More stores outsource credit cards
By Furniture Today Staff -- Furniture Today, August 11, 2003
High Point — Most furniture retailers use third-party providers of retail credit services rather than managing their credit business internally, and retailing as a whole is tilting more heavily in that direction.
Just this year, service providers have made moves to take over significant chunks of the consumer credit receivables that two big general-merchandise retailers had been administering internally.
The largest move was Citigroup's agreement in July to acquire the consumer credit card portfolio of Sears, whose receivables stood at $18.4 billion in 2002, according to The Nilson Report, a publisher of credit industry statistics and analysis. Sears has been by far the largest U.S. retailer to continue to manage its own credit card business.
Earlier, Household Retail Services, part of financial giant Household International, took over the credit card business of Saks, with $1.4 billion in receivables.
At the end of last year, according to Nilson, third-party providers handled about 59% of the $91.3 billion in total store card receivables outstanding at U.S. retailers. The Sears and Saks deals are likely to boost the third-party share to 80% or more.
The third-party store card business is dominated by a few large financial companies, led by GE Consumer Finance-Americas, Household, Citigroup and Alliance Data Systems. Conseco Finance also was one of the larger players until this June, when GE acquired Conseco's $2.4 billion portfolio.
Two furniture retail organizations endorse credit card programs from a pair of third-party suppliers. Citigroup offers a program through the National Home Furnishings Assn., and GE works with the Home Furnishings International Assn.
| Store credit card results, 2002 | ||
|---|---|---|
| Dollar amounts in billions | ||
| In-house: Retailers that own their own store card receivables | ||
| Receivables outstanding | Change from 2001 | |
| Sears Roebuck1 | $18.4 | -17% |
| Federated Dept. Stores | 2.2 | -3% |
| Target | 2.2 | -13% |
| Spiegel Group | 1.9 | -17% |
| Army & Air Force Exchange | 1.8 | 3% |
| Total in-house | $37.3 | -12% |
| Private label: Companies that offer store cards on retailers' behalf | ||
| Receivables outstanding | Change from 2001 | |
| GE Consumer Finance | $27.8 | 14% |
| Household Retail2 | 12.2 | 6% |
| Citigroup1 | 17.3 | 21% |
| Alliance Data Systems | 2.8 | 13% |
| Conseco Finance | 2.3 | -15% |
| Wells Fargo Financial | 0.7 | 24% |
| Shoppers Charge | 0.3 | 14% |
| American General Financial | 0.3 | -16% |
| Other private label | 0.3 | -1% |
| Total private label | $54.0 | 11% |
1. Sears Roebuck announced in July it was selling its credit card business to Citigroup.
2. Household Retail has taken over the credit card business of Saks, which had 2002 receivables of $1.4 billion.
Source: The Nilson Report
