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Retailers respond to credit crunch

Casual Living Industry News

www.fireplacecenter-patioshop.com/Casual furniture retailers' reactions to the credit crisis are almost as numerous as the retailers themselves.

Noticing a tightening of payment terms among some suppliers, some reacted by promising to find other suppliers. Others have noticed little change in credit thus far, but are bringing in less inventory on early buys to prepare for the future.

Joe McLaughlin, president of Oyster Bay, N.Y.-based Dodds & Eder, decided on a take-charge strategy. When things started to tighten up in August, he contacted his bank about a 20% increase in his line of credit. They approved it, even though they weren't generally approving extensions of credit — and even though he hasn't used his credit line in the past couple of years.

"It became important to me to know that I could get an increase in the line even though I didn't need it," McLaughlin said. "Who knows? In a year or two, I may need to dig in more than I used to."

Arthur Thomas Davis, co-owner of Leland's in Indianapolis, Ind., said he has made it his policy to pay his vendors before anyone else — and they will do back-flips for him.

"I have had a couple of vendors say we will have to buy more or they will open up other dealers in the area," Davis said. "I say, 'Do what you have to do. I am not going to put myself farther in debt to make your company happy.' I have people at the door wanting to come in. If they want to go someplace else, that is fine but they will not have the exclusivity of our store."

Randy Dryden, owner and manager of Fireplace Center and Patio Shop, in Amarillo, Texas, said he's noticed that the difference seems to be in the length of time that he's been doing business with suppliers. Longtime suppliers have kept dating terms in the same place; while some newer ones have balked at setting credit.

"And that's OK if they don't want to extend credit at all, then we don't have to use them," Dryden said. "There are other manufacturers out there who are happy to give you 30-day terms or early buy terms."

Dryden added his business was up 30% over the same time last year, which he credited in large part to being in Amarillo, which has been ranked as the third best real estate market in the United States. In Dryden's market, the demand for outdoor furniture — and the money to pay for it — is still healthy.

"We are a town of 200,000 that is 150 or 200 miles from anybody else and we haven't overbuilt here," Dryden said.

In contrast, Bonnie Richins, general manager ofAnaheim Patio and Fireside in Brea, Calif., said her area was hit hard by the collapse of the housing industry. Because of the slowdown, Richins said her early buys will likely be about half what they were last year.

"We need to keep our nose to the ground and make sure we have cash flow," Richins said. "It is a new experience for us, I will tell you. In this climate, we are scrutinizing all our expenses and finding where we can cut back or eliminate."

At Inside-Out Home Furnishings in Brentwood, Tenn., CEO Jerry Stroupe said the economy has been a challenge.

"We have had a fairly, substantially strong history in payments to manufacturers that we have been dealing with," Stroupe said. "With sales off, as they are now, then obviously it makes it harder to continue on the level that you want to continue on."

Manufacturers he went to early buys with last year have shown some flexibility in payment plans in a few cases, Stroupe said. He feels fortunate in not having to use that option very often. In other areas, such as rattan and wicker, he is open to buy as long as he pays invoices in 30 days — down from the 45 days that was true in the past. Being proactive with his business, coupled with his location in a well-heeled Nashville suburb, has helped, Stroupe said.

"If you are not smart enough to have upgraded your store and gotten away from the big box boys, you are not going to compete and you are not going to exist," Stroupe said. "People can see the perceived value of what you do."

Hauser
Hauser's focused on accessories to keep stores looking 'new and fresh.'

At Hauser's Patio in San Diego, Calif., president Doug Wheat agreed with Stroupe. "We specifically went out and spent money on accessorizing to keep the store looking new and fresh," Wheat said.

Given that special orders are now at 56% of his sales, what matters to Wheat are favorable reorder terms, because discounts lose both their appeal and their value when the furniture sits in the warehouse and has to be clearance-priced to move it at the end of the season.

"With everybody who we have a long relationship with, I have told them, 'I know this is tough on you but it's tougher on me, and this is what I need to survive,' " Wheat said. "Most of them are listening and partnering up with us."

At Lawn & Leisure in Sterling, Va., owner Jane Rother said she doesn't owe anybody and doesn't want to.

"We still feel that we want to be able to meet all of our obligations without question," Rother said. "By last June, we were seeing a pretty dramatic slowdown — and I knew it would not be advisable for me to make early buy commitments like we had in the past."

In addition, Rother and her staff have taken a slight salary cut and the bookkeeper now works four days instead of five.

On the positive side, Lawn & Leisure carries not only outdoor furniture but fireplace accessories and high-end power equipment, which brings in additional business.

Rother said things have slowed, even in the Washington, D.C. suburbs, which are normally insulated from a lot of money problems that other communities face.

"You can look at the figures and you can see it and feel it here on the weekends, because you can get some jobs accomplished," she said. "(Before), you could never get anything accomplished on Saturday and Sunday."

Mike Moon, co-owner of Patio Connection in Tucson, Ariz., said its credit has been working pretty much as usual, although he has seen more requests to update his information. Like others, he is keeping early buys to a minimum — and making other changes as well.

"As far as inventory goes, we have watched it carefully and cut hours in-house as much as we can," Moon said. "We haven't had to lay anybody off and that is a definite plus. But everybody, including myself, has to take a hit to get through the lean times here and get back on track."

Arlene Stachel, co-owner ofMountain Lake Pool and Patio in Doylestown, Pa., has been spending more time on balancing supply and demand. She is carrying a smaller amount of inventory for the high-end segment, instead relying on manufacturers to get special orders out in a timely manner.

"We basically have to work with our reps and our manufacturers, because if we are not all on the same page, we are not going to exist," Stachel said. "If you have a good relationship with the manufacturer and a good comfortable relationship with the sales rep, you can come up with something between the three of you that works for everybody."

Emigh

Brian Lawrence, president of Emigh's Casual Living, is approaching the New Year with caution. So far, he has had success working with vendors.

Brian Lawrence, president of Emigh's Casual Living in Sacremento, Calif., was approaching 2009 with caution.

"We are finding that vendors are willing to work with us on different times, where we don't have to buy as much," Lawrence said. "We are buying less and most of them are holding our discounts."

Lawrence has cut back on his early buys and is working out of his vendors' warehouses as much as possible. He also is trying to time his purchases to hit by the end of June, so he will have an opportunity to sell the goods before he has to pay for them.

In addition, Lawrence said he has made some other financial changes.

"We have restructured things to get a number of loans under one loan," Lawrence said. "We have extended our credit line a little bit by borrowing against our building and we are trying to watch our pennies and simplify things as much as we can."

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