FYI - WSJ article prior to bankruptcy filings
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WSJ: Some Vendors Won't Ship To Ailing Ames Dept Stores
By Joseph Pereira
Of THE WALL STREET JOURNAL
08/19/2001
Dow Jones News Service
(Copyright (c) 2001, Dow Jones & Company, Inc.)
BOSTON -(Dow Jones)- Despite moves by Ames Department Stores Inc. (AMES) in the last two weeks to shutter 47 more stores and secure $75 million in additional financing, the ailing discount chain still has yet to convince some of its vendors to ship merchandise.
At least a half dozen of its bigger suppliers are withholding back-to-school and Christmas shipments to the Rocky Hill, Conn. concern until Ames clears its debt with them, said Burt P. Flickinger III, managing director for Reach Marketing, an advisor to the vendor firms.
In an interview Flickinger said his "suppliers won't ship second half orders until they're paid in full for the first half." Flickinger estimated Ames' debt to his clients to be excess of $10 million. He declined to name his vendor clients or specify how much each are owed, citing client confidentiality agreements.
Orders being withheld include lingerie, everyday wear, consumer electronics, health and beauty aids, beverages, cookies, candies, household cleaners, hardline goods and paper products. Payments due each vendor range from "$500,000 to more than $2.5 million," Flickinger said.
Ames hasn't depleted its $800 million secured revolving credit facility it received from General Electric Co.'s (GE) General Electric Capital Corp. in January. But its credit line under that facility is getting dangerously close to the $75 million trigger point at which Ames would be in violation of a covenant with its lender, according to people familiar with the retailer's finances. At the end of the first quarter Ames had approximately $90 million in cash.
In an interview earlier this month Ames chief financial officer Rolando de Aguiar said that the retailer is "nowhere near" the limits of its revolving credit facility. And he added that additional financing of $75 million from Kimco Funding LLC, an affiliate of Kimco Realty Corp. (KIM) provides "plenty of cushion for Ames."
Nonetheless "many in the vendor community" are of the belief that the added financing won't be sufficient to carry Ames into the holiday season and that the discount chain could file for bankruptcy protection against its creditors as early as this week, Flickinger said.
Reached at her office over the weekend, Amy Romano, an Ames spokeswoman, said "the company doesn't comment on speculation." She added that no one at the firm would be available to address Ames' vendor payment issues until Monday.
In a spate of recent press releases the company has blamed its financial deterioration on a souring economy along with higher gas prices and rising energy costs. Year-to-date same store sales at Ames fell 7.4% to $1.48 billion from $1.60 billion in the year-ago period.
But Flickinger noted that over the same period many of Ames' competitors have thrived. Same store sales at Wal-Mart Stores Inc. (WMT), Kmart Corp. (KM), Target Corp. (TGT) and Kohl's Corp. (KSS) respectively grew 6.6%, 3.4%, 3.1% and 5.6% this year. |
