Retailer Gottschalks seeks buyer; files Chapter 11

Jan 15, 2009 (The Press-Enterprise - McClatchy-Tribune Information Services via COMTEX) -- GOTT | Quote | Chart | News | PowerRating -- Fresno-based department store chain Gottschalks emerged as the latest victim of retail industry troubles Wednesday, announcing it has put itself up for sale as it files to reorganize in Chapter 11 bankruptcy.

Gottschalks officials said in a statement the regional chain has negotiated $125 million in debtor-possession financing from a group of lenders led by GE capital. That financing, if approved in bankruptcy court, would fund employee wages and benefits, some vendor payments and other expenses as it reorganizes.

With a history dating to 1904, Gottschalks has 58 stores in six states but its largest market is California, where it operates seven Inland locations. Most of the Inland stores are former locations of the San Bernardino-based Harris department store chain, a fixture on the local retail scene for seven decades before it was acquired by Gottschalks in 1998.

Gottschalks stores are in Riverside, San Bernardino, Redlands, Hemet, Palm Springs, Indio and Victorville. Some still carry the Harris Gottschalks banner.

The retailer closed its Moreno Valley Mall location last June. The closing of Gottschalks' remaining stores is not a certainty as it could find a buyer for the chain.

However, other retailers that filed for bankruptcy in recent months wound up going out of business. In the Inland area, those included Mervyns, Steve & Barry's, Linen 'n Things, and Wickes Furniture. Struggling electronics chain Circuit City plans to close five Inland locations among more than 150 nationwide, as part of its own bankruptcy filing.

Patti Bolter, manager of the Gottschalks at Riverside Plaza, said all local managers have been told to refer questions to company headquarters. Company representatives did not immediately return calls seeking comment.

Gottschalks is an anchor tenant at the struggling Redlands Mall, which the city of Redlands is negotiating to purchase for possible use as a civic center. The City Council last week approved a confidentiality agreement with mall owner General Growth Properties, enabling the two parties to negotiate without revealing confidential business information.

Carl Baker, public information officer for the city of Redlands, said Wednesday the city continues to monitor the status of the mall and Gottschalks. "They've got two major tenants at this point -- CVS and Gottschalks -- so what would happen to either of those could impact the mall itself," Baker said.

"It's really too soon to tell what this means to our malls where we have a Gottschalks," said David Keating, spokesman for Chicago-based General Growth Properties.

Other malls that have a Gottschalks are also waiting to see how the retailer's situation proceeds.

"We're always exploring our options and trying to keep ahead of the trends, especially in this economy," said Jennifer Ciccone, vice president of property management for Santa Monica-based mall operator Macerich, which owns Inland Center in San Bernardino. "We'll work with Gottschalks and we hope they'll stay."

Loyal Gottschalks patrons were concerned about the news.

Jodi Arellanno, of Riverside, who had just finished shopping at the Gottschalk in Riverside Plaza, said she's been visiting the store for years and would be sad to see it go.

While she would have to drive elsewhere to get similar prices, she said she would be hard-pressed to get the same friendly shopping experience. "I really hope it doesn't happen," she said of a possible shutdown.

George Whalin, president of Retail Management Consultants in San Marcos, said Gottschalks is just the latest in a wave of retail bankruptcies and closures that could continue throughout 2009. Even before the most recent industry troubles, amid dropping consumer spending, mid-priced regional players like Mervyns and Gottschalks were already struggling against larger national chains.

Those competitors have bigger marketing budgets and stronger buying power with manufacturers. "They've just been hard pressed to compete against the likes of Macy's and the others," Whalin said of Gottschalks.

Shortly after announcing the Moreno Valley closing last March, Gottschalks CEO Jim Famalette said in an interview that the retailer's remaining Inland stores were doing well, with its Riverside Plaza and Redlands Mall locations among its top sales performers.

Famalette said at the time that Gottschalks was scouting Southern California sites, including the Inland area, for potential new stores. But the nationwide climate for retailers has deteriorated significantly in the past few months.

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