Sunday on Wednesday
It’s not Sunday, I know. I just thought everyone might want a break from my emails for a bit. But there is still something I’d like to express that probably shouldn’t wait. So….
Businesses are in flux. Like never before, retail is being challenged. No footprint or concept has been spared. As stores reopen in the year of a pandemic, every one has to clear a path for the consumer, and trust me, no one has perfected the formula yet. Uncertainty will plague us for quite some time, but life goes on and imagination and creativity will ultimately prevail.
As we navigate our way through these troubled waters, please remember to be open minded. Assessing the credit worthiness of any retailer today is a very difficult job. Balance sheets have been decimated, P&Ls are smeared with red ink. Though none of these numbers are surprising anyone in the credit markets, they are very hard to analyze without knowing if and when the world will resume turning in an uninterrupted fashion again. The retailers we’ve always counted on, the ‘majors’, are consumed with problems. Understandably so, like the magazine world and the record industry, they were weakened prior to this crisis, so digging their way back to the surface, to a break even, is even more difficult now. We will get there. I’m not in doubt of that. But the road will be rocky and rough. And we at Hilldun are tasked with the job of providing credit approvals to you in the most uncertain and hard to read environment I’ve ever experienced.
As I said, we will get there. But at this very moment, each approval we issue is riddled with risk and harder to provide. Many stores chose to hoard their cash and not pay any invoices since the lockdowns began. Hence they are considerably past due and still short on cash. PPP and other government assistance helped keep employees paid, despite the lack of work for them, in many cases. But that has run its course. Now old bills need to be paid, plans need to be put into place to guaranty the flow of new, incoming merchandise, and money needs to be spent on reimagining the retail floor space. Without credit, business grinds to a halt. Everyone needs time to generate cash in order to keep their payables current. And until now, there was barely any opportunity to do that. Retailers are strapped, in many cases with a legacy of bloated overheads, too many stores, too much merchandise and no sense of how quickly the consumer will return to their locations in any significant numbers. It’s a crap shoot with no precedent and no definitive end to the crisis.
Essentially, what I’m saying today is that we, like you, are looking for answers and information, but I don’t anticipate finding any easy ones. We will approve as many orders for you as we possibly can. We are never trying to hamper your ability to ship against your orders. The opposite is the reality. And we are working tirelessly to assess risk, speaking daily to retail executives, CFOs and controllers in an effort to find the comfort level we need to guaranty their payments. I’m not complaining. This is our business and our job, just as you have yours. I’m explaining. Our credit department and our collection department, as well as our back-office, pre-payment collectors are doing everything possible to make it easier for you, and still they cannot always satisfy your immediate needs. I apologize for holding orders past start ship dates. I apologize for declining orders from stores that we formerly approved without thought. Old invoices need to be paid though if we’re going to approve new deliveries. Not all at once. Not in one lump sum. We’re working with all the stores with regard to payment plans, big and small. Fortunately, the specialty store industry has really been fantastic during this disaster. Literally, thousands and thousands of checks have continuously been mailed to us on your behalf and many retained their former credit lines. Many of those who withheld payments all this time are now beginning them again. But, they will have to catch up and rebuild their credibility before we can approve orders from them in any significant dollar amounts. Nonetheless, light is evident at the end of the tunnel. Each day another store we’ve been pursuing (as gently as possible) for payment is sending checks to us, who hadn’t paid since March.
It will take some time to recover, and we’re pushing as hard as we can to assist the market. Please understand that every approval you want, we want to provide. But it’s harder now, and it takes longer to process the orders. So when you get frustrated, please believe us when we tell you we’re doing everything we can. We don’t want to cause you any more pain or delays than you’ve already had. We will do everything we can to provide you with what you need, though I cannot state with a good conscience that you’ll get everything on your wish list. Please just be understanding and believe that time, understanding, patience and collaboration will cure much of this.
On a different note, times like these make people thing long and hard on their previous actions and policies. Many retailers are looking to find new ways of doing business with all of you. We are having an ongoing, brainstorming conversation with Pete Nordstrom regarding how to increase sales incrementally for the brands they carry, without relying upon returns and swaps. Rather we’re searching for ideas that allow transparency into the final amounts to be paid at the end of the season, so that no one needs to be hit with demands for margin help, returns etc at the back end of the season. We want purchase orders to be purchase orders, not veiled consignment sales. Nordstrom is a great retail opportunity today. The company’s credit is strong and its network of stores is larger than Saks, Neimans and Bloomingdales’. Nordstrom, out of these four retailers, has also never ceased to make regular payments during the entire three months of crisis. Hence, Pete Nordstrom and I are working hard to develop new terms and new ways of attaining profitable growth for you and for them. I will keep you posted on all developments.
While we work on new ideas, another immediate opportunity has arisen. Nordstrom is looking to buy summer merchandise that can be delivered immediately. It must be fresh and new, appropriate for the environment we’re currently in, buy now/wear now, and priced appropriately for whatever category it falls into. Those of you who have considerable inventory from summer that fits the qualifications, please let me know asap. Our relationship with the Nordstrom family allows us to share prospects with you that others are not privy to. Let’s make the most of this opportunity.
Stay safe. Stay healthy.
Gary