Gottschalks — The Western Anchor the Credit Freeze Foreclosed

Gottschalks was the department store that anchored the malls of California’s Central Valley and the smaller cities of the West, and on March 31, 2009 it gave up trying to survive and announced it would liquidate. Founded in 1904 by Emil Gottschalk, a German Jewish immigrant who opened a dry-goods store in downtown Fresno, it grew over a century into the largest independently owned, publicly traded department store chain in the United States — roughly 58 department stores plus a handful of specialty shops across California, Washington, Oregon, Alaska, Nevada, and Idaho, employing somewhere around 5,000 people. Its strategy was to be the good department store in the cities the national chains overlooked, and for a long time that worked.

What killed Gottschalks was not, in the first instance, Amazon or Walmart or any single competitor. It was the 2008–09 financial crisis, and specifically the credit freeze at its center. Gottschalks entered 2008 already weakened by years of soft sales and a debt load it was straining to refinance, and a department store runs on credit the way a body runs on blood — it borrows to buy the inventory it sells, and it needs lenders willing to extend that credit through the seasonal swings. When the financial system seized in the autumn of 2008, the credit a marginal retailer needed simply stopped flowing. The company was delisted from the New York Stock Exchange in October 2008, watched a rescue deal with a Chinese conglomerate collapse in December, and filed for Chapter 11 on January 14, 2009.

In a normal year, a 105-year-old regional chain in Chapter 11 might have found a buyer or new financing. In early 2009 there was none to be had — the same frozen markets that pushed Gottschalks into bankruptcy made it impossible for anyone to fund a rescue. After failing to find a buyer, the company converted to liquidation in late March 2009. The same liquidation consortium that had wound down Mervyn’s and Circuit City ran the going-out-of-business sales, and the last Gottschalks stores closed in July 2009, ending 105 years. About 5,000 people lost their jobs, and the Central Valley lost its homegrown department store.