Grocery retail continues to be robust, with pandemic-driven demand remaining strong and continuing challenges keeping the shelves stocked with a number of product categories.
Supply Chain Digest Says...
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There are many reports of vendors in places like Bangladesh and Vietnam in danger of folding due to lack of payments and/or order cancellations. |
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But outside grocers and mass merchants selling groceries, most of the retail supply chain is in shambles, with most department stores and other apparel or specialty stores forced closed by state governments for more than two months.
Now in many cases opened back up, retailers are still in a tough spot, dealing with trying to get rid of now out of season merchandise sitting on store shelves, restrictions on how many shoppers can enter stores, and maybe most important of all changes in consumer behavior that appear likely permanent.
Some are questioning whether the department store and shopping mall concepts will even be viable moving ahead.
Naturally, that causing financial turmoil in the sector, with vendors in the lurch, wondering if they will get paid for many orders already placed or even shipped, and needing to determine which retailers they will continue to provide credit too – and which they won't.
The Wall Street Journal reports that Nike, Columbia Sportswear, and luggage-make Samsonite are among the vendors that recently reported millions of dollars in bad-debt charges in their quarterly results.
Not surprisingly, many cash-strapped retailers have been extending payment terms to vendors – but for suppliers, that's better than a bankruptcy filing such seen at JCPenney and Pier 1, which likely means they won't get paid at all.
"Finance chiefs at these suppliers are making judgment calls about which retailers are facing temporary hardships and which ones won't be able to pay their bills and as a result, how large of a potential write-off the supplier might ultimately have to take," the Journal article notes, adding that "Those determinations have become trickier amid the continuing uncertainty about how the rise in coronavirus infections could affect the economy.
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Columbia Sportswear took a huge charge of about $20 million for bad debt during the quarter ended March 31. Nike disclosed an even larger bad-debt charge of $178 million for the quarter ended May 31. In the same quarter in 2019, it took a charge of a much lower $30 million.
 "It's definitely reflective of an expectation that a lot of the smaller regional or mom-and-pop stores aren't going to make it," Camilo Lyon, an analyst who covers Nike at the investment firm BTIG LLC, told the Wall Street Journal relative to the huge increase in Nike's bad debt reserves.
However, Nike reached an agreement to take a risk with JC Penney to continue supplying goods, as the troubled retailer works through its bankruptcy proceedings, under terms that weren't disclosed.
Larger vendors can often handle such bad-debt charges, but non-payment can be fatal for smaller suppliers, with many reports of vendors in places like Bangladesh and Vietnam in danger of folding due to lack of payments and/or order cancellations.
In early July, after being criticized for not paying some suppliers, jeans giant Levi-Strauss said it was taking full responsibility and paying in full for all finished, ready-to-ship orders and in-progress garment production. The company also said it planned to use raw materials already received by suppliers for product orders in later seasons.
A few other retailers, such as The Gap and Primark, have made similar commitments.
That came after the nonprofit Remake launched the #PayUp campaign tho demand retailers meet their financial obligations, ultimately getting 19 retailers to agree to honor order commitments – if they have the cash to do so.
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