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How Are Finance People Handling the Weak Retail Market and Have They Adjusted Their Financing Rules for Clothing Manufacturers?

April 6, 2017

California Apparel News

By: Deborah Belgum

Every day the headlines are filled with news of venerated retail chains cutting back or going bankrupt. Even veteran designer Ralph Lauren is not immune to the shifting shopping patterns of consumers who are veering toward online sites to browse for merchandise.

As retailers start shrinking their footprints around the country, apparel manufacturers are wondering how to cope with this constricting retail landscape.

Should they produce less? Should they be more cautious when striking deals with stores, and how do they protect themselves from not getting paid?

Many rely on their factors to check out the financial health of the retailers who have placed orders with them. With so many retailers having a hard time getting shoppers through the doors, the California Apparel News asked factors and finance-industry experts this question:

Given that so many retailers are going through challenging times, how are you changing your evaluation of retailers to decide whether you will finance the accounts receivables held by your apparel manufacturing clients?


Gino Clark, Senior Vice President, Portfolio Manager, Western Region for Capital Business Credit

Capital Business Credit has always taken a disciplined approach when it comes to making credit decisions regardless of market conditions.

This process analyzes a company’s liquidity and capital structure. Does a company have enough liquidity to achieve its business plan and pay its bills within terms? Normally we would expect to see a liquidity cushion to mitigate unforeseen events such as last year’s LA dock strike.

However, what has become increasingly important is the impact on revenue and gross margin mixes related to an accelerating shift to online retailing and fast retailing.

These trends, coupled with an overexpansion of bricks-and-mortar assets, require us to closely evaluate the ability of management to adopt to the changing landscape—expanding into online retail while potentially closing or revamping stores.

Adaptation to today’s changing market conditions requires stockholder support, including the ability to secure new capital, management talent, focus and transparency. It is this type of analysis that makes the relationship between wholesalers/manufacturers and their financiers extremely important in today’s economy.

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