Gottschalks Reports First Quarter Fiscal 2008 Financial Results

FRESNO, Calif., May 29  /PRNewswire-FirstCall/ -- Gottschalks Inc. (NYSE:GOT) today reported unaudited financial results for the first quarter. Net loss for the first quarter was $5.1 million, or $0.38 per diluted share, compared to net loss of $4.7 million or $0.34 per diluted share, for the first quarter of fiscal 2007.

As previously reported, total sales for the 13-week fiscal first quarter decreased 11.8% to $125.1 million from $141.8 million for the first fiscal quarter last year.  Same store sales decreased 10.3% for the first quarter of 2008.  The Company operated one fewer store in the first quarter of 2007 compared to the same period of the prior year.

Jim Famalette, Chairman and Chief Executive Officer of Gottschalks, stated, "Gottschalks, like many other retailers, continued to be affected by the difficult macroeconomic environment during the first quarter. Despite the challenging retail sales climate, our team effectively executed on our plan to reduce costs and was able to achieve significant reduction in SG&A expense dollars for the quarter. We also maintained a disciplined approach to managing our inventory levels and promotional activity, resulting in 10% less comp store inventory at the end of the quarter and a gross margin rate improvement over last year's first quarter."

Commenting on the Company's outlook, Mr. Famalette stated, "We will continue to take a conservative, yet proactive approach to managing our organization throughout the remainder of 2008.  We believe that we have the right strategies in place as well as a secure financial structure to position our business in the current challenging environment.  We continue to make progress with our expense management program.  We recently completed a headcount reduction at our corporate headquarters, which we expect will generate approximately $1 million in annualized cost savings.  Further, we are encouraged by the sales increase in our River Park store, which demonstrates that our new store prototype and greater focus on soft goods are resonating with our customers.  We remain focused on implementing the initiatives of our Value Improvement Program and positioning the Company to fully realize the benefits of our efforts as broader economic trends begin to improve."

Earnings Teleconference and Webcast

Gottschalks will host a conference call today at 1:30 p.m. Pacific Time to review its results for the first quarter fiscal 2008.  To access the call, dial 800-894-5910 to listen to the call on the day of the event.  The Conference ID is GOTT.  If you are unable to participate in the call, a replay will be made available through June 5, 2008.  To access this service, please dial 800-388-9064.  No passcode is required for replay.  The live conference call and replay can also be accessed via audio web cast at the Investor Relations section of the Company's web site, located at http://www.gottschalks.com/.

About Gottschalks

Gottschalks is a regional department store chain, currently operating 59 department stores and three specialty apparel stores in six western states, including California (39), Washington (7), Alaska (5), Oregon (4), Nevada (2) and Idaho (2). Gottschalks offers better to moderate brand-name fashion apparel, cosmetics, shoes, accessories and home merchandise. Gottschalks offers corporate information and selected merchandise on its website located at http://www.gottschalks.com/.

Business Risks and Forward Looking Statements

This release contains forward-looking statements (within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties. In some instances, such statements may be identified by the use of forward-looking terminology such as "may," "will," "expects," "believes," "intends," "projects," "forecasts," "plans," "estimates," "anticipates," "continues," "targets," or similar terms, variations of such terms or the negative of such terms. Such statements are based on management's current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements, including, without limitation, the Company's ability to meet debt obligations and adhere to the restrictions and covenants imposed under its various debt agreements; the timely receipt of merchandise and the Company's ability to obtain adequate trade credit from its key factors and vendors; risks arising from general economic and market conditions (including uncertainties arising from acts of terrorism or war); the ability to improve the profitability and cash flows of its stores or to sell, sublease or close underperforming stores; the ability to modify operations in order to minimize the adverse impact of rising costs, including but not limited to health care, workers' compensation, property and casualty insurance and utilities costs; the effects of seasonality and weather conditions, changing consumer trends and preferences, competition, consumer credit, the Company's dependence on its key personnel and general labor conditions, all of which are described in more detail in Gottschalks' Annual Report on Form 10-K and other reports filed by Gottschalks with the Securities and Exchange Commission.  GOTTSCHALKS DOES NOT PRESENTLY INTEND TO UPDATE THESE STATEMENTS AND UNDERTAKES NO DUTY TO ANY PERSON TO EFFECT ANY SUCH UPDATE UNDER ANY CIRCUMSTANCES.

                             (Tables Follow)



                             GOTTSCHALKS INC.
                         STATEMENTS OF OPERATIONS
                    (In thousands, except share data)
                               (unaudited)

                                                          Thirteen Weeks
                                                              Ended
                                                        May 3,       May 5,
                                                         2008         2007
  Net sales                                           $125,128     $141,788
  Net credit revenues                                    1,762        1,106
  Net leased department revenues                           550          650
    Total revenues                                     127,440      143,544

  Costs and expenses:
   Cost of sales                                        83,700       95,204
   Selling, general and administrative expenses         46,304       49,236
   Depreciation and amortization                         3,950        3,909
   Gain on disposal of assets                              (14)         (79)
   New store opening costs                                  74            -
    Total costs and expenses                           134,014      148,270

    Operating loss                                      (6,574)      (4,726)

  Other (income) expense:
   Interest expense                                      2,058        2,585
   Miscellaneous income                                    (56)         (47)
                                                         2,002        2,538

  Loss before income tax benefit                        (8,576)      (7,264)
  Income tax benefit                                    (3,480)      (2,596)

    Net loss                                           ($5,096)     ($4,668)

  Net loss per common share:
   Basic and diluted                                    ($0.38)      ($0.34)

  Weighted average # of common shares outstanding:
   Basic and diluted                                    13,283       13,606



                             GOTTSCHALKS INC.
                         CONDENSED BALANCE SHEETS
                              (In thousands)
                               (unaudited)

                                      May 3,      February 2,      May 5,
                                      2008          2008            2007
  ASSETS
  CURRENT ASSETS:
    Cash                             $6,021         $4,032        $6,080
    Receivables - net                 2,713          7,049         2,750
    Merchandise inventories         168,174        149,310       184,013
    Other                            18,896         18,984        20,031
      Total current assets          195,804        179,375       212,874

  PROPERTY AND EQUIPMENT - net      138,156        137,931       132,401

  OTHER LONG-TERM ASSETS             14,827         14,688        13,564

                                   $348,787       $331,994      $358,839

  LIABILITIES AND STOCKHOLDERS' EQUITY
  CURRENT LIABILITIES:
  Trade accounts payable and other
   current liabilities              $80,950        $72,559       $87,270
  Current portion of long-term
   obligations                        3,541          1,525         1,583
      Total current liabilities      84,491         74,084        88,853

  REVOLVING LINE OF CREDIT          114,507         93,899        90,893

  LONG-TERM OBLIGATIONS
   (less current portion)            11,662         12,049        13,193

  DEFERRED INCOME TAXES AND OTHER    17,002         21,837        26,903

  SUBORDINATED NOTE PAYABLE TO
   AFFILIATE                         14,180         18,180        18,180

  COMMITMENTS AND CONTINGENCIES

  STOCKHOLDERS' EQUITY              106,945        111,945       120,817

                                   $348,787       $331,994      $358,839


DATASOURCE: Gottschalks Inc.



CONTACT:  Greg Ambro, Executive Vice President, Chief Operating Officer

of Gottschalks Inc., [phone]; or Leigh Parrish, [phone], or

Stephanie Rich, [phone], both of Financial Dynamics, for Gottschalks

Inc.



Web site:  http://www.gottschalks.com/ 

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