Gottschalks gets back into the black

By Don Hogsett -- Home Textiles Today, 9/1/2003 12:00:00 AM

FRESNO, CA —

Helped by stronger margins and sharply lower costs, Gottschalks Inc. eased back into the black during the second quarter, recording a small $25,000 profit vs. a prior-year loss of $2.1 million.

After closing seven stores, overall sales at the West Coast retailer declined by 2.5 percent, to $152.0 million from $155.9 million last year. But in the midst of a tough retail environment, same-store sales improved by 0.4 percent.

Driving the bottom-line improvement, Gottschalks slashed its operating costs by 7.9 percent, to $49.1 million from $53.3 million last year, generating a cash savings of $4.2 million. Measured as a percentage of sales, costs decreased by 190 basis points, or 1.9 percentage points, to 32.3 percent from 34.2 percent the preceding year. At the same time, the retailer pared its interest costs by 24.3 percent, to $3.4 million from $4.5 million, dropping another $1.1 million down to the bottom line.

In a further boost, average gross margin widened by 50 basis points, or half a percentage point, to 35.7 percent from 35.2 percent a year ago.

"We are very pleased to report a profit for the second quarter for the first time since fiscal 2000," said Jim Famalette, president and ceo. "Comp-store sales were slightly better than even for the period, which met our expectations."

Gross margins, he said, benefited from "better inventory management and implementation of a new merchandise replenishment system."

Gottschalks Inc.