Gottschalks Saving Grace?

March 26, 2009 6:36:45 PM PDT
The Fresno-based Gottschalks department store chain may survive bankruptcy. Three bidders are in on the auction for the company and one of them could keep at least some of the stores open. Gottschalks filed for bankruptcy in January and it goes on the auction block Monday.A Chinese company called the Shandong Commercial Group is the bidder that could keep Gottschalks alive. What sets it apart from the other two bidders is that its bid is for a "going concern", meaning it wants to keep the company going. But even if it saves Gottschalks, it probably can't save the corporate jet. The Cessna 525 is literally gathering dust at a Corporate Aircraft hangar at Fresno-Yosemite International Airport. It's also a sideshow in the company's bankruptcy trials. General Electric is trying to repossess the jet to make good on $2.3 million in Gottschalks debts. But that may be the least of the department store chain's worries.

Two of those bidders intend to liquidate the entire operation, with "going out of business" sales starting next weekend. "It is a disaster, but it's the reality of today's world," said retail analyst Howard Davidowitz. "We are in a world of liquidation, not reorganization." He says it's a crushing blow for the Central Valley's already fragile economy.

Liquidation would mean 61 stores close and more than 5,000 employees lose their jobs. Customers say that's an unacceptable option. "The more that close, the more people are going to be out of jobs and then what?" asked Betty Jo Sickler. "We don't have that many department stores in Fresno for all age groups," said Frances Avis. But Davidowitz says the store just isn't an attractive buy. He says big department stores are a dying breed, so a buyer would have to find a niche, then try remaking the stores. "So you buy Gottschalks for hundreds of millions of dollars and you spend another $100 million and you don't know where you are," he said. "Let me tell you, that's a tough proposition."

Gottschalk's board member Sharon Levy and her husband Joseph have been involved in the company for more than 20 years. Mrs. Levy says she's praying for Shandong to win the auction. But even if they do, it's possible they'll choose to close some stores to cut costs.

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