UPDATE 1-Gottschalks ends strategic review; posts loss

(Recasts, adds Q2 results, other details)

Aug 30 (Reuters) - Departmental store chain Gottschalks Inc GOT.N said it ended a strategic review that included a possible sale of the company, and decided to focus on a revised business plan to improve sales and operating performance.

The company posted a quarterly loss significantly wider than what analysts expected, due to softer sales and lower gross margin.

Gottschalks also signed an amended five-year, $200 million financing agreement with GE Commercial Finance Corporate Lending to support the new business plan.

The company said its board was evaluating a share repurchase program, which will be funded through its cash and credit facility. If approved, the buyback may begin in the third quarter.

The chain will step up its new store opening schedule and better utilize its own real estate, its statement said.

Gottschalks said it dissolved a committee that it formed in November last year to review alternatives including a sale or a merger of the company. It had retained UBS Investment Bank to advise in the process.

Gottschalks said it expects to roll out the new business plan in the remainder of the year and into 2008. It anticipates near-term benefits to its results in the second half of 2008, with a full realization in 2009.

For the second quarter, the company reported a net loss of $4.8 million, or 35 cents a share, compared with a net income of $486,000 or 4 cents a share, last year.

Analysts expected a loss of 9 cents a share, according to Reuters Estimates.

"We experienced softer sales and gross margin for the quarter, primarily due to weakness in our home store merchandise and select apparel merchandise categories, as well as increased promotional activity to manage our inventory," Chief Executive Jim Famalette said in a statement. (Reporting by Mathew Veedon, Ankur Relia in Bangalore)