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.

In the let's-make-a-deal '80s - when credit was so free local papers regularly ran cute items about paper boys and their collies receiving gold cards in the mail - obtaining a retail loan was a breeze, and the merchandisers became spoiled.

If a retailer violated a covenant of his loan, bankers would let him slide as long as it looked like he wasn't going out of business.

Chill Sets In

In the we'll-think-it-over '90s, collateral requirements suddenly have become much stiffer, and if a covenant is violated, the loan is called or the terms are changed without mercy.

The merchants aren't asking for a return of the bad old days, just some moderation.

The Bon-Ton, which has 38 stores in Pennsylvania, New York, Maryland, and West Virginia, got its line of credit renewed this year. But Mr. Glein had to work much harder at it than ever before.

Other corporations in other industries, like media giant Gannett, have had much the same time-consuming experience.

Exploring Options

Often borrowers must talk to more lenders to obtain the same access to credit that they had the previous year, since bankers are trying to lower loan concentrations to specific industries.

"That ties my hands, in the sense that when I make a decision that requires financing, I can't act right away," says Mr. Glein, whose company went public seven weeks ago.

Though he adds, "Please don't let me make my bankers get angry with me," his company is exploring other funding options. So are lots of other retailers.

The implication for banks is clear and troubling. When it comes time for lending officers to increase loans again, the customers might not need or want them anymore.

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