Conflicting reports on potential Gottschalks rescue, or bankruptcy
| Friday, Jan 09 2009 03:58 PM
Last Updated Friday, Mar 27 2009 12:58 PM
GOTTSCHALKS INC. TIMELINE
1904:launches in Fresno, founded by German immigrant Emil Gottschalk
1987:buys Bakersfield’s popular Brock’s Department Store
1986:trades on the New York Stock Exchange
1998:buys Harris Department Stores’ nine Southern California locations, including Bakersfield’s
2000:buys more than 30 of bankrupt Seattle-based Lamonts stores, expanding Pacific Northwest presence
May 2008:Bakersfield’s two locations in East Hills Mall consolidate, leaving empty the former Harris building
October 2008:delisted from New York Stock Exchange after value falls below $25 million
November 2008:announces $30 million deal with Chinese investor, Everbright
Dec. 4, 2008:reports a $13.6 million loss for first nine months of its fiscal year; days later, the full report says a cash infusion is needed before the end of January
Dec. 18:Everbright scraps deal; the next day, Gottschalks says talks with Everbright and another suitor are ongoing
Jan. 8:December sales results show a 9.6 percent drop from previous year
Jan. 9:Women’s Wear Daily says a $50 million deal is brewing with Everbright and another investor; Fresno’s Business Journal says employees are told to cash paychecks before imminent bankruptcy
Jan. 14:Gottschalks files for Chapter 11 bankruptcy.
Sources: Gottschalks Web site, Californian archives
Images
Gottschalks is facing tough financial times. This is the East Hills Mall store.
Customer Maria Acuna leaves the East Hills Gottschalks last week with her husband, Vicente Macias, and daughter Natalie Macias. Maria said she was a fan of the northeast Bakersfield department store and would be disappointed if it closed.
Maria Acuna places items into her car that she purchased at the East Hills Gottschalks Thursday afternoon. Acuna described herself as a fan of the department store who would be disappointed if it closed.
Shoppers come and go at Gottschalks in Valley Plaza on a January afternoon.
Blogs
Gottschalks rescued, Gottschalks bankrupt ... which will it be?
Anonymous sources bubbled with all kinds of tips Friday, media reports show, but none had been confirmed by the end of the day.
Fashion industry publication Women’s Wear Dailybroke big with an online story saying two potential investors might pitch in a combined $50 million to save the Fresno-based regional department store chain, which has two Bakersfield locations. The story also said Gottschalks had stopped paying vendors in mid-December.
The Business Journalin Fresno, meanwhile, said the chain’s employees had been told to cash paychecks quickly — before a bankruptcy filing that might come by sundown.
Shortly after noon, a woman who answered the extension of Gottschalks’ chief operating officer, Gregory Ambro, said the company would have no press releases before the end of the day and that it had no comment on the media reports.
By 5 p.m., a check of bankruptcy filings at federal district courts in Fresno and Delaware — the state where Gottschalks is incorporated — turned up empty. Gottschalks’ Web site showed no new releases.
Women’s Wear Daily named Spanish department store chain El Corte Inglés as one of the potential saviours.
Ongoing talks with a Chinese firm based in the British Virgin Islands, Everbright Development Overseas Ltd., have previously been widely reported.
GOLDEN DAYS GONE
Department stores once were the pinnacle of the shopping experience. Housewives donned pearls, hats and gloves, then stayed all day.
Gottschalks and its ilk thrived.
Then city centers fell into decline. Department stores fled to malls, which proved no safe haven as specialty shops and big box stores won favor.
Now, with a nasty recession in full bloom, all but the strongest are fighting for their lives.
Gottschalks is on life support.
Larger department stores that might have bought the company a few years ago are struggling themselves.
Cincinnati-based Macy’s, for instance, announced Thursday it would close 11 underperforming stores in nine states, including one in Los Angeles.
Even before Friday’s headlines, the writing was on the wall.
On Thursday, Gottschalks announced December’s same-store sales had dropped 9.6 percent from the prior year, mirroring a weak holiday season across the retail landscape. Year-to-date, same store sales fell almost 10 percent.
Claritas Inc. and Californianresearch show the chain controlled about 6.4 percent of the local department store and discounters market in 2007.
Members of Gottschalks’ management team, through a spokeswoman, declined to be interviewed this week.
SHOPPERS SAD
Loyal customers say watching what could be Gottschalks’ last throes is like losing an old friend.
“I think it would be a big loss to this community if it closes,” said Connie Selgrath, exiting the store at East Hills Mall on Thursday. “What’s left, really? There aren’t many other department stores here. And I prefer to support the local stores.”
George Whalin, owner of Retail Management Consultants in Carlsbad, said there aren’t enough people like Selgrath to keep Gottschalks alive.
“Department stores in general have had difficulty for years, and the smaller regional players have it especially tough,” Whalin said. “Gottschalks is primarily in small markets, and it doesn’t have the critical mass to have real buying power with suppliers.”
The mid-tier company currently has 58 department stores and three specialty apparel stores in six western states.
It’s that middle position between upscale boutiques and discounters that will ultimately do it in, said Jay Goltz, Chicago-based author of “The Street Smart Entrepreneur.”
“In today’s business world, you better be great or you better be cheap, or you’ve got a problem,” Goltz said. “Those middle-range stores are neither great nor cheap. That’s why they’re all dying.”
Local shopper Chris Iturriria exemplifies those challenges.
“I really don’t go to department stores,” she said Thursday. “I’d rather go to Target or Wal-Mart. The prices are better and it’s one-stop shopping.”
END OF ROAD?
It may be too late for Gottschalks, said Daniel Valerio, Ernst & Young’s Americas Retail and Wholesale Sector Leader, but he’s not ready to write off the sector.
“Up until this last six months or so, department stores were making a marked improvement and stabilizing to some degree,” Valerio said. “A lot of the consolidation in the industry was starting to pay dividends until the economy went south.”
Paula Rosenblum, managing partner with Miami-based Retail Systems Research, is less optimistic.
“It’s hard for them to differentiate,” she said. “Department stores are a sea of sameness. And with their inflexible store layouts and real estate footprints, they can’t respond quickly to trends.”
Those trends, she said, include social shifts such the increase in working women who have less time to shop.
“We want to get in and out,” Rosenblum said. “It’s a nightmare if you’re looking for something specific. Have you ever tried to find a black size 7 blouse in a department store? You could wander for days.”
Not everyone is giving up.
Bakersfield mother Maria Acuna, 31, is committed.
“I don’t want Gottschalks to go,” Acuna lamented as she packed shopping bags into an SUV at East Hills Mall Thursday. “I don’t want to go to the discount stores. They don’t have the same selection or customer service.
“I hope they make it,” she said.
