MACY’S BANKRUPTCY : Now It’s on With the Show : Chapter 11 Filing Is a Relief to Store’s Suppliers
R.H. Macy & Co.’s Monday filing for bankruptcy protection from its creditors didn’t come a moment too soon for Francine Browner, a $100-million-a-year apparel maker in the City of Commerce.
Browner was sitting on nearly $200,000 worth of spring fashion orders from Macy’s, wondering if she should deliver them and risk not being paid, or refuse to ship and incur the wrath of one of her most important clients. It’s a decision Browner no longer has to make.
Now that Macy’s has filed for protection under Chapter 11 of the U.S. Bankruptcy Code, it will get $600 million in new loans that will allow it to pay for future merchandise deliveries to its 251 Macy’s, Bullock’s and I. Magnin stores and specialty outlets throughout the country. A hearing to release $60 million of the new loans is scheduled for today in U.S. District Court in New York.
A greatly relieved Browner said Tuesday that she plans to begin spring merchandise shipments next week. And so do dozens of other Southern California apparel makers--including those who are still owed some of the $150 million to $250 million in overdue bills Macy’s left behind when it filed Monday.
“We’ve all been waiting for this bankruptcy to happen for months. Now that it’s happened, we can deal with it,” said Teresa DeBruno, president of the Sassafras swimwear division of Apparel Ventures in Los Angeles which Macy’s owes about $200,000. “It’s time to get rolling again and start doing business with Macy’s like always.”
Added Robin Piccone, whose Piccone Apparel firm in West Los Angeles makes swimsuits under the Body Glove label: “There’s only one season for swimwear, and this is it. Now we can start shipping without worry.”
Although the relief--and even euphoria--that Macy’s had finally filed for bankruptcy protection was palpable Tuesday among Southern California apparel makers, analysts said that feeling may be short-lived.
Perhaps as early as May or June, some analysts suggest, apparel makers may find that Macy’s--constrained by a tight budget and strict bankruptcy court oversight--will be a stingy shopper in their showrooms.
“By the time Macy’s starts shopping for fall merchandise in May, it will be buying less than at anytime in the last 10 years,” said Alan Millstein, publisher of the Fashion Network Report in New York. “They will have to eliminate marginal merchandise, cut out small, under-capitalized manufacturers and drop fringe labels. They will be able to afford to deal with only the biggest players in the apparel industry.”
Millstein said Macy’s can no longer continue as one of the best customers for the nation’s apparel makers, a role it has increasingly played in recent years as other major, national retailers--including the Allied, Federated, and Carter Hawley Hale’s Broadway and Emporium department stores--filed for bankruptcy protection.
“Macy’s is going to be under tremendous pressure to reduce its inventories and it will have only a limited budget to buy new merchandise,” Millstein explained.
Barry Ginsberg, a Newport Beach developer of outlet shopping malls, including the Desert Hills Center near Palm Springs, said Tuesday that two apparel makers contacted him after the Macy’s Chapter 11 filing seeking to open stores in his malls.
Ginsberg, who declined to name the manufacturers, said they made the request after “figuring that Macy’s wouldn’t be buying as much merchandise” as in the past. “These manufacturers want another outlet for their goods so they can keep up their production levels and their revenues,” he added.
But other apparel makers’ worries were more immediate. It was time to think spring merchandise, and that’s what they were doing.
“I’m shipping for all the shops: I. Magnin, Bullock’s and Macy’s,” said Leon Max, a Los Angeles women’s clothing maker. “I’ve shipped to them for the last 10 years and it’s an important customer.”
Even suppliers whose bills were left unpaid by the bankruptcy filing and who face years of waiting for less-than-full repayment, are shrugging off the likely losses as a necessary cost of doing business with department stores these days.
Leonard Rabinowitz, executive vice president of Carol Little, a $200 million-a-year women’s clothing maker in Los Angeles, said that, while Macy’s left his company with $1.4 million in unpaid bills, he will not hesitate to ship the $7 million worth of merchandise Macy’s currently has on order.
“We have made a lot of money with Macy’s over the years and we can again,” he said. “We just have to get through this.”
After three bankruptcies of major national retailers in as many years, most apparel makers said they have gotten used to the drill and were unfazed by Macy’s filing.
“It’s sad to say, but bankruptcy is something that has become a part of our business,” said Browner, the City of Commerce manufacturer. “We’ve become accustomed to it.”
