Gottschalks Fights to Stay Out of Bankruptcy

Gottschalks Inc. (Fresno, Calif.) is reportedly on the brink of becoming the latest retailer to file for bankruptcy protection.

According to the Sacramento Bee, a rescue plan with a foreign investor hasn’t yet panned out, though negotiations are continuing, and the mid-priced department store chain says it could run out of money by the end of January 2009.

In 2007, the retailer reported an operating loss of $10.1 million and a 7 percent drop in revenue. Through the first nine months of 2008, operating losses grew 28 percent and revenue fell 9 percent. In October Gottschalks was suspended by the New York Stock Exchange because its total stock value was below $25 million.

In September, Gottschalks revealed it had negotiated a deal for Everbright Development Overseas Ltd., a Chinese trading company, to pump $30 million into Gottschalks in loans and capital in exchange for 75 percent of the retailer’s stock. Everbright would also provide a pipeline for selling inexpensive, foreign-made goods under Gottschalks' private label brands. The deal died on December 18, with Gottschalks saying Everbright had pulled out though no reasons were given. A day later Gottschalks said it was still talking to Everbright and an unidentified third party. According to Women’s Wear Daily, sources say the other party is El Corte Inglés (Madrid), Spain’s largest department store retailer, which owns about a 16 percent stake in the California chain through U.S. unit Harris Co. Gottschalks bought the nine-store Harris chain in 1998 from El Corte Inglés,

Gottschalks operates about 60 department stores, mostly in California, but also in Alaska, Idaho, Nevada, Oregon and Washington.