The Rain on Macy's Parade:: How Greed, Ambition, and Folly Ruined America's Greatest Store

The real miracle on 34th street, shows Wall Street Journal reporter Trachtenberg, is that Macy's even still exists. The flagship Herald Square store opened in 1902; by 1986, when chairman Edward Finkelstein took this publicly traded Manhattan institution private, Macy's operated 95 stores in 14 states. Before the insiders' buyout, the business had $144 million in debt and $l.48 billion in shareholder equity, i.e., $1 of debt for every $11 in equity; after the takeover, the ratio was $3.15 billion in debt and $290 million in equity, or $10 in debt for each dollar of equity. Following the takeover, disastrous decisions compounded, as Finkelstein relied increasingly on Macy's private-label merchandise; unsuccessfully attempted to buy his competitor Federated Department Stores but settled for two of its California divisions; and appointed two of his sons to high-level positions for which, Trachtenberg suggests, they were unqualified. By 1992 Macy's annual interest expenses alone amounted to $500 million. How this near-collapse came about is the remarkable and ultimately distressing story Trachtenberg relates so stylishly here. Virtually all the participants, except for Finkelstein, agreed to be interviewed, giving the book an insider's intimacy. The tangled finances and the vast cast of lenders and predators would be hard to keep straight if not for Trachtenberg's enormous skill. Before this story is done, he has also given readers an education in today's department store merchandising, which is now controlled by a few conglomerates, among them Federated Department Stores--which, ironically, acquired the Macy's empire in 1992 after Macy's filed for Chapter 11 bankruptcy protection. Trachtenberg's sensitive handling of this venal tale turns it into a morality play of dimension. Photos not seen by PW. (Nov.)