Possible ‘Financial Distress’ Indicated as Retailers Such as Peloton and Saks Persist in Delayed Vendor Payments
In recent months, retailers such as Peloton, Saks, Express, and Bath & Body Works have been struggling to pay their vendors on time, according to data from Creditsafe. Late payments are often seen as a sign of financial distress or an early indicator of bankruptcy risk. This pattern has been observed in the downfall of other retailers like Bed Bath & Beyond, RadioShack, and Toys R Us.
Bed Bath & Beyond’s bankruptcy last April was partly attributed to its failure to pay vendors on time, leading to stock shortages during the crucial holiday season. Similar dynamics have been seen in the demise of other retailers as well. Failing to pay vendors on time can indicate liquidity issues or a lack of concern for the company’s financial health.
While late payments don’t always signal financial troubles, sudden fluctuations in unpaid bills, coupled with falling sales or rising debts, raise concerns about a company’s financial stability. In the case of Peloton, Saks, Express, and Bath & Body Works, their delayed payments suggest potential struggles with cash flow management or preparations for revenue fluctuations.
Peloton, in particular, has experienced a spike in late payments, which could indicate financial challenges and poor cash flow forecasting. The company has been grappling with cash flow issues due to a decline in demand for its exercise equipment since the end of pandemic lockdowns. Although Peloton generates substantial revenue from subscriptions, its inability to sell enough equipment has impacted its cash flow.
Saks, a private department store chain, has also faced criticism for not paying its vendors. The average number of days that Saks pays its bills late has been increasing since October 2023. The company has assured vendors that it has sufficient liquidity and a sound balance sheet but has been classified as being at high risk of failure by Creditsafe.
Similarly, Express, an apparel retailer, is struggling with mounting debt and slowing discretionary spending. The company is looking to restructure its debt and may face bankruptcy if its lenders don’t amend repayment options or provide additional cash. Express has already shown signs of financial strain with an increase in late payments and a drop in its assets-to-liabilities ratio.
Bath & Body Works, known for its home and body care products, has witnessed a slump in sales after the initial pandemic boom. While the company remains profitable, its payment patterns have been erratic over the past year. Unpredictable payment history could hinder Bath & Body Works’ efforts to secure financing or new suppliers.
Creditsafe’s data provides valuable insights into these retailers’ financial health and creditworthiness. Late payments and inconsistent payment patterns serve as warning signs for potential financial risks. However, it’s important to note that late payments alone don’t always indicate financial distress, as some retailers may have sufficient leverage to pay suppliers at their convenience.
Overall, these retailers need to address their cash flow issues and ensure timely payments to vendors to maintain healthy relationships and secure their financial stability. The ability to manage cash flows, improve profitability, and reduce debt will be crucial for their survival in the highly competitive retail industry.
Disclaimer: The information provided in this article is based on data from Creditsafe and statements by industry experts. It should not be considered financial advice. Readers are encouraged to conduct their own research and consult with financial professionals before making any investment decisions.
