Gottschalks: Over and out starts now
| Tuesday, Mar 31 2009 10:13 AM
Last Updated Tuesday, Mar 31 2009 06:46 PM
Gottschalks Inc. timeline
1904: German immigrant Emil Gottschalk founds the store in Fresno
1987: Gottschalks buys Bakersfield's popular Brock’s Department Store
1998: The retailer buys Harris Department Stores’ nine Southern California locations, including Bakersfield’s
2000: Gottschalks expands its Pacific Northwest presence by purchasing more than 30 of bankrupt Seattle-based Lamonts’ stores
May 2008: Two Gottschalks stores in Bakersfield’s East Hills Mall consolidate, leaving empty the former Harris building
October 2008: The company is delisted from New York Stock Exchange, where it had traded since 1986, after its value falls below $25 million
November 2008: A $30 million deal with Chinese investor Everbright is announced
December 2008: Everbright scraps the deal. Gottschalks says a cash infusion is needed before the end of January
Jan. 14: Gottschalks files for Chapter 11 reorganization bankruptcy in Delaware
March 31: Court filings show the prevailing bidder is a group of liquidators. Shares, now traded over-the-counter, close at 3 cents, down more than a nickel
Today: The bankruptcy judge is expected to approve the liquidator’s bid in a morning hearing
Ahead: A going-out-of business sale will likely start Thursday or Friday and be wrapped up by mid-July
Sources: Gottschalks Web site, Californian archives, court filings
“Well, we’re just going to be (left) with good ol’ Macy’s.”
— Bakersfield resident Sally Borrego.
“All we’re left with is Target or Wal-Mart, and that isn’t much of a choice.”
— Kern City resident Christine Whitehead.
“I don’t drive, so I’m not quite sure where I’ll be shopping.”
— Bakersfield resident Cindy LaMothe.
“Being a specialty store makes a big difference.”
— Damon Young, employee of East Hills Mall tenant Hope Christian Stores, referring to strong sales at that location.
“With Gottschalks closing, I don’t know if it’s going to bring enough people to the mall.”
— Cynthia Ibarra, manager of East Hills Mall tenant Touchdown Sports, a sports apparel and collectibles store.
“You’re going to lose every one of these (stores) when Gottschalks leaves.”
— Bakersfield resident Mary Lane, shopping at the East Hills location.
“I just feel sorry for the folks who are going to be out of work.”
— Bakersfield resident Sharon Langham.
“It’s ugly.”
— Bakersfield resident Lizbeth Torres, referring to the situation leading to Gottschalks’s closure.
Details on the Gottschalks properties
Gottschalks is linked to three store locations in Bakersfield, all with different owners. Each will go through the bankruptcy process a different way.
• 2801 Ming Ave., in Valley Plaza Mall
The lease for the 94,000-square-foot site is being sold through Chicago firm DJM Realty along with most of Gottschalks’ other leases and its half-dozen properties.
The Valley Plaza lease runs $4.25 a square foot and is set to expire in February 2017, the marketing brochure shows. A second lease for Village East’s 3,200 square feet is priced at just over $16 a square foot.
The building is owned by a subsidiary of Chicago-based mall giant General Growth Properties Inc.
• 3200 Mall View Road, in East Hills Mall
Gottschalks owns the land at its East Hills site, but not the building.
DJM is marketing the lease, which expires in July. The 79,000-square-foot site runs $6.79 a square foot.
DJM also lists the lease for the existing 5,300-square-foot Gottschalks furniture store next door.
• 3000 Mall View Road, in East Hills Mall
The Harris building — occupied by Gottschalks until last May, now empty — isn’t technically part of Gottschalks’ bankruptcy and isn’t in DJM’s marketing material.
But the building, owned by El Corte Inglés SA, is nevertheless deeply tied to Gottschalks.
The Spanish retailer bought The Harris Co. in the early 1980s. So when Gottschalks acquired the Harris chain in 1998, it was really picking up a stateside affiliate of El Corte.
Harris still exists on paper. It is Gottschalks’ No. 1 creditor, bankruptcy filings show, as well as the single largest stockholder, owning nearly 15 percent of common shares. Two Harris representatives sit on Gottschalks’ board.
El Corte/Harris representatives could not be reached for comment Tuesday regarding the building’s fate.
— Gretchen Wenner, Californian staff writer
Images
Casey Christie / The Californian Mary Lane had some strong opinions about the Gottschalks in East Hills Mall and the future of the mall. (CQ)
Casey Christie / The Californian What lies ahead for the future of East Hills Mall. (CQ)
Gottschalks in East Hills Mall.
