Citi Sells Accounts to Retailer

Bucking the trend of outsourcing store credit card operations, the bank subsidiary of the clothing retailer Charming Shoppes Inc. is buying the card business of Charming’s Catherines store chain from Citibank USA.

Charming, of Bensalem, Pa., said last week that its Spirit of America National Bank had agreed to buy the 1.8 million accounts from the Citigroup Inc. subsidiary for approximately $57 million. The price reflects the accounts receivable and reductions “for certain re-aged and hardship accounts,” Charming said in a Securities and Exchange Commission filing.

Gayle M. Coolick, Charming’s director of investor relations, said it has always operated the card business for its Fashion Bug store brand and obtained the Catherines card business as soon as it was available.

Charming, a women’s plus-size clothing retailer, had 2,221 stores, many in strip malls, as of Jan. 29. It purchased the Catherines chain of 436 stores in 2000; Citibank operated the card portfolio under an agreement that expired this year.

Ms. Coolick said the Lane Bryant chain of 653 stores, which Charming purchased from The Limited Inc. in 2001, has a card agreement with Alliance Data Systems Corp. that will expire in 2007. “I can’t say for certain what will happen with that file, but we will strategically look” at obtaining it, she said.

Charming runs its own card business because “we like to control the process from A to Z,” Ms. Coolick said. “A retailer loses a little bit when they outsource the process to someone else, and from a financial standpoint, it is lucrative to maintain credit.”

She said the card business was profitable, but Charming does not include card figures in its earnings reports.

Sears, Roebuck and Co. was the largest private-label issuer to get out of the business when it sold $18 billion of loans to Citigroup in 2003. The reason Sears cited for selling the loans was rising losses caused in part by a too-aggressive move toward issuing general-purpose cards to its private-label customers.

This month Federated Department Stores Inc., the largest in-house store card issuer, announced plans to buy May Department Stores Co. and said it would consider selling both stores’ private-label businesses. Federated owns around $3 billion of private-label loans; May reported $1.9 billion of store card loans at the end of 2003.

Last year Circuit City Stores Inc. sold $1.8 billion of private-label loans to Bank One Corp., which JPMorgan Chase & Co. later bought. Also last year Dillard’s Inc. sold $1.3 billion of loans to General Electric Co.’s GE Consumer Finance.

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