution center.
The Company currently leases a warehouse in Athens, Tennessee, from a local
bank, of which Mr. Goodfriend is a director and shareholder, and has paid
rent of $40,000 in each of fiscal 1997, 1996 and 1995. Future commitments at
January 31, 1998 under this related party lease are $77,000.
29
<PAGE> 35
<TABLE>
<CAPTION>
BOARD OF DIRECTORS AND OFFICERS
BOARD OF DIRECTORS EXECUTIVE AND OTHER OFFICERS
<S> <C> <C>
ROBERT M. GOODFRIEND(3)
Chairman of the Board and
Chief Executive Officer ROBERT M. GOODFRIEND JOHN W. BOLES
Goody's Family Clothing, Inc. Chairman of the Board and Vice President
Chief Executive Officer Sales - Northern Region
HARRY M. CALL
President and HARRY M. CALL PHILIP M. DANGEL
Chief Operating Officer President and Vice President
Goody's Family Clothing, Inc. Chief Operating Officer Divisional Merchandise Manager
Children's
EDWARD R. CARLIN
SAMUEL J. FURROW (2),(3*) Executive Vice President JOSEPH M. FORBIDUSSI
Chairman Chief Financial Officer and Vice President
Furrow Auction Company Secretary Divisional Merchandise Manager
Furrow-Justice Machinery Corporation Junior's
Owner THOMAS R. KELLY, JR.
Knoxville Motor Company-Mercedes Benz Executive Vice President ROBERT S. GOBRECHT
Land Rover of Knoxville General Merchandise Manager Vice President
Director Merchandise Coordinator
Southeastern-Advertising, Inc. DAVID R. MULLINS
First American National Bank Executive Vice President JEFFREY D. HAYES
Innovo Group Inc. Stores Vice President
Store Development
ROBERT F. KOPPEL (1),(2*) BRUCE E. HALVERSON
President Senior Vice President REGIS J. HEBBELER
East Tennessee Children's Hospital Planning and Allocation Vice President
General Counsel and
STANLEY B. LATACHA Assistant Secretary
IRWIN L. LOWENSTEIN(1),(3) Senior Vice President
Executive Vice President Marketing and Advertising MYRNA J. MAHON
Rhodes/Heilig-Meyers Company Vice President
JOHN J. OKVATH, III Divisional Merchandise Manager
Senior Vice President Ready to Wear
CHERYL L. TURNBULL(1*),(2) Product Development
Director ALLEN P. MARKWAY
Banc One Capital Corporation JAY D. SCUSSEL Vice President
Senior Vice President Divisional Merchandise Manager
Management Information Systems Men's
MARCUS H. SMITH, JR. HAZEL A. MOXIM
Senior Vice President Vice President
Real Estate Human Resources
BOBBY WHALEY ROSALIND C. PARNEIX
Senior Vice President Vice President
Distribution, Transportation and Divisional Merchandise Manager
Logistics Misses Sportwear
DAVID G. PEEK
Vice President
Corporate Controller and
Chief Accounting Officer
KEITH REICHELDERFER
Vice President
General Merchandise Manager
Women's
MIKE H. TEEPLE
Vice President
Sales - Southern Region
DONALD R. WHITTED
Vice President
Sales - Central Region
LYNN R. YOUNGS
Vice President
Store Operations
</TABLE>
Committees of the Board of Directors
1 Compensation Committee
2 Audit Committee
3 Nominating Committee
* Chairperson
32
<PAGE> 36
SHAREHOLDER AND INVESTOR INFORMATION
Common Stock Information
The Company's Common Stock is listed and traded on The Nasdaq Stock Market
(National Market) under the symbol GDYS. At April 16, 1998, there were 380
shareholders of record and approximately 4,100 persons or entities who held
Common stock in nominee name. On April 16, 1998, the closing price of the
Common Stock was $50.75.
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FISCAL 1997
-----------
High $24.38 $39.75 $38.00 $37.13
Low 16.38 15.75 21.38 25.50
FISCAL 1996
-----------
High $ 9.38 $11.00 $14.88 $20.81
Low 6.75 7.13 8.75 13.25
</TABLE>
DIVIDEND POLICY
The Company has not paid cash dividends during the last three fiscal years.
The Company currently intends to retain all net earnings for the development
of its business and does not anticipate paying dividends in the foreseeable
future. The payment of future dividends, if any, will depend upon the
profitability, financial condition, cash requirements, future prospects and
other factors deemed relevant by the Board of Directors. Currently, under
the Company's credit agreement (See Note 3 to Notes to Consolidated Financial
Statements), the Company has certain restrictions regarding the payment of
dividends.
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 10:00 a.m. on Wednesday,
June 17, 1998, at the Company's headquarters in Knoxville, Tennessee.
