Analysis: Could Gottschalks go back to Harris?
| Friday, Jan 16 2009 08:48 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
What’s next for ....
Customers:The company is seeking the bankruptcy judge’s OK to honor programs such as the Plus Program for seniors, the KidZone Program, Gottschalks Treasure Rewards and a credit card that gives customers points and other incentives. The store also wants to continue accepting returns for refunds or store credit and wants to keep selling gift cards.
Employees:An emergency motion to authorize payment of payroll, benefits and related taxes and prevent banks from placing a hold on or reversing automatic deposits will be considered at today’s initial hearing in Delaware.
The company wants the court’s approval to honor vacation, personal, sick leave, bereavement leave and other paid time off.
Gottschalks employs 2,817 full- and 2,465 part-time employees, for a total of 5,282 workers.
East Hills Mall:Gottschalks and Mervyns own their buildings so the mall can’t lease the sites, officials say. They are pursuing tenants for other sites and say overall sales are fine.
Valley Plaza:Parent company General Growth Properties is itself considered likely to file for bankruptcy protection. Mall owners says it’s too soon to tell what impact the Gottschalks filing will have.
Unsecured creditors:Among the top 20 owed money are The Harris Co., Liz Claiborne, The CIT Group/Commercial Services and Finlay Fine Jewelry.
Gottschalks listed $288 million in assets and $197 million in debt.
Shares:As is typical when a publicly owned company files for bankruptcy, trading of shares was expected to be temporarily halted.
Gottschalks, which trades over-the-counter under the symbol GOTT.PK, closed down 3 cents at 15 cents per share Wednesday.
Buyers:Analysts are pessimistic about a purchase of the entire chain. Several larger retailers might pick off assets here and there, they said.
Images
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.
Shoppers come and go at Gottschalks in Valley Plaza on a January afternoon.
Scott R. McGlasson doesn't have any complaints about Gottschalks. He was at the East Hills mall to pay his Gottschalks bill in January.
Dan Spiller said on Wednesday that he likes to shop at Gottschalks.
Related Stories:
- Gottschalks consolidates at East Hills Mall
- Making East Hills alive again
- Demolition of old Robinsons-May site makes way for Target
- Gottschalks kicked off New York Stock Exchange
- Gottschalks: deal scrubbed but talks go on
- Will post-holiday sales make a difference?
- Conflicting reports on potential Gottschalks rescue, or bankruptcy
- Californian exclusive: Construction of new Target shut down
Blogs
There’s a detailed plan for Gottschalks Inc. to sell itself.
Through a court-approved auction slated for March 17 or thereabouts, the company will be liquidated or will continue in some form with a new owner.
The Fresno-based department store chain, which filed for bankruptcy Wednesday, is negotiating in earnest with an unnamed buyer, court documents show. That buyer will put in a bid by March 2 to kick off the auction process.
The Wall Street Journalidentified the buyer as El Corte Inglés SA, a Spanish retailer. The story cited two anonymous industry insiders.
Gottschalks and El Corte have a decade-long relationship through a name you’re more likely to recognize: The Harris Co. Back in 1998, when Gottschalks bought the smaller Harris chain, it was really dealing with El Corte, which had picked up Harris in the early 1980s.
You know Harris. One of the nine stores sold in ’98 was the now-empty location in East Hills Mall.
The Harris name is still used for some of El Corte’s American operations, including the company’s ongoing stake in Gottschalks.
Harris is the No. 1 unsecured creditor in Gottschalks’ bankruptcy, owed more than $16 million. The debt is what’s left of a $22 million note Gottschalks used to buy Harris a decade ago.
Harris also owns about 15 percent of Gottschalks’ common stock through 2 million-plus shares picked up in the 1998 deal.
What’s more, two of Gottschalks’ 11-member board of directors, Tom McPeters and Jorge Pont Sanchez, are Harris guys. Pont Sanchez is Harris’ chief executive and a division director of El Corte; McPeters is Harris’ chief financial officer.
What does this all mean if El Corte/Harris ends up as the successful bidder?
That’s not clear yet.
It seems unlikely, from industry analyst comments, that El Corte/Harris or any other buyer would want to continue running Gottschalks in its current form.
The two Gottschalks stores in Bakersfield, at East Hills and Valley Plaza, have different profiles.
Gottschalks owns the land, but not the building, at the East Hills site. (El Corte owns the empty Harris building, which Gottschalks vacated last spring.)
It leases the Valley Plaza site, as it does most of its stores.
Property owned by Gottschalks is slated for a potentially different path than the leased stores, court papers show, depending how the complex sale unfolds.
A Gottschalks spokeswoman said Friday the company couldn’t comment about the fate of individual pieces of property.
McPeters, the Gottschalks board member and Harris officer, did not return a message left Friday afternoon seeking comment.