Casey Christie / The Californian After shopping at Gottschalks Tuesday, Lizbeth Torres, right, talks with Californian reporter about the future of Gottschalks in East Hills Mall. (CQ)
Casey Christie / The Californian Sharon Langham, is a big fan of Gottschalks and says she buys everything there. (CQ)
Gottschalks is over.
The bankrupt department store chain born in the Central Valley more than a century ago will start selling off merchandise, property and leases as early as this week, court filings show. The sale will wrap up by July 15.
Bakersfield shopper Sharon Langham said Tuesday she cried after entering the East Hills Mall store.
“I’m going to be naked,” she said. “Everything I own comes from this store.”
A liquidation group won the prevailing bid in Delaware federal bankruptcy court, paperwork filed Tuesday shows, ending hopes that some of the West Coast chain’s 58 stores would stay open.
Gottschalks Inc. operates two Bakersfield locations, one in East Hills Mall and the other in Valley Plaza.
The retailer, founded in Fresno in 1904, survived two world wars, the Great Depression and other landmark events before falling victim to the global recession that started more than a year ago.
“Regrettably, liquidation is now the only path for our company,” said Jim Famalette, chief executive, in a release. “We are deeply disappointed with this outcome and the impact it will have on our employees, customers, business partners and the communities we have served for 105 years.”
The company had been racing to reach an agreement with creditors, lenders and bidders to keep the chain going before Monday’s court-ordered deadline fell. The retailer filed for Chapter 11 bankruptcy in January.
The winning bid was accepted late Monday and is slated for court approval Wednesday. Liquidation could then start as early as Thursday.
The prevailing bidder was a joint venture made up of four national companies with retail liquidation expertise. The same group handled going-out-of-business sales for Mervyns, Circuit City and Linens ‘n Things.
Employees were told not to talk to reporters Tuesday.
In Fresno, staffers at the corporate headquarters were packing up, the Fresno Bee reported.
Most were told Friday would be their last day.
Loss in the aisles
Many longtime customers reacted with sadness.
“Where are we going to go to shop?” customer Lizbeth Torres said in Spanish outside the East Hills Mall location.
Shopper Mary Lane worried about the impact on northeast Bakersfield’s shopping scene.
“We have no draws” at East Hills, she said. “We need a draw. A big name.”
Northeast resident Cindy LaMothe said she was “very sad and upset” about the impending closure.
“Once this place goes, there won’t be anything left here,” she said.
Anchors away
The chain’s demise would be a temporary setback for Valley Plaza, said local commercial real estate broker Scott Underhill, but for East Hills, “obviously, it’s devastating.”
After Gottschalks is shuttered, East Hills’ three anchor slots will be empty: The former Harris building and Mervyns were both vacated in the last year. Only the movie theater and specialty shops will be left.
“Anytime you lose an anchor, in boating terms, the boat’s adrift,” said Underhill, who heads retail and investment for Grubb & Ellis - ASU & Associates.
The vacancies do leave room for large retailers, perhaps from the East Coast, to enter the California market, he added.
Gerry Schulman, project manager at East Hills, said he didn’t wish to comment until the deal is finalized in court.
Nick Danesh, who owns East Hills Mall through his BH Mall LLC, didn’t return a phone message left Tuesday at his Los Angeles office.
Danesh bought the mall in 2004 for $5 million, county records show, when the real estate market was booming. Lofty plans for a spiffy remodel and upscale national tenants haven’t yet materialized.
Valley Plaza still has JCPenney, Macy’s and Sears holding down the mall’s corners.
A message left for the mall manager wasn’t returned Tuesday.
David Keating, spokesman for the Chicago-based mall owner, General Growth Properties Inc., said in an e-mail that “it’s too soon to determine what, if any, impact this will have on Valley Plaza.”
Parting thoughts
Christopher Thornberg, principal of Beacon Economics, a Los Angeles consulting and research firm, said Gottschalks’ failure reflects the overall pullback in consumer spending.
Emotions might smart over the loss of an entrenched Central Valley brand, but the liquidation isn’t something specific to the area.
An “almost Darwinian” shakeout of the retail sector is working through the system, squashing weaker companies, he said. Strong ones will grow back when the economy turns around.
“It has to happen,” Thornberg said. “It’s a natural process in the scheme of things.”
