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CIT: Vendors Set for Growth in 2010

CIT study finds majority of vendors expect revenue increases next year.

A majority of vendors expect revenue growth to resume next year, even though a significant number of retailers don’t expect consumer spending to return to pre-recessionary levels until 2011 at the earliest.

This story first appeared in the September 15, 2009 issue of WWD.  Subscribe Today.

Those are two of the conclusions from a new study by CIT Group Inc., which provides financing to small and medium-sized businesses.

Among the vendors queried, 29.8 percent of whom work in apparel and accessories, 17.3 percent expect significant growth in their revenues next year and 42.3 percent expect some growth.

However, expectations differed widely based on company volume. Among firms with revenues of $50 million to $1 billion, significant growth was expected by 22.6 percent, versus 11.8 percent for firms under $50 million, and some growth by 52.8 percent of the higher-volume companies, versus 31.4 percent of their smaller counterparts. More than half the vendors — 54.8 percent — will pursue aggressive pricing to support growth.

Despite upbeat expectations for their own businesses, 57.7 percent don’t believe economic growth will return until after 2010.

CIT found that 47 percent of retailers felt the financial markets would turn around in 2010. However, 45 percent said consumer spending would not return to 2007 levels until 2011 or 2012 and 17 percent said that might not even happen until after 2012. As for the upcoming holiday season, 67 percent said they will stock less inventory than last year, while 66 percent will offer greater discounts. Exactly half of the suppliers said they believed financial markets will turn around next year.

Among the retailers responding, 17.3 percent were from the specialty apparel sector, 15.5 percent were department store executives and 10.9 percent came from the discount channel.

Nearly half, or 48 percent, of retailers believe mergers and acquisitions will increase over the next 12 months, with 34 percent attributing the expected change to greater availability of credit and 32 percent citing reduced valuations.

Among the vendors, 66.3 percent said they have been impacted by a retail customer’s bankruptcy filing in the past 12 months, and 58.7 percent expect to be affected by such a filing over the next 12 months.

More than two in five — 42.3 percent — expect their ability to secure financing to remain the same over the next year. In addition, 45.2 percent expect their financing needs to grow over the next 12 months. Of those who expect to seek financing, 34.6 percent said it will be used for customer financing while 20.2 percent will use it for acquisitions. In general, 72.1 percent will use financing for working capital needs over the next 12 months, with 50 percent for growth and 28.8 percent for acquisitions.

In total, 110 respondents were executives and financial decision makers at middle-market retailers with revenues of $25 million to $1 billion, while 104 executives and financial decision makers were suppliers in the middle market having revenues of $2 million to $1 billion.