(Bloomberg)—Some of Bon-Ton Stores Inc.’s suppliers are scaling back shipments and asking to be paid sooner in order to protect themselves from potential losses in case the department-store chain falls short on its turnaround plans, according to people with knowledge of the matter.
The suppliers have insisted on getting paid with letters of credit or cash on delivery, which can be a drain on the company’s resources, said the people, who asked not to be named because the matter is private. The demands come just as the chain enters the key holiday-shopping season in the U.S. Bon-Ton is No. 171 in the Internet Retailer 2017 Top 500 and operates stores under the Bon-Ton, Carson’s, Bergner’s, Herberger’s and Boston Stores brands.
“We maintain constructive relationships with our vendors,” Christine Hojnacki, a spokeswoman for the York, Penn.-based company, said in a statement. “Our team has been working closely with all of our vendors, large and small, as we build inventory ahead of the holiday season.”
The company’s troubles with suppliers are similar to those faced by Toys R Us Inc. (No. 38) earlier this year, when vendors tightened their conditions as the toy retailer struggled with debt. Toys R Us filed for bankruptcy last month.
Bon-Ton, which operates 260 stores across 24 states, had hired PJT Partners and AlixPartners over the summer to explore options for dealing with its more than $1 billion debt load. In September, it announced an $18.9 million sale-and-leaseback transaction for a store in Roseville, Minn., that will boost liquidity in the short-term and buy breathing room.
Bon-Ton’s $350 million of bonds due in June 2021 are trading at 37 cents on the dollar, down from about 54 cents a year ago, according to the Trace price-reporting system.
Shares of the company have lost 75% of their value this year as the retailer contends with declining comparable-store sales and slower foot traffic. The weak performance led CEO Kathryn Bufano to step down earlier this year. She was replaced by chief operating officer William Tracy.
Department store chains have been struggling to prop up sales in recent years as shoppers increasingly migrate to online competitors. Retailers including Macy’s Inc. (No. 6), J.C. Penny Co. (No. 33) and Sears Holdings Corp. (No. 19) have closed underperforming stores.
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