Home Front

A blog about the economy and the Sacramento-area real estate market.

January 14, 2009
The Gottschalks bankruptcy

    A few thoughts about Gottschalks Inc. filing for Chapter 11 bankruptcy earlier today:

     1. It's fascinating how quickly things can go downhill. Although its sales have been sluggish for some time, Gottschalks was still profitable in 2006. But in the fiscal year that will end Jan. 31, Gottschalks estimates that sales fell 11 percent.

     2. The Fresno chain will be trying to sell itself during a brutal climate for retailers. Revenues are collapsing all over. And arranging a deal becomes even tougher in a credit crunch; a consultant told me there's precious little credit available for these kinds of purchases, assuming someone does want to step up and buy Gottschalks.

     3. Another complication: This is the slowest time of the year for retailers. That might make it tougher to find a buyer (although anyone interested in buying a retailer presumably understands that the real business doesn't happen until fall).

     Meanwhile, my colleague with a penchant for the offbeat, Darrell Smith, just came back from talking to shoppers at the Gottschalks at Country Club Plaza in Sacramento.

     The first thing that caught his eye was a group of signs for sale - those little morale-boosting signs you hang in your kitchen. One of them read, "Things are bad. Send chocolate."

      On a more serious note, the other thing that caught his eye was the proliferation of "sale" signs - up to 80 percent off in some cases.

     Things were quiet, but those shoppers who were strolling about proclaimed their loyalty. . "I think Gottschalks is a landmark," said Susan Sevioun of Georgetown.

     It's true that loyalty is increasingly spotty in this era of relentless discounting and online selling. And obviously Gottschalks has struggled to keep hold onto its customers. But it makes you wonder: Where will the Susan Seviouns shop if Gottschalks disappears? I guess they'll adjust, like everyone else.

   Meanwhile, just to drive home the point about the lousy retail environment: my colleague Mark Glover reports that Ann Taylor and Banana Republic  are closing their stores in Downtown Plaza.

      We'll have much more on all this in Thursday's paper.

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