Magazine article American Banker

Stores Blaming Their Banks for Christmas Blahs

Magazine article American Banker

Stores Blaming Their Banks for Christmas Blahs

Article excerpt

Stores Blaming Their Banks for Christmas Blahs

Bah, humbug.

Retailers looking at a potentially terrible Christmas shopping season are blaming banks for the tight credit that prevents them from ordering fresh merchandise - the stuff that might tempt recession-weary shoppers to cave in to their impulses and buy, buy, buy.

The retailers say bankers, like Scrooge, are going to live to regret their holiday penny-pinching.

"They're turning their backs on old customers," says Michael Gleim, a senior executive vice president with the Bon-Ton department stores in York, Pa. "I have to believe there will be a payback day."

Christmas provides the last hope for retailers to make up for the first 10 dismal months of this year.

Going into the season, merchants find themselves squeezed by the factoring community - banks and other companies that finance inventories. Unnerved by predictions that shoppers will spend a lot less this season, the factors have placed a large number of retailers on "credit watch," according to John Schultz, president of the National Retailers Federation.

Cash on the Barrelhead

This means the store owner has to pay up front to receive his goods, forcing him to go to the local bank to borrow operating funds. And the local banks are balking, too.

"There's no question - if ever banks had a customer service attitude, it's gone. They've turned inward to focus on their problems," says Mr. Glein.

Bankers claim retailers are borrowing less because they've decided to keep inventories lean in anticipation of a disappointing holiday period.

Spending May Fall 47%

Indeed, polls by Chicago-based Leo J. Shapiro & Associates show that spending could be down almost 47% from last year, according to the research firm's president, Philip Johnson.

Perhaps the retailers are afraid to speak up, but one reason they are keeping inventories low is that it is extremely hard for them to ask for money from bankers. …

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