Buffums to Close in May, Ending 87-Year History : Retail: The department store chain lost $4.2 million its last fiscal year. The jobs of 1,400 employees will be eliminated.

Buffums, a Southern California department store chain that opened as a dry goods shop 87 years ago, announced Wednesday that it will close its doors for good at the end of May.

The widely anticipated shutdown will eliminate the jobs of 1,100 full-time employees and 300 part-time workers. The company’s 16 stores extend from Glendale to San Diego; its headquarters and distribution center are in Long Beach.

Buffums’ closing follows a long-term decline by the retailer, leading to losses of $4.2 million on sales estimated at $110 million in its last fiscal year. The chain catered largely to an aging clientele, and analysts considered many of its sites too small and too poorly located to compete effectively against major department stores, discounters and specialty shops.

“For 10 years, we have slowly but surely gotten out of sync with a broad customer base,” said John H. Duncan, who was named president and chief executive of Buffums in August. Industry analysts said the company has lost money for more than three years.

Duncan said the company’s Australian owner--anticipating a deep, continuing recession in Southern California--decided it would be too expensive to try to turn around the business.

Buffums’ owner, a unit of troubled Adelaide Steamship Co., considered but ultimately rejected a proposed $30-million program to, among other things, modernize Buffums’ stores and bring in new merchandising managers.

The Australians were also unsuccessful in their efforts during the past “several years” to find a buyer. Duncan said “16 or 17” prospective buyers looked at Buffums but were put off by the size of its stores, which average about 65,000 square feet--roughly one-quarter the size of some of Buffums’ competition.

Buffums’ closing comes amid a rash of retailing bankruptcies, including the Chapter 11 filing last month by Carter Hawley Hale Stores, parent of the Broadway-Southern California and three other department store chains. Buffums, however, hopes to liquidate without going into bankruptcy. Unlike many of the chains that have failed recently, Buffums is relatively debt free, and its net worth is estimated at $25 million.

Duncan said Buffums expects to pay all of what it owes suppliers by the time it closes. He said the company also appears to be close to reaching settlements with the landlords of all but two or three of its locations.

But if Buffums is unable to negotiate an agreement with the remaining landlords, Duncan said, it may also seek a settlement in bankruptcy court.

Duncan said Buffums will be closed Monday and Tuesday to prepare for a liquidation sale beginning later in the week to clear out the company’s merchandise. He said employees will be able to keep their jobs until the anticipated shutdown the last week of May.

Under the company’s severance plan, employees will receive one week of pay for every year they have worked for Buffums, up to a maximum of 16 weeks of pay. According to Duncan, an outplacement service was retained to help employees find new jobs.

Workers were notified of the company’s plans at a 9 a.m. meetings Wednesday at the company’s 16 stores.

Adelaide Steamship is working on a major overhaul--under pressure from its banks--to reduce its huge debt. Despite the decision to close Buffums, Adelaide has said it plans to focus on retailing.

In Australia, Adelaide is the third-largest corporate employer. It owns, among other things, David Jones Ltd., an upscale department store chain, and Woolworths Ltd., which has discount and food stores. Its Woolworths unit is unrelated to the U.S. company by the same name.

Adelaide’s U.S. holdings include Eastman Inc. of Signal Hill, a major distributor of office furniture and supplies. Until closing it last year, Adelaide also owned a frozen-food business based in Tustin that sold meat pies known in the United States as Aussie Snacks.

Buffums was founded in 1904 when Charles A. Buffum and Edwin E. Buffum, two brothers from Illinois, purchased a dry goods store near Pine Avenue and Broadway in Long Beach. The Buffum family eventually expanded the business and rose to prominence in Southern California.

Charles Buffum’s daughter, Dorothy Buffum Chandler, spurred the establishment of the Music Center of Los Angeles County. She is the widow of Norman Chandler, third publisher of the Los Angeles Times.

Adelaide, through its David Jones Ltd. unit, in 1974 acquired the then-publicly held Buffums with a $21.5-million tender offer.

BUFFUMS AT A GLANCE Founded in Long Beach in 1904 by brothers Charles A. Buffum and Edwin E. Buffum; purchased in 1974 for $21.5 million by David Jones Ltd., a unit of Adelaide Steamship Co. of Australia.

* Stores: 16, extending from Glendale to San Diego.

* Employees: 1,100 full-time and 300 part-time workers.

* Financial results, fiscal year ended:

June, 1988: Revenue, $106.8 million; net loss, $711,000

June, 1989: Revenue, $107.4 million; net loss, $319,000

June, 1990: Revenue, $110 million; net loss $4.2 million

*From industry estimates and credit agency reports.