On the Rack : Landmark L.A. Store May Be Caught in Middle of Bankruptcy

While 81-year-old Sherman Jensen sat on a bench waiting for the landmark I. Magnin/Bullocks Wilshire store on Wilshire Boulevard to open Sunday morning, he explained why he recently stopped eating Sunday brunches at the store’s ever-popular tea room.

“For years they had these wonderful Sunday buffets,” said Sherman, who, with his wife, drives 16 miles from Downey each weekend to shop for bargains at the store. “But the last few months they stopped serving the buffets,” he said, “and now you can only order regular meals.”

Shoppers with an appetite for something special--from designer neckties to beaded wedding dresses--have long counted on the Wilshire Boulevard store for the very best. But financial realities may already be changing that. Industry analysts speculated Sunday that R. H. Macy & Co., the operator of that store and Macy’s, I. Magnin and Bullock’s stores nationwide, may file as early as today for protection from creditors under Chapter 11 of the Federal Bankruptcy Code.

But filing for bankruptcy protection would be just the beginning of a lengthy attempt to save the chain from liquidation. Macy’s ongoing financial problems have raised the possibility that the retailer will sell its 24-store I. Magnin and 22-store Bullock’s operations. But with no sale imminent, analysts say Macy’s only immediate chance for survival is to file for bankruptcy protection.

“I don’t believe they can wait any longer,” said Kurt Barnard, president of the New York-based Retail Consulting Group. “They are in the position of having run out of cash, run out of bank credit--and their stores are running out of fresh merchandise.”

A bankruptcy filing would give Macy officials at least some financial breathing room. Banks would likely be more willing to lend Macy’s cash to pay off some of its $3.5 billion in debts because debts incurred under court supervision would be repaid first.

Last week, Macy’s board spent long hours deliberating how to get the 134-year-old company out from under its debt load. Late Friday, an anticipated deal fell apart with Laurence A. Tisch, head of CBS Inc. and Loews Corp., when the parties sharply disagreed over terms that would have pumped a reported $1 billion into Macy’s.

“Barring a miracle, Macy’s will have to become a substantially slimmed-down operation,” said Barnard. “That could come at the expense of employees who have been there for many, many years.”

Macy’s officials declined comment Sunday. No one would speculate on possible layoffs--or which stores might eventually be closed. A far cry from all of this is the optimism of nearly four years go, after Macy’s agreed to pay $1.1 billion for the Bullock’s, Bullocks Wilshire and I. Magnin chains. Many analysts point to that ill-fated purchase as the beginning of the end for Macy’s.

Days after the agreement, Macy’s Chairman Edward S. Finkelstein told a Times reporter that he expected Macy’s to directly compete with the Nordstrom chain in Southern California. Even then, however, Finkelstein acknowledged how tough the competition is here. “Southern California will never be our biggest market,” he said. “We dominate in states like New York, New Jersey and Pennsylvania. But I don’t see that happening in Southern California.”

There were few signs of financial duress on Sunday at the 62-year-old Wilshire Boulevard store. Display windows in front of the store featured elegantly dressed female mannequins--each holding gold-painted brooms. Inside the store, shelves and clothing racks appeared well stocked.

Employees entering the store declined to speak to a reporter. “We’ve been asked not to talk to anyone about anything,” said one employee who declined to identify herself. Another salesclerk inside the store told a reporter: “I can’t talk to you--but I’d love to sell you something.”

One salesclerk in the men’s furnishings department was clearly displeased when a reporter inquired if he expected the store to remain in business. “Of course,” the clerk snapped.

When the store opened precisely at noon, nearly 30 faithful shoppers were already waiting outside. Among them were Elizabeth Desota and her fiance, Andres Valle, who drove in from Riverside to pick out Desota’s dress for their May wedding. Just five years ago, Desota, who is now divorced, was at the same store to help her daughter pick out a $2,800 wedding dress.

“This is my kind of store,” Desota said. “It’s got quality--and style.” And, she said, she would continue shopping there, even if the store’s parent company is suffering financial problems.

Likewise, Cindy Altenfelder, a legal secretary from Sun Valley, drove to the store with her mother on Sunday to exchange some Christmas gifts. Altenfelder, who works in Century City, said she spends many lunch hours strolling through the I. Magnin/Bullocks Wilshire store looking for bargains. “I keep going back again and again until the things I like are marked down.”

Also at the store Sunday was Ann Chu, an accountant who lives in Hollywood, who came to purchase a birthday gift for a friend. Chu said she is far more concerned about the future of the store’s employees than the store itself.

“As a place to shop, it’s not a big deal,” she said. “But as a place of employment, if this place ever closes, it would be a major catastrophe.”

Times staff writer Carla Lazzareschi also contributed to this report.