Now might also be the time to funnel more funds into IT and other areas that help improve operations, said Madison Riley, retail strategist and senior partner at Kurt Salmon Associates.

“If you can employ that money around [research and development] and around product innovation, around improving your analytical systems, analytic capabilities, and investing in store experience, I think those are all great things to do right now because they’ll play critical roles down the road for the next five, 10 years,” Riley said.

There are also some scant signs of life in the M&A market. Private equity firm Advent International Corp. bought Charlotte Russe Holdings Inc. for $380 million last month.

But plenty have been holding off, perhaps creating some pent-up demand. According Robert W. Baird & Co., there were only 43 mergers and acquisition deals with price tags under $1 billion in the first half, a 37.7 percent decline from the 69 deals cut a year earlier.

Among those on the hunt is Phillips-Van Heusen Corp., which has almost $370 million burning a hole in its pocket.

PVH snatched up Calvin Klein in 2002, bought neckwear producer Superba in 2007, and in the past year has added more than $100 million to its cash coffers. For now, the company is still on the hunt for the right deal.

“There have been slim pickings so far,” said Emanuel Chirico, chairman and chief executive officer of PVH, late this summer. “We’ve looked at some companies, but they’ve been troubled, and nothing has interested us so far. We haven’t found any brands that we think will create true consumer demand. And good businesses that we might be interested in don’t want to do transactions now, with valuation multiples where they are.”

Chirico said the company could put its cash to work and deals could materialize next year if the credit markets loosen.

“We’re not a bank, and when it accumulates, we need to return it to shareholders,” Chirico said. “Ideally, that would be through an acquisition, but we could also consider a stock or debt buyback.”

The recession has led to some unusual deals as companies focus on rebuilding their balance sheets. This summer, The Finish Line Inc. gave Jimmy Khezrie, owner of Jimmy Jazz, $7.7 million to take over the 75-door Man Alive chain and assume its debts.

The types of deals ultimately cut in the fashion industry are expected to be on the smaller side.

“When the environment does pick up and become better, you may see more strategic acquisitions,” said Tom Chin, managing director of consulting and analytics at Telsey Advisory Group. “They may not be big, multibillion-dollar transactions. Generally speaking, it’s tough to raise the debt financing that you would need to make a larger, game-changing acquisition.”

But before you can spend it, you have to make it. And not everyone has the knack for building up a billion-dollar cash hoard. Amassing that type of cash starts with the decision to keep tight tabs on money as it flows through your business.

“You can have all the ideas in the world you want, but if you don’t have the balance sheet or the cash flow to reinvest, you really can’t go anywhere,” said Roger Farah, president and chief operating officer of Polo, at the WWD CEO Summit last year.

The cash-to-cash cycle has been cut in half since Farah joined the company in 2000, meaning the company’s investments in product turn back into cash—when the shoppers pay up in the store—twice as quickly as they used to. Polo founder and CEO Ralph Lauren and Farah have used their cash flow to strengthen the firm’s retail presence, relaunch the Lauren by Ralph Lauren better line and develop American Living at J.C. Penney Co. Inc.

Most companies with big rainy-day funds share one simple trait: They hold on to each nickel as long as they can.

“The best way to amass cash is to have a very profitable business model and to be managing it very closely,” said Kurt Salmon’s Riley. “Obviously you pay your vendors, but you wait until the last darn minute to do so.”

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Evan Clark is an associate financial editor and contributor to WWD.