Retailers’ Sales Advance for the Second Month . . . : . . . but Macy’s to Close 60 Stores, Including 3 I. Magnins in State

Launching its first major retrenchment since seeking bankruptcy court protection, R. H. Macy & Co. announced Thursday that it will close nearly 60 stores, including three I. Magnin locations in California.

Separately, in a sign of a possible power struggle at Macy’s, Chairman Edward S. Finkelstein denied a report that Vice Chairman Myron Ullman III had been designated to succeed him.

In its store-closing announcement, Macy’s spared its big department stores--including the Bullock’s chain in Southern California and Macy’s California in the northern part of the state--from its current hit list. But analysts predicted more store closings as well as asset sales by the time the big New York-based retailer emerges from Chapter 11 bankruptcy proceedings.

“They haven’t even started to use the carving knife yet,” said Alan Millstein, publisher of the Fashion Network Report newsletter.

Macy’s said about 800 of its 69,500 employees work at the stores being shut, but that it hopes to find jobs for some at other locations. The closings are expected in May or early June.

The doomed I. Magnin stores in California are in Santa Clara, Sacramento and Palm Springs. Also being closed are a pair of I. Magnin stores in Illinois and Maryland.

Many industry observers expect the San Francisco-based I. Magnin chain, a prestigious name in the fashion world but a longtime financial weakling, to be put up for sale. After the five closings, the chain will have 19 stores, almost all in California.

In Sacramento, few of the I. Magnin store’s 100 employees appeared surprised by the news.

“It’s more of a family town. More people would rather shop at (Target) stores,” said Judy Bibbens, who was tending the fragrance counter. Still, Bibbens called her store a “beautiful place to work.”

Macy’s is also retreating from its foray that began in the late 1980s into the small suburban specialty store business. Scheduled to be shut in May are all 34 of its Fantasies by Morgan Taylor stores, a lingerie chain.

Also slated for closing are about 15 of Macy’s 35 Charter Club women’s “career clothing” outlets.

In addition, Macy’s said it would pull out of three of its 37 Aeropostale locations, which sell casual wear for young men and women.

It was not disclosed how many of Macy’s seven or eight small specialty stores in California will be affected.

Macy’s tried to put the best face on its announcement Thursday, saying it still plans to build five Aeropostale stores in the Northeast this year and, over the next three or four years, another dozen department stores. That would include four or five new Bullock’s locations.

“These actions are important elements in our realignment and rehabilitation process. They are part of an ongoing program to reduce expense levels and concentrate on our best and most profitable stores,” Finkelstein said in a news release.

Separately, Macy’s disputed a report in Thursday’s Wall Street Journal that Ullman, the retailer’s 45-year-old vice chairman, has gained the inside track to succeed Finkelstein as chairman and chief executive.

In recent bankruptcy court filings, the company said it granted Ullman a new employment contract on Jan. 27, when it filed for Chapter 11 protection, to keep him from accepting a pending offer from an undisclosed competitor.

The new deal gives Ullman a base salary of $800,000 a year, 10% annual increases for three years and severance pay equal to three times his current salary if he is not promoted when the 66-year-old Finkelstein steps down. It also gave him the title of chief operating officer.

In a letter sent Thursday to senior executives, Finkelstein said he has no plans to retire. He added that if he became “incapacitated,” he would recommend that Macy’s President Mark Handler be named chief executive.

But Millstein, the newsletter publisher, said Ullman appears to be gaining support from the board, possibly at Finkelstein’s expense. Finkelstein “better be watching out for a palace coup,” he said.

Other industry analysts also saw logic in elevating Ullman.

“For the next couple of years, Macy’s needs someone at the helm who can deal with the legal and financial issues (of Chapter 11 bankruptcy proceedings), and that’s not Mr. Finkelstein’s cup of tea,” said Kurt Barnard, a consultant and president of Retail Marketing Report.

Although Finkelstein is one of the most respected merchants in the department store business, he is also blamed for the $3.7-billion management buyout of Macy’s in 1986 that burdened the company with debt and ultimately led to its bankruptcy filing.

Times staff writer Dan Morain in Sacramento contributed to this report.