Clovis News

Forever 21 'stalking' bankrupt Gottschalks

Women's clothing retailer Forever 21 has submitted a bid in bankruptcy court to take over 16 Gottschalks locations, including four stores in the central San Joaquin Valley -- at Fashion Fair mall, The Shops at River Park, Visalia Mall and Hanford Mall.

Forever 21 wants to create expanded versions of its stores, something the retailer recently started doing since buying 15 Mervyns stores out of bankruptcy in January.

The Los Angeles-based company filed a "stalking horse" bid for the Gottschalks spaces, which means Gottschalks would have to pay Forever 21 a fee -- $354,000 in this case -- if it accepts a different bid.

Gottschalks supports the $17.7 million bid, which would enable Forever 21 to buy three properties -- in Hanford, San Luis Obispo and Yuba City -- and take over 13 rental locations. The deal would not include Gottschalks locations at Sierra Vista Mall in Clovis or Manchester Center in Fresno.

Gottschalks is trying to unload 58 department stores and three specialty stores as part of its bankruptcy. A bankruptcy judge could approve the sale of the leases Thursday. Sale of the property would be approved on another date.

Forever 21 is known for trendy fashion and low prices. Its store in Fashion Fair mall frequently attracts lines of young women waiting for the dressing room.

Gottschalks stores are much larger than most Forever 21 stores. Opening in such a space is a new move for the retailer, but it is part of its broader strategy to expand.

Fourteen of the 15 former Mervyns stores have opened with the new concept, although they are still undergoing upgrades, said Larry Meyer, a Forever 21 executive vice president.

Although Forever 21 usually caters to women, the larger stores would include menswear. The new stores would carry the company's Faith 21 line of larger sizes and the Love 21 line of more contemporary clothing suitable for the workplace, Meyer said. And they would include a broader selection of accessories and shoes.

"Getting larger-size stores is what our goal is," Meyer said, "and we'll do that in other parts of the country, but California is our home, so ... we can watch over them."

Thriving business at Forever 21 stores in Central California played a role in the decision to expand, Meyer said, adding that the Fashion Fair store is particularly busy.

"It's one of the best in the chain," he said, noting that the store broke a sales record when it opened.

The larger stores would employ more people than the current stores, possibly around 100 or more, Meyer said.

Forever 21 already has stores in three malls where the company hopes to take over Gottschalks locations. Meyer declined to detail what would happen in those malls, saying only: "We're going to integrate it. I'd rather not say because we're still talking to the landlords."

The retailer is likely to close one of the locations in each of the malls, said Scott Testa, a professor of marketing who follows retail at St. Joseph's University in Philadelphia.

Forever 21 may see "an opportunity to be able to get a footprint relatively quickly in some of the Gottschalks, and they're probably getting a pretty good deal on top of it," he said.

Bankruptcy courts and bankrupt retailers tend to look favorably upon bidders buying large lots of stores, Testa said. That could work in favor of this bid, he said. A hearing is scheduled today in bankruptcy court in Delaware on Forever 21's bid.

Gottschalks CEO Jim Famalette said: "It's good news because all of us want these stores continuing to operate and people continuing to have jobs."

And it could help Hanford Mall, said acting general manager Diana Silva.

"It's too early to speculate, but we're excited that Forever 21 is bidding on the Gottschalks location at the Hanford Mall," she said.

The bid is a smart move, said Steve Geil, president of Economic Development Corp. serving Fresno County. The stores would have plenty of talented Gottschalks workers to hire, he said.

"The fact that Forever 21 is looking at these locations also sends a message to other large retailers or chains saying, 'Hey, the Fresno market is still a good market, and maybe we better take another look at it,' " he said.