Suppliers of Bon-Ton Stores are insisting on payment by L/C or cash on delivery as the US department store chain that opened its first outlet in 1898 struggles with debt.

Analysts are drawing parallels with the trouble suppliers had with Toys "R" Us shortly before it filed for bankruptcy earlier this year.

L/C pressure

Bon-Ton'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's turnaround plan fails.

Meanwhile, the suppliers insistence on being paid on L/C terms or cash on delivery is creating additional pressures on Bon-Ton's cash flow and its ability to deliver the turnaround plan.

The demands on the stores' finances come just as the chain enters the key holiday-shopping season in the US.

Similarities

The company's troubles with suppliers are similar to those faced by Toys "R" Us earlier this year, when vendors tightened their conditions as the toy retailer struggled with debt.

Department store chains have been struggling to prop up sales in recent years as shoppers increasingly migrate to online competitors. Retailers including Macy's, J C Penny and Sears Holdings have closed underperforming stores.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.