Gottschalks Red Ink Thickens in Q3

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Struggling regional department store operator Gottschalks Inc. reported lower sales and deeper losses for the third quarter.

The Fresno, Calif.-based firm said late Tuesday that its net loss for the three months ended Oct. 28 was $2.7 million, or 20 cents a diluted share, versus a year-ago loss of $1.6 million, or 12 cents. The loss per share included special items, such as losses on the discontinued Lamonts operation, that added 5 cents to the loss in the most recent period. Even so, the shortfall exceeded the consensus estimate of an 11 cent per share loss.

Sales declined 1.6% to $148.8 million from $151.3 million, but were up 0.5% on a same-store basis.

Jim Famalette, president and chief executive officer, said that weak sales of home merchandise and additional costs attributable to store closings, stock option expensing and higher property taxes contributed to the weak performance. However, he didn’t deviate from his previous guidance of net income of between $3.6 million and $4.0 million for the entire year.

Famalette commented, “Our key merchandise categories continued to generate solid top-line growth and led our same-store sales increase for the quarter. In addition, the strong performance in our soft lines drove a 20-basis-point increase in our margin. Our merchandise and in-store presentation are well positioned and we ware optimistic about the important holiday season.”

Gottschalks said earlier this month that it would consider strategic alternatives for the operation of its business, including a possible sale or merger. With 66 stores, including 61 department stores, in six western states, Gottschalks is among the smallest of the publicly held regional department store chains left in the U.S. retail market and is considered by many analysts to be a likely acquisition target for either a larger regional operator, such as Belk’s or Bon-Ton, or a private equity group.

For the nine months, the net loss stood at $6.2 million, or 46 cents a diluted share, nearly twice the year-ago loss of $3.4 million, or 25 cents. Same-store sales were up 0.1%, but total sales receded slightly to $445.7 million from $447.1 million.

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