Gottschalks Announces $30 Million Investment

After three years of poor business, department-store company Gottschalks Inc. might have found a savior for its long-running problems. On Nov. 21, the Fresno, Calif.–based retailer signed what it has called a definitive agreement with Everbright Development Overseas Ltd., a British Virgin Islands–based company, for a $30 million investment.

Gottschalks shareholders still have to vote on the agreement between the ailing retailer and Everbright, which describes itself in statements as a company that provides trade facilitation, acting as an intermediary between American and Chinese regulatory bodies. It also provides credit and logistical support to manufacturers and merchants doing business with China. Financial consulting company Financo Inc. and law firm O’Melveny and Myers are advising the deal, according to a company statement.

Along with the $30 million investment, Everbright and Gottshalks said they will build several new businesses. One of these will be a consignment business that will be tested in Spring 2009 at selected Gottschalks stores. Everbright will source goods from China to be sold on a consignment basis at Gottschalks. It will allow Gottschalks to expand its merchandise categories without making a heavy investment, according to a company statement.

Other new businesses created by this deal will include creating a buyers club for shoppers. For an annual fee, consumers will be connected to Everbright’s manufacturing partners through an Internet platform. The company will supply personal shoppers who will guide deals between American consumers and Chinese suppliers.

This agreement may spell a new beginning for Gottschalks, which has weathered several years of tough setbacks. On Oct. 27, it was delisted from the New York Stock Exchange. Its last reported increase in same-store sales was in August 2005. Financo tried to sell the suffering retailer in 2005, but no one stepped up to buy it.

In a public statement, Gottschalks Chief Executive Jim Famalette sounded hopeful about his company’s future. “We anticipate our partnership with Everbright will support our long-term growth initiatives, [and it will] allow the company to diversify its business model and have a positive impact on our results over time,” he said.

Gottschalks owns 59 department stores and six specialty shops spread throughout the western United States. —Andrew Asch