by David Bodamer April 16th, 2008
Talbots Inc., the women’s clothing chain that lost half its market value in 2007, fell the most in more than 14 years in New York trading after two banks canceled $265 million in letters of credit to the retailer.
Talbots plunged $3.85, or 30 percent, to $9 at 2:20 p.m. in New York Stock Exchange composite trading, the biggest drop since its initial share sale in November 1993, after saying yesterday that HSBC Holdings Plc and Bank of America Corp. ended the agreements.
Losing the letters of credit means most suppliers in Asia won’t ship goods to Talbots without up-front cash payments, said consultant Michael Appel of Quest Turnaround Advisors LLC. The retailer, which imports most its clothes, had $25.5 million in cash at the end of February, down from $35.9 million a year earlier, according to data compiled by Bloomberg.
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by David Bodamer April 16th, 2008
Chairman and Chief Executive Myron “Mike” Ullman III said late Tuesday that the company is stretching out its five-year store growth strategy because of the economic downturn, with plans to open 36 new stores this year instead of the 50 it had projected. It also aims to renovate 20 units this year, instead of the planned 65.
But Ullman also told analysts that the company plans to accelerate its merchandising innovation. Penney this week announced several new lines for teens, along with the launch of a new store brand of home furnishings and accessories called Linden Street.
Ullman’s address, which kicked off a two-day analyst meeting, came as Penney and other retailers have stumbled in the face of a consumer spending slowdown amid higher gasoline prices, slumping home prices and a drop in consumer confidence. Penney slashed its first-quarter profit outlook last month, and last week the retailer reported a larger-than-expected 12.3 percent drop in same-store sales, or sales at stores open at least a year, for March.
Ullman told analysts that Penney is taking “a hard look” at 2009 and will figure out its store growth plans for next year in July.
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by David Bodamer April 16th, 2008
That mount of debt that GGP’s dealing with is becoming more of a sticky subject the longer the credit crunch goes on. Today there was a story in the Wall Street Journal describing how the REIT is out actively looking for joint ventures to help it raise capital as a way to deal with its $27 billion debt load with $18.7 billion of that coming due in the next four years. Refinancing the debt looks to be a challenging proposition. So instead, joint ventures may be a good solution. General Growth has a higher debt-to-capitalization ratio than most other retail REITs in part because of the debt it took out to fund its 2004 acquisition of Rouse Co.
If you don’t have a sub to the Journal, you can see Reuters summation of the story here.
The story meshes with something we reported a couple of weeks ago–about how REITs were increasingly turning to joint ventures in the current market.
Chicago-based General Growth, which owns more than 200 malls, said the ventures would likely target some of the 165 malls the company owns outright, a category that includes such high-profile properties as Fashion Show Mall and the Grand Canal Shoppes in Las Vegas and Ala Moana Center in Honolulu. Malls that already are part of joint ventures, including Water Tower Place in Chicago, are unlikely to take on additional investors.
Bernie Freibaum, General Growth’s chief financial officer, said in an interview that the company is approaching pension funds and life-insurance companies to first determine if they are interested in a deal before hashing out which properties would be involved. “It’s not going to be that people can cherry-pick and just ask for the best assets,” Mr. Freibaum said. “If it’s multiple assets [in a deal], it will be a good cross-section of our portfolio.”
In addition to seeking joint-venture partners, General Growth said it is considering other ways to whittle down its debt load — which totals $27 billion — including mortgaging some shopping malls and divesting itself of office buildings. “We’re telling the market that we’re going to reduce our leverage,” Mr. Freibaum said. But, he added “there are no distress sales going on.”
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