Sensing a catastrophic cash crunch as consumers hunker down to stop the spread of the coronavirus, retail and apparel firms drew down at least $13.86 billion from their credit lines in the recent weeks to ensure they can feed their ongoing operating costs.
The $13.86 billion is just a fraction of the $98.94 billion that consumer companies tapped in recent weeks to shore up their cash balances during the expected downturn from the coronavirus pandemic that’s seen sparking a slowdown eclipsing the Great Recession. Borrowing by firms in the consumer sector represents 63.9 percent of the total $154.79 billion taken on by companies across all sectors, according to data from LCD, a unit of S&P Global Market Intelligence.
Near-term liquidity is a major concern of companies, and that pressure is gaining speed the longer businesses remain closed.
By sector, within fashion and retail, the apparel retail group led the charge, borrowing $6.93 billion from revolving credit lines.
Department stores tapped $3.75 billion, while apparel, accessories and luxury goods firms borrowed $3.16 billion. Footwear companies drew down $20 million. Specialty stores, which include a broader merchandise mix that could include some apparel categories, adds another $2.46 billion to the $13.86 billion total.
Easy access to credit and relatively low interest rates in the aftermath of the Great Recession that began in 2008 have left American firms with high levels of corporate debt. That, in turn, has left many companies–such as retailers–with near-term liquidity concerns as cash flow issues loom on the horizon due to mandatory store closures in the era of social distancing.
Here’s how much some companies have accessed to boost their cash reserves:
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Entire revolving credit lines
Macy’s Inc., $1.5 billion
Kohl’s Corp., $1 billion
Gap Inc., $500 million
A portion of availability under their credit lines
VF Corp.: $1 billion
TJX Cos. Inc.: $1 billion
L Brands Inc.: $950 million
Nordstrom Inc.: $800 million
Ross Stores Inc.: $800 million
Tapestry Inc.: $700 million
Ralph Lauren Corp.: $475 million
Kontoor Brands Inc.: $475 million
Burlington Stores Inc.: $400 million
American Eagle Outfitters Inc.: $330 million
Guess Inc.: $212 million
Abercrombie & Fitch Co.: $210 million under its senior secured asset-based revolving credit facility and $50 million from its Rabbi Trust
Urban Outfitters Inc.: $200 million
Revolve Group: $30 million
Steve Madden Ltd.: $30 million
Those who borrowed, but didn’t disclose amount
J.C. Penney Co. Inc.: on Tuesday the retailer said it is “utilizing funds available under the revolving credit facility.”
Gildan Activewear Inc.: last month the company drew down the “remaining available portion of its revolving long-term bank credit facility.”
Wolverine World Wide Inc.: last month the footwear maker also drew down the available balance of an $800 million revolving credit line, giving it $450 million of cash on hand.