Retailers and Suppliers Expect Consumer Spending to Trail Financial Markets Recovery

Upcoming Holiday Season Eyed with Caution as Industry Continues To Manage Slow
Moving Inventory

Many Suppliers Turning to Factoring to Protect Value of Accounts Receivable
During Sustained Downturn
NEW YORK--(Business Wire)--
Faced with one of the most challenging years on record, retailers and those who
supply them believe that consumer spending will lag the turnaround of the U.S.
financial markets. According to a new study released today by CIT Group Inc.
(NYSE:CIT), a leading provider of financing to small businesses and middle
market companies, 47% of retail respondents believe the financial markets will
turn around next year; separately, 45% believe that consumer spending will not
return to 2007 levels until 2011 or 2012.

The continuing softness in the retail market has caused many retailers to
reevaluate and adjust their business models. They are taking a more conservative
and cautious approach to the upcoming holiday season by controlling their
inventories, and are planning more aggressive discounts earlier in the season.
Other key findings among retail respondents include:

* 67% will stock less inventory than in 2008;
* 69% will expand online and direct selling;
* 56% will advertise more aggressively;
* 66% will offer greater discounts; and
* 68% will hold clearance and other sales prior to New Year`s Day.

The research report, "U.S. Small and Middle Market Outlook 2009: Retailers and
Suppliers Take Stock of Economic Downturn," examines how retailers and their
suppliers are navigating through the current financial crisis. It is the third
in a series of four studies that Forbes Insights has produced this year in
association with CIT.

"These results corroborate what we have been hearing anecdotally from the
marketplace," said Burt Feinberg, Managing Director and Industry Group Head of
Retail Finance at CIT. "Many retailers continue to be concerned about consumer
demand and are following conservative inventory and pricing tactics in
anticipation of the upcoming holiday season, trying to maintain liquidity, so
that they can be better positioned for what is hopefully resumption in consumer
spending in 2010."

Jon Lucas, Executive Vice President and Chief Sales Officer of Trade Finance at
CIT, said, "The decline in consumer spending has trickled down from retailers to
the manufacturers and vendors that supply them. Many of these suppliers are
managing through this business cycle by cutting expenses, imposing more
stringent credit terms on their retail customers, and doing less business with
slow paying retailers. In addition, many have turned to factoring and credit
protection services to protect the value of their accounts receivable, if they
do not already have those relationships in place."

Noteworthy findings:

* Cautiously awaiting the return of consumer confidence. While half of
middle-market retailers saw their revenues decline over the past 12 months, 41%
expect their revenues to grow over the next year. However, growth rates may be
tempered by consumer spending issues; only about one-third (32%) indicated that
they expect consumer spending to reach 2007 levels in 2010, while nearly 45%
thought it would take at least until 2011 or 2012 for such spending to resume,
and 17% said it would occur after 2012.
* Cutting costs and conserving cash. In light of the economic downturn,
retailers have had to alter their strategies. Forty-six percent have reduced
their staff levels, 42% halted planned expansions, 29% delayed store
renovations, 29% re-merchandised their shelves, and 21% closed stores. In
addition, 40% renegotiated their rent and 38% received other concessions from
their landlords.
* Increased M&A activity on the horizon. Nearly half (48%) of all respondents
expect M&A activity to increase over the next 12 months. They believe that the
primary drivers of M&A activity will be the greater availability of credit
(34%), reduced valuations (32%) and the need for weaker companies to merge
(26%).
* Inventory issues: Many retailers have already reduced their inventory levels
-43% indicated that their current inventory levels are lower or significantly
lower than they were a year ago. The cuts may not be deep enough; as nearly half
(48%) of respondents said that they should have carried less inventory during
the first half of 2009. The end result: 46% of retailers have cut prices in
order to accelerate inventory turns.
* Retailer bankruptcies impacting suppliers. Two-thirds (66%) of suppliers have
been affected by a retail customer bankruptcy and 59% expect additional retail
bankruptcies in the next 12 months. In addition, 23% of suppliers said that they
are using factoring and credit insurance more to protect themselves from
possible customer bankruptcies.
* Managing customer relationships. To protect their businesses, more than half
(60%) of suppliers are doing less business with retail customers with weak
finances; 60% are monitoring their accounts receivable more closely; 54% are
imposing more stringent credit terms and 39% are requiring deposits for new
customers. At the same time, 30% are offering incentives to retail customers who
pay early.

Middle market companies, a key component of the U.S. economy, account for more
than $6 trillion in sales and employ almost 32 million Americans. U.S. small
businesses employ nearly 59 million Americans (approximately half of all
private-sector jobs), constitute approximately 97% of all identified exporters,
and produce approximately 29% of the known export value.

EDITOR`S NOTE: Complimentary copies of the report are available for download at
http://middlemarket.cit.com.

About the Report

The information in the U.S. Small and Middle Market Outlook 2009: Retailers and
Suppliers Take Stock of Economic Downturn is based on the results of two surveys
and a series of one-on-one interviews conducted by Forbes Insights in July and
August 2009.

The first survey questioned 110 executives and financial decision makers at
middle market retailers. All companies had revenues of $25 million to $1
billion. Respondents represented a broad range of retail segments, including
specialty apparel, consumer electronics, appliances, sporting goods, convenience
stores, housewares, and discount chains. All respondents held senior-level
titles (including CEO, COO, CFO, and VP) and had functional responsibility for
finance, strategy and business development, or general management.

The second survey queried 104 executives and financial decision makers at
suppliers to the middle market retailer sector. All companies had revenues of $2
million to $1 billion; slightly under half weighed in at less than $50 million.
These suppliers represented a broad range of market segments, including apparel
and accessories, consumer electronics, housewares, footwear, home furnishings,
and other retail. All respondents held senior-level titles (including CEO, COO,
CFO, and VP) and/or held functional responsibility for a business unit or
department. Over half were either a CEO or owner. The interviewees were not
clients of CIT.

Individuals interested in receiving future updates on CIT via e-mail can
register at http://newsalerts.cit.com

About CIT

CIT (NYSE:CIT) is a bank holding company with more than $60 billion in finance
and leasing assets that provides financial products and advisory services to
small and middle market businesses. Operating in more than 50 countries across
30 industries, CIT provides an unparalleled combination of relationship,
intellectual, and financial capital to its customers worldwide. CIT maintains
leadership positions in small business and middle market lending, retail
finance, aerospace, equipment and rail leasing, and vendor finance. Founded in
1908 and headquartered in New York City, CIT is a member of the Fortune 500.
www.cit.com

About Forbes Insights

Forbes Insights is the custom research practice of Forbes Media, publisher of
Forbes magazine and Forbes.com, whose combined media properties reach nearly 50
million business decision makers worldwide on a monthly basis. Taking advantage
of a proprietary database of senior-level executives in the Forbes community,
Forbes Insights` research covers a wide range of vital business issues,
including talent management, corporate social responsibility, financial
benchmarking, risk and regulation, and doing business in emerging markets.
www.forbes.com/forbesinsights

CIT MEDIA RELATIONS:
C. Curtis Ritter, 212-461-7711
Vice President
Director of External Communications & Media Relations
Curt.Ritter@cit.com
or
CIT INVESTOR RELATIONS:
Ken Brause, 212-771-9650
Executive Vice President
Ken.Brause@cit.com
or
FORBES INSIGHTS:
Debbie Weathers, 212-366-8848
dweathers@forbes.net

Copyright Business Wire 2009