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FRESNO, CA-Gottschalks Inc. on Thursday reported that earnings dipped for the fourth quarter ended Jan. 28 and stayed flat for the year, but sales and comparable store sales both increased. The department store chain also said it was encouraged by the success of its first lifestyle store, and it plans to modify formats in other stores to reflect lessons learned in the lifestyle format.

Discussing the company’s financial results in a conference cal with financial analysts, Gottschalks executives reported that net income for the fourth quarter was $8.7 million, or 63 cents per diluted share, compared with net of $8.8 million, or 65 cents per diluted share, for the fourth quarter of fiscal 2004. For fiscal 2005, net income totaled $5.4 million, or 39 cents per diluted share, compared with $5.3 million, or 40 cents per share, for the previous fiscal year.

The earnings figures suffered from a one-time event. During the fourth quarter, the company recorded a one-time pre-tax charge of $1.65 million for expected costs relating to litigation involving its voluntary employee benefit association trust. Excluding the one-time charge, Gottschalks would have reported net income for the fourth quarter of $9.7 million, or 71 cents per diluted share. Excluding the one-time charge, fiscal 2005 net income would have been $6.4 million, or 46 cents per diluted share.

Total sales for the fourth quarter increased 3.6% to $229.9 million, compared to $221.8 million for the fourth quarter of fiscal 2004. Fourth quarter same-store sales increased 2.2%. Fiscal 2005 total sales increased 2.3% to $676.9 million compared to $662 million for fiscal 2004, while same-store sales increased 1.2%.

Despite the impact of the one-time charge, Gottschalks CEO and president Jim Famalette pointed out that 2005 was the first year in more than five years in which Gottschalks “was again on a growth track.” The company opened two new stores, generated comparable store sales increases and executed long-term growth initiatives.

Among the company’s growth initiatives is a focus on “better sportswear, juniors, accessories, cosmetics and shoes” as Gottschalks improves its fashion image, Famalette said. He said the company was quite encouraged by the results of its new River Park lifestyle center in Fresno.

“Customers and shopping center developers both are showing an interest in the store’s design and format,” Famalette said of the River Park store. “We look to leverage our success at River Park in additional company-wide store initiatives in 2006.

Famalette did not say specifically how many new stores Gottschalks plans to open in 2006. He said that the company has “several new store opportunities on which we may be able to capitalize” but is not at liberty to say more about the plans yet. However, Famalette said that Gottschalks will be taking some of the lessons learned at the River Park location and applying them to other stores in the chain.

The company also will make “significant investments in a store renovation program” that will modernize key merchandise areas such as shoes, accessories and cosmetics in select stores. Gottschalks operates 63 department stores and six specialty apparel stores in six western states, including California, Washington, Alaska, Oregon, Nevada and Idaho.

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