AGREEMENT


This Agreement (Agreement) is made this 14th day of
March, 1997, by and between Gottschalks Inc., a Delaware
Corporation (Company) and James R. Famalette
an individual (Employee).

1.   EMPLOYMENT
Company agrees to hire Employee as President and C.O.O. 
The initial term of this employment shall be for two
years with automatic one-year extensions thereafter. 
Company may terminate upon the last day of the initial
term or thereafter, provided one year notice is given the
other party in writing.  Employee shall also be a member
of the Board of Directors of the Company during his term
of employment.  The initial term shall begin upon
Employee reporting to Corporate Headquarters in Fresno
California, ready to assume his duties.  Should Employee
fail to report by April 15, 1997, this Agreement for
employment shall become null and void.

2.   COMPENSATION
As compensation for performance in the position of
President and C.O.O. and as Director, Employee's base
compensation for year one shall be three hundred twenty
five thousand dollars ($325,000), payable bi-weekly. 
Base compensation for year two (2) shall be three hundred
and fifty thousand dollars ($350,000), payable bi-weekly.  
Employee shall receive as bonus compensation,
one hundred thousand dollars ($100,000) in May 1998.  For
purposes of this Agreement, "base compensation" means
Employee's annual base salary only, and excludes all
other income heretofore received by Employee, such as,
but not limited to, bonuses, incentive compensation,
fringe benefits, commissions, overtime, retainers, fees
under contracts, income arising from the exercise of
stock options or expense allowances granted by Company.

3.   STOCK OPTION
Employee shall be granted the option to purchase 20,000
shares of common stock in the Company on the date of
employment, under the Company's stock option plan,
whereby one quarter of the option becomes vested each
anniversary of Employee's employment date.  The option
price shall be the market price effective on the date of
employment.

4.   BONUS PLAN
Employee shall be eligible to participate in Company's
Bonus Plan, which is effective for 1997.  This
participation is separate and apart from the $100,000
bonus discussed above in Article 2, Compensation.

5.   CAR ALLOWANCE
Employee shall receive a monthly car allowance of $1,000,
but in no event shall such amount paid as a car allowance
exceed that which is allowed as a tax deduction by the
Company for a car allowance.  Should an excise tax or
other penalty be imposed upon the Company due to the
amount of the car allowance, then Company shall be
allowed to deduct a portion of the amount of the car
allowance paid, to avoid such tax or penalty.

6.   TEMPORARY EXPENSES & CLOSING COSTS
Employee shall be entitled to receive up to six months
temporary housing allowance. Upon the close of escrow on
a permanent residence, the temporary housing allowance
shall terminate.  However all closing costs on the
purchase of the permanent residence shall be paid by
Company.  Employee shall be entitled to one round trip
per month to Hawaii during the temporary time period.

7.   MOVING EXPENSES
Employee shall receive reimbursement for all properly
documented moving expenses, including the transportation
by boat of two vehicles from Hawaii to Fresno, CA.

8.   OTHER BENEFITS:
Employee shall be entitled to three weeks vacation during
his first year of employment, and each year thereafter,
until he has completed five years of employment, at which
time he shall be entitled to four weeks yearly vacation. 
He shall be eligible to participate in the Company's 401K
plan beginning upon his first day of employment.  He
shall also be eligible to participate in the Company's
health insurance benefits, life insurance, and disability
insurance beginning upon his date of employment.  All
other company benefits shall be made available to
Employee beginning upon his first day of employment.

9.   TERMINATION WITHOUT COMPENSATION
Notwithstanding anything to the contrary contained in
this Agreement, Employee shall not be entitled to
continued compensation in any form if employee terminates
his employment from the Company, including without
limitation, (i) through retirement, disability or death
of Employee; (ii) Company sells all or part of its
business (or otherwise merges, divides, consolidates or
reorganizes), and Employee has the opportunity to
continue employment with the buyer (or with one of the
resulting entities in the event of a merger, division,
consolidation or reorganization), at or above the
employee's base compensation, regardless of whether the
other terms and conditions of Employee's employment after
such sale, division, consolidation or reorganization are
the same or different from the terms and conditions of
Employee's employment with Company; or (iii) Employee is
terminated for "cause", which includes, without
limitation , a good faith determination by Company that
Employee (1) has committed a material breach of his
duties and responsibilities, (2) refused to perform
required duties and responsibilities or performed them
incompetently, (3) breached or violated any fiduciary
duty owed to Company or (4) is or has been personally
dishonest, or has willfully or negligently violated any
law, rule or regulation or has been convicted of a felony
or misdemeanor (other than minor traffic violations and
similar offenses).


10.  INTERPRETATION, ASSIGNMENT, INTEGRATION, AMENDMENT
This Agreement shall be governed by the laws of the State
of California.  This Agreement may be amended only by a
subsequent written agreement signed by Employee and an
authorized representative of Company following approval
by the Board of Directors of Company.  This Agreement is
personal to Employee and is not assignable by Employee. 
This Agreement shall inure to the benefit of and be
binding upon Company and its successors and assigns and
any such successor or assignee shall be deemed
substituted for Company under the terms of this Agreement
for all purposes.  As used herein, "successor" and
"assignee" shall include any person, firm, corporation or
other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly
acquires the stock of Company or to which Company assigns
this Agreement by operation of law or otherwise.  This
instrument constitutes and contains the entire agreement
and understanding concerning the subject matters
addressed herein between the parties, and supersedes and
replaces all prior negotiations and all agreements
proposed or otherwise, whether written or oral,
concerning the subject matters hereof.  This is an
integrated document.

11. ARBITRATION, ATTORNEY FEES
Any dispute, controversy or claim arising out of or in
connection with this Agreement or any other aspect of
Employee's employment with Company, shall be resolved
exclusively through binding arbitration to be held in
Fresno County, California in accordance with California
Civil Procedure Code ss 1282-1284.2.  In the event either
party institutes arbitration under this Agreement, the
party prevailing in any such arbitration shall be
entitled, in addition to all other relief, to reasonable
attorneys' fees relating to such arbitration.  The
nonprevailing party shall be responsible for all costs of
the arbitration, including but not limited to, the
arbitration fees, court reporter fees, etc.


IN WITNESS WHEREOF, Company has caused to be executed and
delivered, and Employee has executed and delivered this
Agreement as of the day and year first above set forth.

GOTTSCHALKS INC.

By:_\s\Joe Levy__________________________
Title:      CHAIRMAN & CEO               



            Employee:______________________

By: \s\James Famalette