Study: Credit turmoil rocks retailers in ’09

Chicago A study released Thursday by BDO Seidman has identified general economic conditions (96%), credit availability and company indebtedness (93%) as the most common risk factors among the 100 largest public U.S. retailers.

While the economy was also cited as a leading factor in 2008, credit and financing jumped from No. 11 on the list in 2008 to No. 2 this year, indicating retailers’ acute concerns over their access to financing.

Seventy-four percent of retailers identified consumer confidence and spending as a leading risk, which was up from 58% in 2008. Risk factors such as competition and consolidation (No. 3) and impediments to expansion (No. 11) dropped in importance from 2008 showing that retailers are less focused on growth in the difficult economic climate.

“When consumers stop spending and retail sales fall, banks become increasingly concerned about lending to retailers,” said Doug Hart, a partner in the retail and consumer product practice at BDO Seidman. “In order for retailers to improve their credit standing, they either have to reduce costs, leading to layoffs; or increase sales, which is dependent on consumer spending.”

On a positive note, added Hart, there are some bright spots on the horizon that may signal an end to the cycle. “An increase in consumer confidence in April, along with incoming tax refunds, may bode well for consumer spending and the greater economy.”

The 2009 BDO Seidman RiskFactor Report for Retail Businesses examined the risk factors listed in the most recent SEC filings of the largest 100 publicly traded U.S. retailers. The factors were analyzed and ranked by order of frequency cited.