NEW YORK — Factoring executives, who as recently as January were bearish about the apparel-textile industry, have turned optimistic.

Earlier this year, growth in the factoring field was coming almost exclusively from new business. The existing client base, principally apparel manufacturers and textile firms, was reporting generally flat sales, according to the factors. Because of the new business, the factors were doing well — but their clients were struggling.

Now factors talk of a clear pickup at the client level in the first quarter, strength that is expected to carry through the year.

Not every executive was upbeat, but the majority interviewed were encouraged by first-quarter results, including the signs of gathering momentum in March. There were, of course, some sticky problems remaining, with credit losses in some cases running above the comfort level.

At Heller Financial, a multi-billion-dollar factor, J. Parker Lapp, who heads the factoring operation, said, “Our basic factoring volume has been going up, and we expect a good year in 1994.” He said Heller’s factoring business is essentially apparel based, so that increased volume reflects improved apparel business.

He added, however, that credit losses have been “a little higher than we like to see.” He pointed out that he didn’t think the credit losses were a function of the economy, which he called “OK,” but rather problems for some retail operators.

“There are still issues at retail to be dealt with,” Lapp said.

Lawrence A. Marsiello, president and chief executive officer of CIT Group/Commercial Services, was bullish on business over the next several months, citing increased volume flowing from clients to retailers after a sluggish winter, especially in the Northeast. CIT is the largest factor in the nation, with volume this year expected to top $12 billion.

As for his factoring business, Marsiello said, “Levels of customer credit losses continue to be at highly acceptable levels and a significant percentage of our growth, both in volume and loans, are from new clients.”

He predicted much of the growth over the next six months will also come from new business, although he expects existing clients will continue to rack up increases.

Joseph A. Grimaldi, president of BNY Financial Corp., whose volume this year is expected to approach $12 billion — making it a close second to CIT — said his business in the first quarter has been very strong.

“It was a record first quarter,” Grimaldi said. “March was particularly strong and April looks good, though not as good as March. It’s not supposed to be.

“For the first time in 18 months, we’ve seen an improvement in the volume of our existing client base and we continue to sign up new business at a rapid pace. Our apparel and textile clients have shown volume gains for the first time in quite a while, and that’s a very good sign for the rest of the year.”

Grimaldi added that credit losses have been under control and are running lower than last year. Summing up, he said he was “cautiously optimistic” and noted that he hoped the improvement in the first quarter “is real and not just rain on the roof from a temporary filling of the pipelines.”

Jerome Kenyon, president of Congress Talcott Corp., said he thought business in the first quarter was going to be flat but that it ended ahead 14 percent, compared with last year. March business was up 22 percent, he said.

“Business was much better than I had anticipated,” Kenyon said, a change he attributed to the release of pent-up demand at the consumer level.

Kenyon said the threat of rising interest rates and an unstable stock market didn’t worry him.

“I really don’t think the apparel industry is tied that closely to the stock market,” he added. “Last year, while the stock market was doing well and hitting record numbers, the apparel business was in the doldrums.”

Kenyon said while he looked for business to pick up, it wouldn’t be “a bonanza” over the next six months.

“We are seeing our pickup come from both new business and growth of existing business,” Kenyon said. “A lot of the new business is coming from Hong Kong, where people have been making money and are now looking to get into the U.S. market.”

The executive said he didn’t see any radical change in the style of business he does, with a good percentage coming from letters of credit and some from direct imports.

Kenyon said he is not seeing many startup operations here in the U.S.

David Finkelstein, senior executive vice president of Century Business Credit, one of the medium-sized independent factors, was worried, however, about the unstable stock market and economic conditions and said he thought they would weigh heavily on the consumer mind.

“The bond market is going down the tubes, interest rates are rising and the stock market is uneven,” he said, adding that he looked for consumers to clamp down on spending.

“I don’t think we are looking at a rosy six months,” Finkelstein said. “The consumer confidence just isn’t there.”

In contrast, Jerry Sandak, executive vice president of Rosenthal & Rosenthal, another of the medium-sized independents, said: “I’m usually a very negative person and don’t do a lot of forecasting, but I have a feeling things are going to get better.”

Sandak said there was “nothing drastic happening out there” with the economy and nothing out of the ordinary to keep people out of the stores. “The worst of the [stagnating recovery] is behind us.”

For the second half of 1994, Sandak expects a moderate improvement in the factoring business and in the retail business.

“I was concerned at the beginning of the year with the tax increase,” he said. “But the economy keeps rolling along and there is money out there and people are working.”

As for the factoring business, Sandak said much of the sales gains in the past year have come from new clients rather than growth of existing ones. He attributes this increased reliance on factors to the security sought by manufacturers as Chapter 11 filings mounted and bank financing dried up.

“That will change over the next 12 months, and I expect most of the growth in the factoring business, at least at Rosenthal & Rosenthal, to come from the expansion of existing clients,” he said.

Walter Kaye, president of Merchant Factors Corp., which handles relatively small clients, outlined two reasons for optimism.

First, he said, merchants’ volume in the first quarter was up just slightly from 1993 levels, but profits were up 15 to 20 percent as clients were starting to draw down more money in anticipation of increased business in the second and third quarters.

Kaye said that level of increased business should carry through the end of the year. The power behind the increases, he added, comes in large part from the mass merchants.

“People tell us that business with the small, independent specialty store is down considerably, and is really stagnant, and that the real action is with mass merchants like Wal-Mart, Kmart, Sears and Penney’s,” Kaye said.

Looking at the size of the orders coming from the mass merchants and their recent track record, Kaye predicted that group of retailers should lead the expansion through the end of the year.

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