Gottschalks, Goodies File for Chapter 11
Retailers Gottschalks Inc. and Goody’s LLC filed for Chapter 11 bankruptcy protection on Jan. 14.
Fresno, Calif.–based department store Gottschalks has been struggling for several years and is reportedly looking for a buyer. The company has been reporting negative same-store sales numbers since summer 2005 and has been on and off the market since then, as well. Gottschalks operates 58 department stores, including 38 in California, and six specialty shops spread throughout the American West. As recently as November, the company reported landing a $30 million investment from British Virgin Islands–based Everbright Development Overseas Securities Ltd. But by mid-December the deal with Everbright had fallen through, and the grim holiday sales season did little to improve the company’s prospects.
In a company statement, Gottschalks Chairman Jim Famalette announced the news: “Persistent challenges in the economy and recent unexpected reductions to our borrowing capacity as a result of tightening credit markets have left us with no other recourse.”
The retailer, which employs more than 5,000 people, announced plans to reorganize and has secured from GE Capital and other lenders a $125 million loan, which will be used to cover operating costs, including payroll.
This is the second filing in less than a year for Nashville, Tenn.–based retail chain Goody’s, which announced plans to liquidate. The company, which currently operates 282 stores, first filed for Chapter 11 bankruptcy protection in June. After restructuring debt and closing nearly 75 stores, the company continued to see sales fall. In January, the company reported a net loss of $91 million on sales of $786 million for the previous 11 months.
Prentice Capital Management, which acquired Goody’s in 2006, has stuck a deal with Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC to liquidate inventory through a series of going-out-of-business sales at Goody’s stores. —Alison A. Nieder
