State

Chinese company best bet for Gottschalks and the valley

This is a big week for Gottschalks, its employees, its customers and our community.

We hope it goes well for everyone.

The longtime valley retailer, whose 58 department stores include two in Modesto, goes on the auction block today in Delaware.

One of three things will happen to the 100-year-old Fresno chain:

It will be purchased and its new owners will continue to operate its stores in California, Alaska, Washington, Oregon, Idaho and Nevada.

It will be purchased and its new owners will continue to operate the most profitable stores while selling or shutting the others.

It will be purchased and liquidated, its stores closed, its assets disposed and its creditors paid in part or in full.

The first scenario is unlikely, since the struggles that led Gottschalks to file for bankruptcy in mid-January stemmed at least in part from the chain's less profitable stores outside California.

Most analysts have felt strongly that Gottschalks was headed for the retail graveyard, to be liquidated and laid to rest alongside Mervyn's, Circuit City and other companies that have failed in the recession.

News that Gottschalks had identified a liquidation consortium as the leading bidder for the company only strengthened the belief that the end was near.

Wednesday, though, a Chinese firm joined the competition, bidding for Gottschalks as a "going concern."

If its bid is successful, Shandong Commercial Group General Corp., one of China's largest retail corporations, would continue to operate an undisclosed number of Gottschalks stores.

That would be very good news for the valley, and especially for cities such as Modesto and Fresno where Gottschalks has a major retail footprint.

The two Modesto stores -- in Vintage Faire Mall off Highway 99 and in Century Center on the city's east side -- consistently have been strong performers and presumably would be among the locations kept open.

Conversely, if Shandong's bid is unsuccessful, it's all over for Gottschalks.

That would be very bad news -- for our community, which would lose substantial sales tax revenue, and for some of our residents, who are among Gottschalks' nearly 5,200 employees.

The two other bidders are groups that would shut down Gottschalks. One, a consortium of four liquidation firms, closed out Mervyn's and Circuit City. The other, a joint venture of real estate and liquidation firms, also would sell Gottschalks' assets and close the stores.

After today's auction, Gottschalks will consider which offer will best allow it to satisfy its creditors. Although the lead liquidation group is considered to have an edge, Gottschalks has some ability to favor a bid that would keep the business running.

Wednesday, a federal bankruptcy judge will be asked to approve the best bid.

When all is said and done, we hope Gottschalks will get a new lease on life. The firm has been a valley fixture for more than a century, a valued retailer and a good citizen in the communities it serves.

Losing Gottschalks would be a shame.

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