Gottschalks Inc. on Tuesday reported its first annual loss in five years and warned that a weakening economy likely would continue to hurt sales and financial performance in the first half of 2008.
But executives with the Fresno-based department store chain said they hoped cost-reduction efforts, better inventory management and other efforts could improve performance this year, if the economy allows it. Gottschalks has two stores in Modesto, one in Vintage Faire Mall and one on Oakdale Road.
For the year ending Feb. 2, Gottschalks saw a loss of $12.4 million, or 91 cents per share, compared with a profit of $2.6 million, or 19 cents per share, in fiscal year 2006, the company reported.
It is the company's first annual loss since 2002, when it lost $11.6 million, and worse than the marginal annual profit officials had projected, reflecting a poorer-than-expected showing in the all-important fourth quarter holiday sales season.
Net income for the fourth quarter of 2007 was $1.1 million, or 8 cents per share, compared with $8.9 million, or 64 cents per share, in the same period in 2006, and worse than the 40 to 50 cents per share profit Gottschalks had projected.
"We saw a significant reduction in customer spending which impacted our performance, particularly in the second half of the year and the important holiday season," said Jim Famalette, Gottschalks chief executive and chairman, in a Tuesday conference call with industry analysts.
Financial results were particularly hurt by the poor economic climate in California, where Gottschalks sees about 80 percent of its sales, as well as from competition from rival retailers that forced Gottschalks to conduct "deep discounting during the year," Famalette said.
Gottschalks, which operates 59 stores in six Western states, has reported sales declines over the past several months that are worse than department-store rivals such as Macy's or J.C. Penney.
"It's performing at the bottom of its peer group, largely due in part to their heavy focus in California," said Shaun Smolarz, a retail analyst for Sidoti & Co. LLC in New York.
Retailers across the country have reported falling sales in the past several months, as the collapse of the housing market, the subprime mortgage meltdown, rising inflation and increasing unemployment have sapped consumer spending.
But for Gottschalks, California's "weak housing market and the mortgage crisis is unfortunately impacting their customers" more heavily, Smolarz said. "So you've got the geography, combined with their smaller scale and more limited resources than their much larger competitors."
Gottschalks' total sales for the 52-week fiscal year 2007 fell to $628.6 million, down 8.1 percent from $683.9 million in the 53-week fiscal year 2006, the company reported.