Gottschalks Revival? Ex-CEO says financing set for new retail chain

FRESNO -- A former chairman of Gottschalks Inc. wants to resurrect the venerable retail name with a new chain of department stores.

Joe Levy, whose great-aunt was the wife of Gottschalks founder Emil Gottschalk, said Monday he has formed a new company -- called Gottschalk by Joe Levy Inc. -- with plans to open stores in the valley and beyond.

The original Gott-schalks started with one store in downtown Fresno in 1904 and eventually expanded to dozens throughout the western United States -- many in smaller cities often passed over by national retailers. But a sour economy, declining sales and rising debt forced the chain to file for bankruptcy in January 2009. The last of its 58 stores closed during the summer.

With the valley economy shaken by high unemployment and deflated home prices, retail experts aren't sure that Levy's new company would will fare any better than its predecessor. And while Levy says he has financing lined up, it's unclear if those resources are enough for so expensive an undertaking.

Levy, 78, declined to reveal Monday how many stores he's planning, where they would open or when -- although some of those details may be announced at a news conference today. But he expressed confidence that customers would return to the familiar Gottschalk name.

"The object here is to bring the public what Gottschalks used to be," Levy said. "We want to provide good customer serv-ice, high-quality fashions and merchandise at a very competitive price. ... Since Gottschalks closed, there's a large void in that type of merchandising."

Levy said stores would emphasize men's, women's and children's clothing, cosmetics and shoes, as well as housewares, small appliances and gifts. At least to begin with, the stores wouldn't sell furniture or mattresses.

The name of the new company, Gottschalk -- without an "s" at the end -- by Joe Levy, was chosen "because it's a family name," Levy said, and to avoid possible infringement problems.

Robert Wiser, a former vice president and general merchandise manager for the old Gottschalks, is the chief executive officer of the new company, Levy said. Robert Lawson, a former chief financial officer for Gottschalks through the early 1990s, will fill the same role with Levy's new effort.

Levy joined the family business in 1956 and eventually rose to chairman and CEO. Several years before Gottschalks filed for bankruptcy, Levy relinquished day-to-day control and took the title of chairman emeritus.

Retail experts offered an uncertain prognosis for Levy's new enterprise.

"The best-positioned department stores are the ones who are the most promotional, and Gottschalks had a good track record of that," said Jeff Green of Jeff Green Partners, a Mill Valley consulting firm. "If Levy can keep the debt low, keep his store count low and sell promotional-priced merchandise, I think he can actually find a niche for himself competing with stores like Macy's."

But Green and James Tensor, a consultant with VSN Strategies in Arizona, said the department-store industry is fraught with danger for an upstart company.

"Gottschalks was a great name, one a lot of people remember," said Tensor. He added, however, that "the department-store concept isn't as relevant as it once was."

Said Green, "People don't buy full-price merchandise in department stores any more. We've gotten way too used to deals."

After past recessions, retailers have seen a bounce of pent-up demand as consumers return to old shopping and spending patterns. "But this time, we've seen more of a flight to value, almost to austerity," Tensor said. "I think we may see in this instance some lasting change in shopping behavior."

The result: A rebound may not materialize this time around.

Levy said he's not deterred by a flagging economy.

"We've been asked by developers, by the people who own these malls and freestanding stores, to come in and do something," Levy said. "We've had lots of customers who have been asking for this. ... There are enough of us who want to give this a chance."

While Gottschalks Inc. was a publicly traded company, Levy said Monday that his new company will be privately owned. He declined to reveal who's putting up the money, but ruled out Spanish retail giant El Corté Inglés or Chinese companies Everbright Overseas Development or Shandong Commercial Group -- names bandied about as would-be saviors as the old Gottschalks capsized.

Wiser and Lawson have long histories with Levy, but Lawson's history isn't without hiccups.

Lawson was fired as Gottschalks' chief financial officer in 1992, as the company dealt with an Internal Revenue Service investigation of an improper tax deduction dating to 1985. Federal investigators accused Lawson and other company officials of trying to defraud the U.S. government of about $1.6 million in taxes.

Gottschalks eventually paid $1.5 million in fines to settle federal criminal charges over corporate taxes and securities. Conspiracy and fraud charges against Lawson ultimately were dropped, but only after an agreement with prosecutors in which he pleaded guilty to personal tax evasion.

He was sentenced to one month of home confinement and ordered to pay a $5,000 fine. Since then, Lawson has worked as a consultant for companies nationwide raising capital.

Levy said he had full faith in his choice for CFO.

"The only thing Lawson did was backdate a check," Levy said Monday, saying the company followed a recommendation of its accountants over changes in tax laws for employee benefits. "To me, he's one of the best CFOs I've ever worked with."

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