Gottschalks remains in hearts of valley residents

Jan 10, 2009 (The Modesto Bee - McClatchy-Tribune Information Services via COMTEX) -- GOTT | Quote | Chart | News | PowerRating -- Gottschalks was there for one of Robert Tate's most life-changing moments, but he hasn't exactly returned the favor lately.

"I bought the first gift I ever gave a woman here, a blue scarf. She must have liked it because she hugged me -- that was a big deal -- and then she married me," said Tate, 47, of Modesto. "I think about that every time I come in."

But it has been four years since Tate last shopped at Gottschalks, and that was only because he had a gift certificate. Sales lured him into Gottschalks this week.

While Tate scoped out post-Christmas deals, Gottschalks executives in Fresno strategized ways to keep the 105-year old retailer afloat.

Women's Wear Daily, a publication covering the retail fashion industry, reported Friday on its Web site that a potential rescue deal may be near for Fresno-based Gottschalks Inc.

Relying on unnamed sources, WWD.com reported that Gottschalks has been in discussions since mid-December with Everbright Development Overseas, a Chinese company, and El Corte Ingles, a Spanish retail company that already owns a 16 percent stake in Gottschalks. The report said the three companies were expected to vote on a deal soon.

Also Friday, the Fresno Business Journal cited anonymous Gottschalks employees who said the retailer may file for bankruptcy within days and close more than a dozen stores.

Gottschalks reported Thursday that same-store sales dropped 9.6 percent in December from the same period last year.

Company Chairman Jim Famalette and Chief Operating Officer Greg Ambro did not return calls Friday to comment on either report and have not spoken publicly about the company's financial situation since mid- December.

If better fortunes don't shine on Gottschalks soon, the company said it could run out of money by the end of the month and close. That could leave two colossal holes in shopping areas on the west and east sides of Modesto, in addition to Merced, Sonora, Tracy and Stockton.

It also would put thousands of employees out of work in stores across the West and at its distribution center in Ma-dera. While company officials would not state how many people Gottschalks employs in the valley, its most recent annual report shows it had 4,800 employees as of February.

This news comes on the heels of the closure of Mervyns, including stores in Modesto, Merced, Turlock, Manteca, Sonora and Stockton.

Gottschalks' difficulties come at a bad time for the Northern San Joaquin Valley, said Nael Aly, dean of the California State University, Stanislaus, College of Business Administration.

The company's demise would inflict yet another wound on a region battered by the economy's nose dive. Foreclosures in the valley are among the highest in the nation, Stanislaus County unemployment is at a 10-year high of 12.4 percent -- compared with 8.4 percent statewide -- and business closures, from restaurants to auto dealerships, continue.

"We struggle to attract stores like these," Aly said of Gottschalks. "When we get these major stores, it's a great achievement, everyone is excited."

Remembers 1984 opening

Margaret Cohen, 72, remembers when Gottschalks opened in Century Center on Orangeburg Avenue and Oakdale Road in 1984.

"It was the only place to shop on this side of town. I'm so sad to hear they aren't doing well. I buy all of my clothes here," she said.

Gottschalks leaving Century Center would be a blow to busy families and seniors in east Modesto, said Pamela Holly. It also would affect the Hallmark store she manages, which has benefited from being next to one of Gott-schalks' highest-earning stores. Both Modesto stores have a history of strong performance.

"We have a lot of older customers who say this shopping center has all they need. They won't go to the mall or McHenry because it's too busy," Holly said. "We'd probably feel it, too. We share a lot of customers. On days they have good sales, it helps our business."

Stores cycling in and out of locations may be a normal part of the retail market, but it would be hard to see Gottschalks leave, said Bill Bassitt, Stanislaus County Economic Development and Workforce Alliance chief executive officer.

"It's very discouraging to see a store that's been in the community so long have to leave," he said.

While Gottschalks' future is still hazy, retail management consultant Bob Bartlett of San Rafael sees closures and failures as a normal part of the retail business -- and, sometimes, a good thing.

"The vacancies created by Mervyns, and if Gottschalks goes out of business, will be filled again," Bartlett said. "Retail is incredibly efficient. When one store fails to attract customers, it leaves and everything gets recycled: store space, employees, customers.

"Modesto is going to have plenty of great stores. It may have to deal with some dark spaces for a while," he said.

The big question is how long would it take to fill those spaces were Gottschalks to close?

"We're not in normal times, so it will take longer to bounce back when businesses go out of business," said Kelvin Jasek-Rysdahl, an economist at CSU, Stanislaus. "If Gottschalks were the only one in peril, we'd get over it. But we're a year into this recession, and it's tough all over."

Gottschalks -- with a three-story 154,000-square-foot store in the mall and a 100,000-square-foot store in Century Center -- would leave gaping retail vacancies in Modesto.

"It kind of conveys a negative image of the city," Bassitt said.

That's the way the market works, according to retail consultant Bartlett. Residents essentially vote for which stores stay in their communities by shopping at those stores, he said. If people aren't shopping at Gott- schalks, they're saying it's time for something new.

Closures create opportunities, Bartlett said.

"Ask yourself, what do the people of Modesto want? Value and a good shopping experience. There is a sense of excitement about new things."

While he'd hate to see a company such as Gottschalks fail, Tate said he'd like to see more new stores in the mall like the new high-end shops in the Village at Vintage Faire.

"I probably bought that scarf at Gottschalks because it was new at the time," he said.

The Fresno Bee contributed to this report.

Bee staff writer Eve Hightower can be reached at ehightower@modbee.com or 578-2382.

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