Despite some signs of stabilization from J.C. Penney Co. Inc. and other firms, recession-driven declines persist for retailers, vendors and related segments of the economy.
Watching the interchange between retailers and their vendors closely is CIT Group Inc., a factor that funds shipments to stores and is increasing its commission rates and focusing on large retailers with strong balance sheets.
“We expect the retail environment to remain challenged throughout 2009 as consumer demand continues to struggle,” said Alexander Mason, president and chief operating officer. “Therefore, we expect to continue to be prudent in our lending, which means foregoing volume to manage credit risk.”
The company’s first-quarter factoring volume fell to $8.3 billion from $10.4 billion in the fourth quarter. Overall, CIT posted losses of $504.5 million and investors drove down its shares 21 percent to $2.78.
The credit crunch has squeezed the real estate market.
Eight more shopping centers owned by subsidiaries of General Growth Properties Inc. filed for bankruptcy late Wednesday, putting a total of 164 of the developer’s properties under Chapter 11 protection.
The Chicago-based firm’s bankruptcy last week was the largest ever for a real estate company. Both General Growth and the subsidiaries registered their insolvency in Manhattan bankruptcy court.
General Growth, which has a portfolio of more than 200 malls, said operations at the centers would continue as usual.
“We filed these additional companies under Chapter 11 as part of our overall plan to restructure our debt,” said Adam Metz, chief executive officer. “We do not currently contemplate that additional GGP subsidiaries will file for protection, although it is possible that circumstances could change during the restructuring process.”
Among firms reporting earnings, Columbia Sportswear Co.’s first-quarter profits fell 65.4 percent to $6.9 million, or 20 cents a share, on an 8.5 percent decrease in sales to $272 million. The company’s stock rose 4.1 percent to $37.53 before the aftermarket report but then fell sharply in after-hours trading.
The firm’s wholesale backlog for fall was $608 million as of March 31, a 15 percent drop from a year earlier. “Our fall wholesale backlog reflects, in part, the weak global retail environment during the first quarter, coupled with the financial and credit market challenges that have led many of our customers to continue reducing their planned inventory levels for the remainder of 2009,” said Tim Boyle, president and chief executive officer.
Stores, vendors and consumers can’t borrow as much money and frugality is becoming the new norm. The result is a cycle in which businesses lay off workers as sales slow and consumers pull back further for fear they’ll lose their jobs. The Obama administration is pumping billions of dollars into the economy to try to short-circuit the cycle.
The S&P Retail Index slid 0.7 percent, or 2.29 points, to 329.33 Thursday, trailing the Dow Jones Industrial Average, which was up 0.9 percent, or 70.49 points, to 7,957.06.