Detailed information about the meeting is contained in the Notice of Annual
Meeting and Proxy Statement sent with a copy of this Annual Report to each
shareholder of record as of April 27, 1998.
CORPORATE HEADQUARTERS
Goody's Family Clothing, Inc.
400 Goody's Lane
Knoxville, Tennessee 37922
Tel: (423) 966-2000
Fax: (423) 777-4230
INDEPENDENT AUDITORS
Deloitte & Touche LLP
Atlanta, Georgia
GENERAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
New York, New York
TRANSFER AGENT AND REGISTRAR
Communications concerning shareholder records, the transfer of shares, lost
certificates or change of address should be directed to:
Wachovia Bank of North Carolina, NA
Post Office Box 3001
Winston-Salem, North Carolina 27102
Tel: (910) 770-5822
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998, as filed with the Securities and Exchange Commission, may
be obtained, without charge, upon written request to Edward R. Carlin,
Executive Vice President, Chief Financial Officer and Secretary, Goody's
Family Clothing, Inc., 400 Goody's Lane, Knoxville, Tennessee 37922.
33
<PAGE> 1
EXHIBIT - 21
GOODY'S FAMILY CLOTHING, INC.
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF INCORPORATION
NAME OF SUBSIDIARY PARENT OR GENERAL PARTNER OF SUBSIDIARY OR ORGANIZATION
- ------------------ --------------------------------------- ----------------------
<S> <C> <C>
SYDOOG, Inc. ....................... Goody's Family Clothing, Inc. ....... Delaware
GOFAMCLO, Inc. ..................... Goody's Family Clothing, Inc. ....... Delaware
Trebor of TN, Inc. ................. Goody's Family Clothing, Inc. ....... Tennessee
GOODY'S MS, L.P. ................... Trebor of TN, Inc. .................. Tennessee
GOODY'S IN, L.P. ................... Trebor of TN, Inc. .................. Tennessee
GFCTX, L.P. ........................ Trebor of TN, Inc. .................. Tennessee
</TABLE>
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-32357, 33-51210, 33-68520, 333-00052 and 333-09595 of Goody's Family
Clothing, Inc. on Form S-8 of our report dated March 18, 1998, incorporated by
reference in the Annual Report on Form 10-K of Goody's Family Clothing, Inc.
for the year ended January 31, 1998.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1998, AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE FIFTY-TWO WEEKS ENDED ON JANUARY 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> JAN-31-1998
<CASH> 64,174
<SECURITIES> 1,555
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 151,667
<CURRENT-ASSETS> 227,915
<PP&E> 150,218
<DEPRECIATION> 52,750
<TOTAL-ASSETS> 328,316
<CURRENT-LIABILITIES> 154,362
<BONDS> 608
0
0
<COMMON> 28,199
<OTHER-SE> 131,858
<TOTAL-LIABILITY-AND-EQUITY> 328,316
<SALES> 971,923
<TOTAL-REVENUES> 971,923
<CGS> 706,766
<TOTAL-COSTS> 213,060
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 542
<INCOME-PRETAX> 53,386
<INCOME-TAX> 20,100
<INCOME-CONTINUING> 33,286
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,286
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 1.98
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 1, 1997, AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE FIFTY-TWO WEEKS ENDED ON FEBRUARY 1, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE
RESTATED DATA CONSISTS SOLELY OF EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> FEB-01-1997
<CASH> 43,316
<SECURITIES> 1,453
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 107,495
<CURRENT-ASSETS> 161,953
<PP&E> 132,272
<DEPRECIATION> 43,317
<TOTAL-ASSETS> 254,347
<CURRENT-LIABILITIES> 117,937
<BONDS> 871
0
0
<COMMON> 26,466
<OTHER-SE> 97,110
<TOTAL-LIABILITY-AND-EQUITY> 254,347
<SALES> 819,056
<TOTAL-REVENUES> 819,056
<CGS> 609,684
<TOTAL-COSTS> 182,628
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 762
<INCOME-PRETAX> 27,442
<INCOME-TAX> 10,291
<INCOME-CONTINUING> 17,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,151
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 1, 1997, AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE THIRTY-NINE WEEKS ENDED ON NOVEMBER 1, 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE
RESTATED DATA CONSISTS SOLELY OF EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> NOV-01-1997
<CASH> 28,947
<SECURITIES> 1,518
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 215,234
<CURRENT-ASSETS> 262,852
<PP&E> 147,700
<DEPRECIATION> 51,324
<TOTAL-ASSETS> 362,433
<CURRENT-LIABILITIES> 181,488
<BONDS> 25,871
0
0
<COMMON> 28,139
<OTHER-SE> 114,519
<TOTAL-LIABILITY-AND-EQUITY> 142,658
<SALES> 637,171
<TOTAL-REVENUES> 637,171
