Tariffs Leave Retailers’ Lenders Feeling Nervous
With tariffs threatening to raise prices, creditors that lend to the retail space are reportedly worried.
That’s according to a report Saturday (May 3) from Bloomberg News, which cited the example of Saks Global Enterprises.
That department store chain’s creditors were already concerned, even before Saks announced plans to raise more debt, as its notes that mature in 2029 had dropped by 40% in value in the space of five months.
The report noted that Saks recently said it aims to raise as much as $350 million via a new loan, funds that will help the company maintain what CEO Marc Metrick called an “ample” liquidity cushion, even as it deals with future liabilities such as the first interest payment on its 2029 notes.
Some advisers are cautioning banks and private credit outfits that steep apparel costs shouldn’t alter their appraisals of client inventory when making loans, Bloomberg said. In fact, this is a major topic of discussion at banks such as Wells Fargo, the bank’s head of global receivables and trade Daniel Pfeiffer told Bloomberg.
“There’s a lot of discussion right now about the value of the current appraisals, how tariffs show up on invoices and how that flows through to when the goods are sold,” Pfeiffer said. “That cost is on the invoice as well, and in some scenarios could make up half the value of what you’re financing.”
In terms of figuring out a borrowing base, he added that, “You have to be very careful when you’re monitoring all of the assumptions that go into that.”
Meanwhile, it’s not just big retail chains being squeezed by tariff pressures. As PYMNTS wrote last week, small to medium-sized businesses (SMBs) are now being forced to make difficult choices. They need to find new ways to share, mitigate or avoid costs, or risk losing ground in the global marketplace to bigger rivals.
“For SMBs, tariffs aren’t just a line item; they’re an existential threat. Prices for goods and services climbed to their steepest rate in over a year this month, with tariffs fueling an especially sharp increase in prices of manufactured goods,” that report said. “SMBs account for around one-third of total imports to the United States.”
These companies don’t have the same leverage as bigger firms when it comes to diversifying suppliers or negotiating bulk contracts. Yet they represent most of the U.S. economy, in ways that are hard to understand until their products vanish due to supply chain and pricing pressures.
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