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Gottschalks hurt by 3Q sales slowdown

Declining sales and rising expenses combined to increase the third-quarter loss for Gottschalks Inc. The West Coast department store chain posted a net loss of slightly more than $2.6 million in this year's third quarter, slightly ahead of the loss it posted in the same period in 2001.

Gottschalks' third-quarter sales slipped 0.4 percent, to $153.1 million. Same-store sales for the quarter increased 1.3 percent over the 2001 third quarter. The company attributed the drop in sales to the closure of six stores in 2001 and two in July of this year.

"Our third-quarter results were impacted by the softer sales we experienced in August and September," said Jim Famalette, the company's president and ceo. "While October sales were more in line with our expectations, we were not able to compensate for the lower sales early in the quarter."

The company's operating income for the period fell by more than 27 percent, to $1.8 million. The operating number was depressed by a 2.4 percent increase in its selling, general and administrative expenses, leading to a 100 basis-point gain in its SG&A ratio to sales, which finished the quarter at 34.8 percent.

Yet, according to Famalette, "We continued to successfully contain expenses during the quarter, which were lower than projected despite a significant increase in utility costs due to this year's warmer weather and the loss of temporary rebates we received for reduced summertime electricity usage during last year's California energy crisis."

The ceo also noted, "Our gross margin improved as a percentage of sales (to 35.9 percent, up 50 basis points), but due to the lower sales volume, gross margin dollars were below our plan. Comparable-store inventories were down approximately 3 percent on average for the third quarter. We continue to manage our inventories carefully and have achieved improved turnover in each quarter this year. Currently, our inventory level and content remain in line with our plan, and we are well stocked for the upcoming holiday season."

Gottschalks Inc.

Qtr. 11/2/02 (X000) 2002 2001 % chg
( ) : loss
Net sales $153,108 $153,674 -0.4
Oper. income (EBIT) 1,829 2,512 -27.2
Net income (2,603) (2,578)
Per share (diluted) (0.20) (0.20)
Average gross margin 35.9% 35.4%
SG&A expenses 34.8% 33.8%
9 months
Net sales 458,536 469,564 -2.3
Oper. income (EBIT) 8,377 5,080 64.9
Net income (7,408) (9,984)
Per share (diluted) (0.58) (0.79)
Average gross margin 35.9% 35.0%
SG&A expenses 34.1% 33.9%


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