CHAIN SET TO CLOSE 6 STORES GOTTSCHALKS ALSO FARMS OUT ITS CREDIT CARD SERVICES.
PALMDALE - Gottschalks has announced plans to close six of its stores in the Pacific Northwest and turn over control of its credit card business to Household's Retail Services Business.
The West Coast department store chain announced a five-point strategic and financial positioning plan that company officials said was designed to strengthen its financial structure and position it for stable long-term growth.
``We expect this five-point plan will significantly strengthen our ability to effectively manage our business and return to the levels of success achieved prior to the acquisition of Lamont's and the overall economic decline which began in 2001,'' said Jim Famalette, president and chief executive officer. ``Our focus this year will be to dramatically improve the productivity of our existing store base and our overall financial condition.''
The five-point plan will improve liquidity and reduce the company's debt by approximately $37 million, the company said.
As part of the plan, the company has completed the sale of its private-label credit card operations to Household. The sale agreement includes the servicing of the company's more than one million credit card accounts that generate annual credit card sales of more than $300 million.
The deal increased available capital by $30 million at closing on Friday and will also provide ongoing annual income to the company as program compensation, officials said.
``Our objective is to strengthen Gottschalks' position in key western markets, generate opportunities for new stores and achieve our long-term growth objectives,'' Famalette said. ``Our plan is to open two new stores per year, similar to our past practice prior to our acquisition in 2000. There are no new stores planned this year, but we do have several California locations targeted and expect to finalize our growth plans for 2004 later this year.''
Gottschalks' five-point strategic and financial positioning plan was developed as part of its annual business planning process and with the advisory support of Financo Inc., a New York-based financial advisory firm specializing in the retail and consumer products sectors.
Based on seasonal fluctuations in credit card receivables, the company estimates the credit card deal will increase available capital from $22 million to $30 million during the course of the year. The company anticipates that partnering with Household and utilizing its substantial marketing capabilities, as well as leveraging its risk management expertise, will generate an increased number of card holders and, in turn, increased revenue from Gottschalks' credit card usage.
Closing the six Pacific Northwest stores will improve annual operating income for the company by approximately $2 million. The stores, including four in the Seattle-Metro area, one in Wenatchee, Washington, and one in Corvallis, Oregon, are closed or expected to close over the next 90 days.
The company's merchants will more aggressively pursue opportunities with its private-label brands in 2003, which differentiate the stores' product offerings from competitors and historically have generated higher profit margins. Its exclusive product lines include the Shaver Lake and Sarah Bentley brands. Gottschalks anticipates private-label sales will grow by 15 percent in 2003 to approximately $80 million, or nearly 12 percent of total owned sales, compared to 2002.
A key component of this initiative is the expected launch of an exclusive new children's private-label merchandise program this spring.
Gottschalks will report fiscal 2002 fourth quarter and year-end results on March 6.
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Feb 4, 2003|
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