In reading an article in MRketplace.com by Harry Sheff entitled “Apparel Industry Concerned Over CIT Group’s Financial Woes”, I found a very significant line at the end of the article.“Smaller undercapitalized independent retailers who don’t have strong balance sheets are definitely going to be in for a rude awakening, and their purchasing power may be more about their own personal finances going forward than their balance sheets.”

Right now our clients are doing very well and recovering nicely. The defensive moves taken early to cut costs are paying dividends now. The aggressive marketing, event, training and selling actions as well as the right inventory are all creating demand and shoppers are back into the stores. Hopefully this will last but without cash or credit to buy goods, it won’t matter!

This line above sums up the challenges that retailers face over the next 6 months if they are not cash rich and if CIT is not cash generous.

It is very important that we are constantly working with clients now to be reviewing their balance sheets and taking all possible actions to improve the picture they portray to the outside world. There are many actions that are needed depending on the situation, store, environment and direction the economy takes. The important thing is that we do not wait and see what direction the economy takes but are proactive about things like:

  • Negotiate debt to lower levels.
  • Subordinate debt where possible.
  • Get clients to look ahead to where the cash will come from if it won’t come from the factors.
  • Eliminate the use of credit cards to finance inventory! This leaves the retailer with no recourse for erroneous shipments and high fees to overcome as well.
  • Set up lines of credit with your bank NOW if you have a solid financial position.

Retailers that may not be able to fulfill their OTB will be pressed to find high margin goods to keep cash flow and profits with lower sales. Help them find these sources.

Realizing NOW what the situation might be later is important for developing the strategies and tactics to get retailers through this potentially difficult situation. Keep in mind also, this is all projection and reality could take a different turn… hopefully for the better. We will be ready for whatever happens!