Credit Companies Tell Suppliers to Hold Off Shipments to Woolworth
NEW YORK (AP) _ Several retail credit and factoring companies have told suppliers to hold off on shipments to Woolworth Corp. until the retailer provides more information about an internal investigation into alleged accounting irregularities.
Factoring companies guarantee manufacturers will be paid for shipments to retailers. Retail credit companies advise factoring companies, manufacturers and suppliers about the creditworthiness of retailers.
The companies said Friday they are concerned that a pending restatement of Woolworth’s past earnings could adversely affect the company’s ability to pay suppliers.
Vincent Creo, senior retail analyst at Solo Credit Service Corp., said at least a dozen of his manufacturer clients have put Woolworth on hold until a committee of outside directors can investigate the allegations. The committee is looking into accounting procedures that led to the required revision of last year’s books.
″We’re just advising people to hold off,″ Creo said. ″Let’s see what the committee comes up with, what they find. At that point, you assess the damage.″
Reports in The New York Times and The Wall Street Journal said other factoring companies had also told manufacturers not to ship to Woolworth.
A call on Good Friday to Woolworth’s offices for comment was not returned.
Creo said Woolworth could not survive a long interruption of shipments.
″This is not something that can go on for a month,″ he said. ″They’ll need merchandise. It’s very important that they clear this up as quickly as possible.″
The New York-based operator of specialty and general merchandise store chains said Wednesday it will restate figures for its last fiscal year, which ended Jan. 29, and may have to restate results for the prior year as well.
While the changes for 1993 and possibly for 1992 are unlikely to affect Woolworth’s overall annual results for those years, analysts are concerned that the retailer was unable to estimate the amounts of the required restatements.
Moody’s Investors Service said Thursday it may downgrade Woolworth’s debt, depending on the outcome of the investigation.
Analysts were already jittery about Woolworth, which is in midst of a massive restructuring that involves closing or altering the formats of nearly 1,000 stores. The company lost $46 million, or 35 cents a share, in its final 1993 quarter, compared with earnings of $165 million, or $1.26 a share, a year earlier. Revenue fell to $2.82 billion from $3.14 billion.
Woolworth operates more than 9,000 specialty and general merchandise stores in North America, Europe, Australia and Asia. One of its best known chains is the Foot Locker athletic gear retailer.