LOS ANGELES — Troubled Mervyns confirmed reports on Friday that CIT Group Inc. has stopped approving about $40 million in credit on merchandise orders and that some small vendors have stopped shipping.
This story first appeared in the June 30, 2008 issue of WWD. Subscribe Today.
“For the most part our vendors are still delivering, and CIT has a liquidity crisis of its own,” said a spokesman for the Hayward, Calif.-based retailer. “We were affected earlier by the economic downturn and if you look at the situation for all of California, it’s been hard for retailers.”
CIT, a large specialty lender that has been hit hard by the subprime mortgage fallout, stopped approving credit last month for about $40 million worth of orders to the struggling retail chain. CIT, one of the apparel industries largest lenders, shut its home lending operations last summer and reported a $134.5 million loss in the second quarter. Calls to CIT were not returned.
Mervyns, which has an average store footprint of 80,000 square feet in its 175 units, has scaled back inventory in response to the economic downturn and current circumstances, but the spokesman said the chain has adequate stock — tens of millions of dollars worth of merchandise — for the upcoming fall season.
“We do have a plan we will execute in terms of what we are offering our customers and how best we can serve them and meet their needs,” he said.
Mervyns was sold by Target Corp. in 2004 to Cerberus Capital Management LP and Sun Capital Partners Inc. This spring, the company brought in turnaround specialist John Goodman, formerly of Levi Strauss & Co., as chief executive officer.
In April, Mervyns announced 350 layoffs in two distribution centers and, in May, set two store closings because it wasn’t able to renegotiate leases. The firm, which employs about 20,000 workers, said it plans to sell five to 10 underperforming stores with high real estate value, but also expects to open five stores next year.