By JAMES COVERT
Last updated: 3:20 am
April 15, 2009
Posted: 3:19 am
April 15, 2009
Scrambling to keep hot fashions flowing despite tight credit from traditional lenders, some big retailers are breaking out the plastic.
In a little-noticed move that's unusual for a major chain, Lord & Taylor has begun to finance a small portion of its monthly merchandise shipments with an American Express card, The Post has learned.
Recent word of the card charges has surprised industry insiders. On one hand, it's typical for the owner of a small -- and often cash-strapped -- boutique to load up a personal card to keep goods in stock.
But "it's extremely unusual for a big department store to do something like this," said Gary Wassner of Hilldun, a New York-based financial lender in the retail industry. He added that he had no knowledge of Lord & Taylor's recent card charges.
Insiders say the practice isn't necessarily a signal of dire financial straits. Lord & Taylor, which recently received a $60 million cash injection from its owner, the real estate company NRDC Equity Partners, is making the charges as part of a two-year-old partnership with AmEx.
But sources said AmEx is striking similar deals with other big chains, as the firms that have traditionally financed retail inventories have been rattled by the banking crisis. So-called "factoring" companies -- including commercial-lending giants CIT and GE Commercial Finance -- have clamped down on credit, demanding steeper fees and heavy collateral from retailers like Lord & Taylor and Barneys New York.
In response, some chains are plunking down the plastic mostly for smaller vendors that, while not regular business partners, have sizzling product.
The card charges -- which can run to tens or even hundreds of thousands of dollars each -- leave more room on major credit lines.
That, in turn, allows retailers like Lord & Taylor to finance bigger shipments from key suppliers like Michael Kors, Ralph Lauren and Calvin Klein, which run into the millions each, sources said.
Insiders expect card charges to become more common as fashion struggles to keep its edge amid the economic slump.
While smaller labels can be crucial for keeping stores fresh and exciting, they're also typically among the first to lose financial guarantees.
"Little vendors are scared about this economy," says Bob Carbonell of Bernard Sands, a retail-credit consultant. "They need the retailers to make them feel more comfortable, and this credit-card idea is a rather creative way of doing it."
A side benefit to the retailer, according to one senior retail executive, is that credit-card payments can be done more discreetly.
"If there's a record out there that a retailer paid their little vendors immediately" through a traditional middleman, "then big vendors will come in and start demanding the same treatment," the executive said.
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