Gottschalks to keep Bend, Ore., department store open despite bankruptcy filing

Jan 15, 2009 (The Bulletin - McClatchy-Tribune Information Services via COMTEX) -- GOTT | Quote | Chart | News | PowerRating -- Fresno, Calif.-based Gottschalks Inc. filed for Chapter 11 bankruptcy protection Wednesday but plans to keep its stores, including its newest one in Bend, open while it considers its options, according to a company statement.

The 104-year-old company blamed the filing on the down economy and an inability to secure enough credit to see it through the downturn, and said it may consider selling the chain.

The Bend store, which opened in October in the new Pioneer Crossing mall in southeast Bend, was the first new department store to open in the city since at least 1988, when JCPenney moved to what is now the Cascade Village Shopping Mall.

Gottschalks has lauded its new 58,000-square-foot Bend store as a prototype for the company's future.

The store has a smaller footprint, is located in an outdoor mall, emphasizes brand name apparel for mature women and young men, and offers gift items. The company operates 58 stores and three specialty stores in six Western states, including five stores in Oregon.

"Every indication we have is that they are going to continue operating and are looking to survive as opposed to closing this location," said the mall's developer, John Keba, of Bend-based Equity Management Group.

"This store is a brand-new prototype store, so if Gottschalks would close any stores, it's our understanding this would be one of the last ones because it's a prototype and because sales have been strong."

Calls to Gottschalks' Fresno office were forwarded to a public relations firm in New York City, which released a statement saying the company is pursuing options to "create value for stakeholders, including a sale of its business or other transaction with a third-party investor through a process to be approved by the (Bankruptcy) Court in order to attain the highest and best offer from interested parties."

The company has arranged for $125 million in debtor-in-possession financing through GE Capital in order to fund its operating costs while in reorganization. Gottschalks employs roughly 4,800 people, with approximately 75 in Bend.

Yvonne Parker, manager of the Bend Gottschalks, said "it's business as usual."

Retailers have not fared well in the recession. Retail sales dropped an estimated 2.7 percent in December from November, the U.S. Commerce Department reported Wednesday. In addition, retail sales have dropped month over month for the past six months, according to the report.

Gottschalks joins a number of retailers who have filed for bankruptcy.

Also Wednesday, Knoxville, Tenn.-based Goody's Family Stores, which operates 282 stores primarily in the Southeast and is not related to Bend-based Goody's Candy Store Inc., refiled for Chapter 11 and announced plans to liquidate.

"(Gottschalks) has a chance to sell the company or sell some stores and liquidate others, but a sale of the whole company, that seems doubtful," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm based in New York City.

"A sale of some stores and the liquidation of the rest seems more realistic. Who knows what's going to happen? But by next year, I doubt there will be a Gottschalks," added Davidowitz.

Mervyns, a regional department store chain based in Hayward, Calif., filed for Chapter 11 bankruptcy protection last July before announcing in October it would liquidate.

Davidowitz said the department store business model isn't dead, but added that it's hard for smaller regional chains to survive in the face of competition from larger national chains such as Macy's and Kohls, as well as discount chains such as Wal-Mart and Target.

"It's tough to be a small guy out there in the land of giants... and in this environment, the customer is trading down," Davidowitz said.

Gottschalks reported that its total assets as of Jan. 3 amounted to $288.4 million, against total debts of more than $197 million, according to a McClatchy news report Wednesday.

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