14229 Thu, 04/10/2008 - 1:43pm
By Barbara Thau
NEW YORK–Numerous home vendors said they have stopped shipping goods to Linens ’n Things and that the retailer is poised to file for bankruptcy.
At the same time, some factors have given the retailer’s credit-worthiness a thumbs down, also prompting vendors to cease shipments, suppliers said.
The retailer has been suffering chronic bottom-line losses and is saddled with debt. And vendors, some of whom have been burned by Fortunoff’s recent bankruptcy filing, are getting skittish.
Linens ’n Things, into the first three years of a nine-year turnaround plan led by Chief Executive Officer Bob DiNicola, did not return phone calls seeking comment.
“If vendors stop shipping, they whip right into bankruptcy court,” said a factor. “Although Linens ’n Things may have the cash flow to operate for a few quarters, [when vendors stop shipping] it’s the kiss of death.”
One housewares vendor stopped shipping the specialty retailer about a month ago.
“There was a lot of talk among current management and former management that there was more trouble than appeared on the surface,” the vendor said. “Second, the Chinese factories were starting to talk about how they were getting paid slowly and canceled orders. And third, we had a meeting with their buyers and they were very non-committal to programs.”
As of April 9, “we’re holding shipments,” said one credit manager of a home furnishings vendor.
“This is extraordinary for them, not consistent with their normal payment patterns,” said the credit manager. “We got some payments last week after the first quarter ended, then nothing. We put phone calls in to them. I was able to talk to some people at Linens who told me they are waiting for direction, waiting to get a schedule of payments. That call was April 4, and I haven’t heard from them since.”
The credit manager started noticing payment irregularities at the end of March.
“Linens ’n Things has been considered a high-risk account for us since February 2006, when Apollo purchased them,” the credit manager said. “They leveraged their balance sheet heavily, and you always have to watch a company like that.”
Two home vendors said their factors, who get a percentage of a sale and guarantee payment, deemed Linens ’n Things financially unsound.
“If they don’t clear them, we don’t ship them,” one of the vendors said.
“They got highly promotional last year—they weren’t generating sales and they weren’t generating profit,” said the other.
A few suppliers said they are still shipping the retailer and are taking a wait-and-see attitude.
Four soft-home vendors said they have not been paid starting with the week of March 10.
One of the vendors said its factory in China needs an order commitment in the next 60 days. That’s when the textiles supplier will decide if it will put in Linens ’n Things’ fall order.
Linens ’n Things told the textiles vendors that the check was in the mail.
Meanwhile, the CEO of a housewares vendor said his company has received payments from Linens ’n Things, but it’s business with the retailer is relatively small.
Some sources said a bankruptcy filing is just what Linens ’n Things needs. It would give the company an opportunity to get its house in order and prune underperforming stores.
But a number of suppliers said a filing would be a blow to the home vendor community.
In a consolidated home retailing sector, many suppliers have their eggs in Linens ’n Things’ basket.
“They are a big account that was growing tremendously,” said one home vendor. But “in a tough market, the weak ones lose.” — David Gill contributed to this report.