Buffums--the 84-year-old department store chain with a dowager's image--is up for sale for a reported $40 million, sources say, following years of sluggish sales.
At least four major real estate developers are said to be interested in purchasing all or part of the Long Beach-based company, according to sources familiar with the negotiations.
Three of the developers are said to be interested in phasing out the chain and remarketing the space to high-volume--and perhaps discount--retailers. Buffums' 16 stores are scattered throughout Los Angeles, Orange and San Diego counties.
Of the four, sources said, the apparent front-runner is Manhattan Beach-based Alexander Haagen Co., headed by Haagen, who is president of the Los Angeles Coliseum Commission.
In March, the Haagen company bought 24 former Gemco discount store sites. It has converted 17 of the Gemco locations to high-volume retail operations, including Pace discount warehouses, markets, drugstores and apparel stores.
Another potential buyer that has talked with Buffums is Bel Air-based Sterik Co., headed by Meshulam Riklis, the husband of celebrity Pia Zadora. Last year, Sterik bought 25 of former Zodys discount store sites and has leased most of them to Ralphs as warehouse supermarkets known as Giants.
The conversion strategy used in the past by both companies has fueled speculation among retailers that the firms would take the same approach with Buffums.
Executives at Alexander Haagen Co. and Sterik Co. declined to comment on reports that they are negotiating to buy Buffums.
Buffums Chief Financial Officer Robert W. Phillips denied that the company is being sold, saying, "We're not looking." But he added, "You can sell anything if you get the right price for it."
Officials at the Australian companies that own Buffums--David Jones Ltd. and Petersville Sleigh Ltd.--said in telephone interviews that they are unaware of any plans to sell the chain and declined to comment further.
However, sources familiar with the negotiations confirmed that Buffums made overtures to sell the chain two months ago.
Buffums, which was purchased by Australians in 1974 for $21.5 million, has 16 stores on leased property located throughout Southern California--including Newport Beach's Fashion Island and the Glendale Galleria--and plans to open its 17th in Solano Beach this month.
Third Suitor Cited
The firm owns only its Long Beach warehouse and a distribution center, Phillips said. Real estate developers are interested in its brick and mortar shells--many of which are elaborate buildings with long-term leases at bargain-basement rates.
In addition to Haagen and Sterik, a third company, Indianapolis-based Melvin Simon & Associates, also is said to be interested in Buffums.
And a fourth developer, Newport Beach-based Hughes Investments, reportedly is negotiating to buy Buffums' La Habra store at the aging Fashion Square retail center as part of a plan to buy the entire 14.4-acre complex for a new promotional center.
Negotiations with Hughes are said to be at a stalemate because Buffums reportedly wants more than $5 million for its lease and an option to buy the site. Hughes is said to have about half that amount in mind.
Insiders also handicap Hughes as an unlikely buyer for the 120,000-square-foot La Habra store because Buffums reportedly wants to sell its stores as a package.
The chain's $40-million price tag is also a big stumbling block for some potential buyers. One source said his company has backed off active negotiations because "the price is too high right now."
Another source familiar with negotiations, however, described Buffums' reported asking price as "not too out of line."
While Phillips and others touted Buffums' upcoming advertising budget boost to promote a fall campaign, industry sources said Buffums' sales have sagged for years as a result of changing retail patterns, problems in luring younger buyers and the chain's imperceptible attempts to change its image.
One source cited Buffums' 56,100-square-foot store at Newport Center Fashion Island. Sales there in 1986 totaled about $8 million, he said, in a store that "should have been doing a minimum of $12 million-$15 million."
Has Smaller Stores
According to Phillips, Buffums reported sales of $107.6 million at 15 stores in 1986--an annual increase of 7.4% from the $100 million reported the year before.
The chain threw in the towel at its money-losing, 37-year-old store in downtown Santa Ana last summer. With a $90-million make-over then just about completed at nearby MainPlace/Santa Ana, Buffums' executives decided they could not compete with their outdated, free-standing store and sold it to Hutton Development Co.
Buffums also tried to move the store into MainPlace, executives told reporters at the time. That attempted resuscitation failed when the center turned Buffums down.
News of the chain's reported shopping for a buyer came as no surprise to half a dozen retail executives, who said Buffums was being marketed 18 months to two years ago. "They were anxious to sell then, but it was taken off the market. So it wouldn't surprise me a bit" if Buffums were again for sale, one competitor said.