By Douglas Martin

New York Times News Service

Edward Finkelstein, a master merchandiser who turned Macy’s into one of the nation’s smartest, fastest-growing department store chains, only to see it wind up in bankruptcy court, died Saturday at his home in Thousand Oaks, Calif. He was 89.

His son Daniel confirmed the death.

“Between Aug. 1, 1979, and through most of 1985, few merchants were as lavishly praised as Ed Finkelstein,” Isadore Barmash, a former retailing reporter for The New York Times, wrote in his 1989 book, “Macy’s for Sale.”

Stanley Marcus of Neiman-Marcus called him “one of the brightest merchants of our time.” It was Finkelstein, as president of Macy’s California in the early 1970s, who came up with the idea for the Cellar, transforming what was a bargain basement into a sparkling housewares arcade.

In 1974, after being promoted to president of Macy’s New York, he brought the concept to the company’s flagship store in Manhattan. The Cellar there included gourmet food shops, flower stalls, a replica of a 19th-century English pharmacy and a branch of P.J. Clarke’s, a popular Manhattan bar and restaurant.

Another innovation was made in California, where, prompted by census reports predicting fewer teenagers, he began offering older women the breezy, youthful styles that had previously been available only in junior sizes.

“We seized on that,” he told Barmash. “We saw it as a basic business opportunity, not as much as a lifestyle as on the basis of changing demographics.”

As head of the New York store, which was in danger of being shut down because of declining sales, Finkelstein spent $15 million to restore the ground floor to its original grandeur, including its escalators’ burnished wood. To polish the store’s image, he brought back Macy’s Fourth of July fireworks as part of the nation’s bicentennial celebration after a hiatus.

After becoming chairman of what was then R.H. Macy & Co. (it is now Macy’s Inc.) in 1980, Finkelstein introduced private brands like INC, Charter Club and Alfani. He opened stores in Texas, Florida and other Sun Belt states. He developed “Little Shops” for high-end designers, presenting Macy’s largely as a group of 12 to 15 specialty store operations.

Women’s Wear Daily credited him with being one of the first retailers to recognize the appeal of designs by Liz Claiborne to middle- and upper-middle market customers.

“He felt she was clever, could exploit sportswear like no other designer and understood what working women needed and what women wanted to wear in casual settings,” the newspaper said.

Buoyed by his success, Finkelstein, in 1986, joined with nearly 400 of his executives to take control of Macy’s in a leveraged buyout for $3.6 billion, in part to prevent a hostile takeover.

Although the debt stressed company finances — particularly as recession bit into retail sales — Finkelstein took on even more debt in 1988, when Macy’s bought two store chains owned by Federated Department Stores, I. Magnin and Bullock. (Macy’s had recently lost a battle to take over Federated.)

The debt burden, poor sales and stiff competition from specialty stores like Gap and The Limited forced Macy’s to seek protection under federal bankruptcy law in January 1992. Three months later, Finkelstein resigned.

“Finkelstein was a terrific merchant, one of the absolute best,” Bud Konheim, chief executive of Nicole Miller Ltd., a maker of fashionable women’s clothing and men’s furnishings, said in an interview with The Times in 1992. “But he believed merchandising could cure financial cancer, and he was wrong.”

Edward Sidney Finkelstein was born on March 30, 1925, in New Rochelle, N.Y. Several years later, the family moved to Mount Vernon, N.Y., where he graduated from high school. Finkelstein joined Macy’s in 1949, starting out as a fabrics buyer. He moved on to run the budget and ready-to-wear departments from 1956 to 1962 and spent most of the rest of the 1960s overseeing merchandising and sales promotion at the Bamberger’s chain, a Macy’s unit with stores mostly in New Jersey.

In 1969, he went to Macy’s California for five years and made record profits for that division before moving to New York and finding more success. In 1982, Macy’s growth in annual sales exceeded 20 percent.

His son Robert died of cystic fibrosis, and Finkelstein long championed charitable efforts to fight the disease. In addition to his son Daniel, he is survived by his wife, the former Myra Schuss; another son, Mitchell; six grandchildren; and a great-granddaughter.