The Buzz On Business: Gottschalks improving

GOTTSCHALKS SHOWS IMPROVEMENT: Gottschalks Inc. reported Thursday that it lost $4.4 million in the second quarter of 2008, an improvement over the same quarter last year for the Fresno-based department store chain. That was despite the fact that second-quarter 2008 total sales were down 7.8 percent to $133.7 million, compared with $145 million in the second quarter of 2007. The second-quarter loss of $4.4 million, or 33 cents per share, was slightly lower than the net loss of $4.8 million, or 35 cents per share, in the same quarter of the previous year, the company reported. For the first six months of fiscal year 2008, net loss was $9.5 million, or 72 cents per share, compared to a net loss of $9.4 million, or 69 cents per share, for the first six months of fiscal year 2007. Jim Famalette, Gottschalks chief executive and chairman, pointed to the reduced loss as a sign that cost-cutting and other measures lessened the effects of the economic downturn that has hurt the company's sales and pushed it to a $12.4 million loss for fiscal year 2007. Gottschalks' strategies include reducing inventories, cutting sales and administrative expenses, improving proprietary credit card sales and "streamlining our store base" with the closure of a store in Moreno Valley and consolidation from two stores to one store in malls in Bakersfield and Palmdale.

STIMULUS IMPACT IS WEARING OFF: Consumer spending slowed to a crawl and personal incomes plunged in July, reflecting the waning impact of $93 billion in economic stimulus payments. The Commerce Department report Friday showed that consumer activity got off to a shaky start in the third quarter, raising new worries that the economy could falter in coming months because of rising unemployment, a continuing credit crisis and the deepest housing slump in decades. Personal incomes fell by a bigger-than-expected 0.7 percent in July, the biggest drop in nearly three years, and consumer spending edged up a modest 0.2 percent, just one-third the 0.6 percent gain in June. The report showed that the June and July spending figures were skewed by a huge jump in inflation during the period. An inflation gauge tied to consumer spending rose over the past 12 months by 4.5 percent, the biggest price jump in 17 years, led by higher costs for energy and food. Without the big jump in prices, consumer spending would have fallen by 0.4 percent last month after dropping 0.1 percent in June, underscoring just how weak current activity is.

FEES RISE ON GOVERNMENT-BACKED LOANS: Borrowers who take out government-insured mortgages will have to pay higher fees under new rules announced this week. Effective Oct. 1, the Federal Housing Administration will raise its mortgage insurance fee to 1.75 percent for new mortgages and many refinanced loans. That's up from 1.5 percent. For a borrower with a $200,000 loan, that means a fee of $3,500, up from $3,000. The government agency, which backs loans to borrowers with poor credit or low down payments, has seen its share of the mortgage market grow dramatically over the past year, after the collapse of subprime lending to borrowers with poor credit. Loans backed by the agency are on track to make up 30 percent of all new loans this year, up from a mere 3 percent last year, according to trade publication Inside Mortgage Finance. The higher fees replace the FHA's short-lived "risk-based pricing," in which borrowers' insurance premiums were tied to the size of their down payments and credit scores. Democrats in Congress placed a one-year moratorium on that pricing system last month, despite FHA's warning that without it, the agency would have to raise fees for all borrowers, rather than those considered riskier. Though FHA loans are insured by the government in the event of default, the mortgages are made by major lenders such as Bank of America Corp. and are typically offered to investors as mortgage-backed securities by federal housing finance agency Ginnie Mae. FHA loans have traditionally required a 3 percent down payment. The new housing bill raises that requirement to 3.5 percent.

BEE NEWS SERVICES

Figuratively Speaking

25: Percentage of workers who say they stay in contact with work while on vacation, according to a survey conducted by CareerBuilder.

9: Percentage who say their bosses expect them to be working or at least checking voice mail and e-mail while on vacation.

15: Percentage who say they gave up vacation days in 2007 because they didn't have time to use them.

JOHN MacINTYRE,

UNIVERSAL PRESS SYNDICATE

This story was originally published August 29, 2008 at 9:45 PM with the headline "The Buzz On Business: Gottschalks improving."