One way to raise capital for future growth is to simply demand it from your suppliers, apparently the strategy of choice for home shopping company N Brown. The clothing group, which houses brands like Simply Be, Figleaves and High and Mighty, asked its suppliers to pony up a 2.5% rebate on all turnover from last spring until now.
A spokesperson for N Brown said, “We are talking to our long-term suppliers about a potential small discount, reflecting our ambitious growth plans for the future, which include heavy investment into international markets, a substantial store opening program and increase in online activity — all of which will combine to drive higher product sales in a multichannel environment.”
Some argue N Brown doesn’t even need the involuntary infusion of cash given its strong performance of late. During the six months leading up to August, it enjoyed a 7.1% hike in pre-tax profits to $61 million, with revenue rising 8 percent to $554 million. The collective revenue increase for all its brands for the same period was 5.1%.
N Brown’s strategy is reminiscent of the one employed by department store chain Debenhams last year, which dispatched a letter to all its suppliers that asked them to “support its commitment to ongoing investment,” promising that its success would “mutually benefit” all parties. Leaving nothing to the imagination, the letter from Debenhams detailed precisely how the payments should be calculated and dispensed. Each supplier was asked to make two separate disbursements, the first of which should amount to 2.5% of the value of all outstanding payments due as of December 17. The second was also 2.5%, but this time of the total value of all open orders, also as of December 17, 2013.
Unsurprisingly, many of N Brown’s suppliers have responded to their demands with outrage. Alexander Jackman, head of policy at Forum of Private Businesses, said, “Suppliers shouldn’t be targeted for the failures of their customers’ financial management so we will be looking with interest at how N Brown is seeking to justify this.”