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Gottschalks Sharpens Promotions as Losses Mount

Heath E. Combs, Cecile Corral -- Home Textiles Today, December 15, 2008

To maximize onan otherwise lackluster holiday selling season, Gottschalks this month started courtingformer Mervyns shoppers in its markets with a special promotional effort, anted up its television campaign, and brought inventories to "appropriate levels," the 59-unit regional department store said during its third quarter earnings call.

Gottschalks' early holiday selling season has produced mixed results, said James Famalette, chairman and ceo. He said Black Friday promotions garnered strong initial sales that then slowed through that weekend. "We've planned our marketing campaign to maximize sales during December as we take advantage of two additional shopping days before Christmas to drive traffic into our stores and increase sales," he said.

The retailer reported a quarterly loss of $10.1 million, or 76 cents per diluted share, compared to a loss of $4.1 million, or 30 cents, in the year-ago period. In 2008 year-to-date, the net loss was $19.7 million, or $1.48 per share, deepened from the loss of $13.6 million, or 99 cents, one year ago.

Quarterly sales fell 13.3% to $119.1 million; comps decreased 12.1%. Year-to-date sales fell 10.9% to $378.0 million with comps down 9.7%.

Looking ahead to the new year, Gottschalks is bracing for"an unfavorable economic backdrop." The company, he said, is feeling more secure having recently signed off on a definite agreementfor up to $30 million in investment in the retailer by Everbright Development Overseas Ltd. Famalette said thisproposed transactionremains subject to customary closing conditions, includingapproval of shareholders, receipt of third party consents, and a diligence review that expires on Dec. 15.

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