<CGS> 461,990
<TOTAL-COSTS> 150,380
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 370
<INCOME-PRETAX> 25,617
<INCOME-TAX> 9,606
<INCOME-CONTINUING> 16,011
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,011
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF AUGUST 2, 1997, AND THE RELATED CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THE TWENTY-SIX WEEKS ENDED ON AUGUST 2, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE
RESTATED DATA CONSISTS SOLELY OF EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 41,667
<SECURITIES> 1,512
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 153,653
<CURRENT-ASSETS> 212,668
<PP&E> 138,810
<DEPRECIATION> 48,455
<TOTAL-ASSETS> 306,223
<CURRENT-LIABILITIES> 156,905
<BONDS> 871
0
0
<COMMON> 27,662
<OTHER-SE> 108,478
<TOTAL-LIABILITY-AND-EQUITY> 136,140
<SALES> 402,263
<TOTAL-REVENUES> 402,263
<CGS> 289,116
<TOTAL-COSTS> 97,045
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 219
<INCOME-PRETAX> 16,761
<INCOME-TAX> 6,285
<INCOME-CONTINUING> 10,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,476
<EPS-PRIMARY> 0.65
<EPS-DILUTED> 0.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS AT MAY 3, 1997 AND THE RELATED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED ON MAY 3, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE
RESTATED DATA CONSISTS SOLELY OF EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 29,579
<SECURITIES> 1,461
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 142,315
<CURRENT-ASSETS> 186,507
<PP&E> 134,666
<DEPRECIATION> 45,816
<TOTAL-ASSETS> 278,802
<CURRENT-LIABILITIES> 136,325
<BONDS> 871
0
0
<COMMON> 27,016
<OTHER-SE> 102,417
<TOTAL-LIABILITY-AND-EQUITY> 278,802
<SALES> 190,057
<TOTAL-REVENUES> 190,057
<CGS> 135,080
<TOTAL-COSTS> 47,245
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> 8,093
<INCOME-TAX> 3,035
<INCOME-CONTINUING> 5,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,058
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS AT NOVEMBER 2, 1996 AND THE RELATED STATEMENT OF OPERATIONS FOR
THE THIRTY-NINE WEEKS ENDED ON NOVEMBER 2, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE RESTATED DATA CONSISTS SOLELY OF
EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 25,321
<SECURITIES> 1,421
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 177,967
<CURRENT-ASSETS> 216,883
<PP&E> 134,470
<DEPRECIATION> 41,962
<TOTAL-ASSETS> 312,833
<CURRENT-LIABILITIES> 163,595
<BONDS> 25,110
0
0
<COMMON> 26,142
<OTHER-SE> 86,765
<TOTAL-LIABILITY-AND-EQUITY> 312,833
<SALES> 545,558
<TOTAL-REVENUES> 545,558
<CGS> 405,493
<TOTAL-COSTS> 129,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 513
<INCOME-PRETAX> 11,178
<INCOME-TAX> 4,248
<INCOME-CONTINUING> 6,930
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,930
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF AUGUST 3, 1996 AND THE RELATED STATEMENT OF OPERATIONS FOR
THE TWENTY-SIX WEEKS ENDED AUGUST 3, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. THE RESTATED DATA CONSISTS SOLELY OF
EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<CASH> 19,631
<SECURITIES> 1,410
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 141,610
<CURRENT-ASSETS> 176,257
<PP&E> 129,916
<DEPRECIATION> 39,713
<TOTAL-ASSETS> 269,915
<CURRENT-LIABILITIES> 148,612
<BONDS> 1,110
0
0
<COMMON> 26,066
<OTHER-SE> 83,401
<TOTAL-LIABILITY-AND-EQUITY> 269,915
<SALES> 334,177
<TOTAL-REVENUES> 334,177
<CGS> 246,295
<TOTAL-COSTS> 82,517
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 280
<INCOME-PRETAX> 5,752
<INCOME-TAX> 2,186
<INCOME-CONTINUING> 3,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,566
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS AT MAY 4, 1996 AND THE RELATED STATEMENT OF OPERATIONS FOR THE
THIRTEEN WEEKS ENDED ON MAY 4, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. THE RESTATED DATA CONSISTS SOLELY OF
EARNINGS PER SHARE DATA.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 22,901
<SECURITIES> 1,403
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 111,209
<CURRENT-ASSETS> 145,238
<PP&E> 124,170
<DEPRECIATION> 37,712
<TOTAL-ASSETS> 235,134
<CURRENT-LIABILITIES> 115,673
<BONDS> 1,110
0
0
<COMMON> 26,040
<OTHER-SE> 82,039
<TOTAL-LIABILITY-AND-EQUITY> 235,134
<SALES> 150,766
<TOTAL-REVENUES> 150,766
<CGS> 108,121
<TOTAL-COSTS> 39,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 3,555
<INCOME-TAX> 1,351
<INCOME-CONTINUING> 2,204
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,204
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
