Westward Ho Markets' owners trek into Chapter 11.

Two companies that run the five stores seek protection

The two companies that together own all five upscale Westward Ho Markets have filed for Chapter 11 bankruptcy protection.

Brentwood-based Westward Ho Markets Inc., which operates four of the stores, filed Sept. 8. Malibu-based Preston Market Acquisition Corp., operator of the other one, filed Aug. 24. Both companies are owned by Jerry Preston. Preston Market also operates Trancas Market in Malibu.

Westward Ho Markets, at which many upscale customers choose to shop because of their convenience and service, was hit hard by the recession. Customers began to steer away from much of the chain's pricey food and instead bought lower-priced items, said David Levene, the attorney representing Westward Ho Markets.

The chain started seeing a decline in profits in calendar 1991 because of customers' changing habits and demands for higher wages from its unions. That year Westward Ho Markets had to cut back on personnel, security, janitorial services and refurbishment of its stores.

As a result, the stores didn't look as good, service suffered and there were longer lines at the checkstands, Levene said. The chain had revenues of $34 million during fiscal 1993 ended Sept. 30.

In addition, Westward Ho Markets' six union contracts provide for higher wages and better benefits than do rivals' contracts, Levene said.

The company is petitioning the U.S. Bankruptcy Court to obtain temporary relief from the high wages and benefits the contracts require until it can negotiate permanent reductions with the unions, Levene said.

"We have asked them (Westward Ho Market owners and their attorneys) to come up with documentation and a game plan," said Keith Hall, a divisional representative for Teamsters Local 630, which represents workers who drive produce trucks and work in the produce warehouse. "They have failed to do so."

Westward Ho Markets management contends it needs a 19 percent rollback in wages from all the unions in order to survive, but the unions don't believe owner Preston has the capability to turn the company around, Hall said.

Westward Ho Markets is also running into problems with its two lenders, New York-based Chase Manhattan Bank, which is a secured creditor, and Oklahoma City, Okla.-based Fleming Foods, an unsecured creditor, Hall said. Chase Manhattan is owed more than $10 million and Fleming Foods is owed more than $4 million.

The company had revenues of about $15 million during calendar 1992.

Preston Market opened stores in Oxnard and West Hollywood in 1992 that were both flops and closed this year, Jerry Preston said. The company lost a lot of money from these failures and was unable to repay an undisclosed amount of debt to Fleming Foods, a partially secured lender in this case, he said.

Fleming Foods threatened to file a writ of possession, which would have allowed the lender to take Preston Market's inventory, but Preston Market filed for Chapter 11 as protection.