Shop Talk

Retailers, consumers and prices

Check Out Line: Liz gets new credit line — at a price

Photo

Check out the amendment to Liz Claiborne’s credit facility. USA-HOLIDAYSALES/
 
The owner of the Juicy Couture, Kate Spade and Lucky Brand chains worked out a new credit agreement that will not mature until 2011, replacing a current one that was set to mature in October.
 
Liz will get less credit — $600 million, down from $750 million — which the company says is appropriate given recent divestitures.
 
The agreement also comes with higher fees and interest rates, but eliminates some covenants.
 
The financial markets have closely watched Liz and other retailers to see if they can weather the tight credit markets and for any signs that those markets are loosening up.
 
The news of the new credit agreement helped boost Liz’s stock more than 12 percent in morning trading.  Investors shrugged off the fact that the company now expects to break even or post a loss for continuing operations in the fourth quarter, rather than the profit of 19 cents to 24 cents per share it previously forecast.
 
Who needs to make money during the holiday season when your banks will let you extend your credit terms … As long as you can pay the higher prices.
 
Also in the basket:
 
Wendy’s scales back breakfast plans
 
Tesco, Metro show scars of downturn, but coping
 
Dumpster couture gets a boost at Green Inaugural Ball (WSJ)

(Photo: Reuters)

Circuit City employees speak

Photo

Circuit City employees say they’re not surprised the struggling retailer is closing 155 stores in an attempt to remain solvent amid deteriorating liquidity and tighter credit conditions from vendors.

Employees interviewed by Reuters correspondent Chelsea Emery at Circuit City’s Paramus Towne Square, New Jersey store seemed resigned to difficut times ahead. The store is not among the 155 slated to close and employees who work there declined to give their last names.

Check Out Line: Talbots finally comes out talking

Photo

talbots.jpgCheck out Talbots trying to communicate.
 
Three days after first saying that two major banks would no longer issue it letters of credit, Talbots is holding a conference call with investors to try to further explain the issue and how it is solving the problem.
 
Perhaps seeing the stock lose almost 40 percent of its value in two days made executives think more explanation was needed.
 
Even some analysts who think the decision by HSBC and Bank of Americas to stop giving the companies letters of credit is not a big problem — and is  in fact more a symptom of problems with the banking industry than with Talbots — think communication on the issue could have been better.
 
“We would note the volatility in the stock, based on this announcement, suggests to us that the communication could have been better by the company,” analyst Jennifer Black said in a research note Wednesday.
 
Talbots on Friday stood by its financial forecast for the year and also stressed that it had worked out different financing agreements with is vendors that would actually improve its cash flow.
 
Talbots first disclosed the decision by the banks to stop letters of credit in a regulatory filing after the market closed on Tuesday. 
 
After shares plunged on Wednesday, the company issued a press release late in that trading day to try to clarify the issue, including the fact that its cash flow actually improves under the open account agreements it had switched to with most vendors.
 
Still, the stock continued to fall on Thursday and the company decided to hold a conference call on Friday.
    
On that call, the company also said that there would be no increase in cost of units purchased under the new agreements — rebutting an assumption made by some analysts.
 
 
Chief Executive Trudy Sullivan admitted during the call that the company did not communicate the matter effectively.
 
“We clearly misjudged the impact that the information disclosed in our 8-K filing would have on the investment community and the media. We should have done a better job of highlighting the difference between lines of credit on the one hand, which were not impacted, and our letter of credit, and we should have executed a much stronger and comprehensive communication program for you all, particularly given the sensitivity in the marketplace.”
 
Investors seemed more receptive once the message was communicated on Friday as shares rose 9 percent.
 
Also in the basket:
 
Sticker shock in organic aisles (N.Y. Times)
 
Trian says Wendy’s rejected two takeover offers 
 

  •