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Creditsafe Releases Financial & Bankruptcy Outlook for U.S. Retailers

Creditsafe Releases Financial & Bankruptcy Outlook for U.S. Retailers

New Report Examines the Financial Strengths and Weaknesses of Top Retailers, Including Target, Macy’s, Neiman Marcus, JCPenney and The Kroger Co.

Amid rising inflation, a cost-of-living crisis and a steep decline in consumer spending, many retailers are calling for flat to declining sales this year. So, retail bankruptcies have become more common in recent years with the likes of Serta Simmons Bedding, Neiman Marcus Group and JCPenney filing for Chapter 11. Today, Creditsafe released its Financial & Bankruptcy Outlook: Retail report, which examines how financial planning, cash flow management and Accounts Payable management have affected the financial health of U.S. retailers.

The report provides an in-depth analysis of the financial health and payment behaviors of 10 major U.S. retailers, including Serta Simmons Bedding, Macy’s, Inc., JCPenney, Lowe’s Companies Inc., Neiman Marcus Group Ltd. LLC, Nordstrom, Inc., Stein Mart, Inc., Target Corporation, The Kroger Co. and Belk Inc. The data included in the report was gathered from multiple sources, including financial earnings reports released by the retailers, filings with the U.S. Securities and Exchange Commission and the Creditsafe credit risk and intelligence platform.

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Highlights from the report include:

  • The Kroger Co. is in strong financial shape with increased sales and profitability and a track record of paying its bills on time. The company pays 88% to 92% of its bills on time, which means very few of its bills are paid late. Plus, the value of its late payments dropped significantly in October 2023. It’s also worth noting that Kroger’s Days Beyond Terms score (the number of days past payment terms it takes to pay bills) has ranged between 2 and 6 for the last 12 months and was over 5 times lower than the industry average (11.44) in October.
  • With increasing net income and consistently low Days Beyond Terms (DBT), Target is on the right track. The retailer has one of the lowest Days Beyond Terms (DBT) scores out of the retailers examined in the report. To put this into context, Target’s DBT has ranged between 4 and 6 for the last 12 months – meaning it typically pays its bills within a week of the agreed payment terms. Meanwhile, the industry average DBT was between 13 and 15.
  • Macy’s and JCPenney may be in the same category of department stores, but their financial health differs vastly. Macy’s has improved its cash flow through disciplined sales and inventory forecasting. This has helped keep its DBT low for the last 12 months and drastically reduce the number of delinquent bills (91+ days). On the other hand, JCPenney, which filed for bankruptcy in May 2020, is struggling to pay its bills with an increasing number of delinquent payments (91+ days) in recent months.
  • Neiman Marcus is struggling with declining revenue and late payments, while Nordstrom’s annual revenue has grown and DBT has consistently been below the industry average. Three years since filing for bankruptcy, Neiman Marcus’ quarterly revenue and store sales have dropped. Although its track record of paying bills on time has been erratic over the last six months, the number of late payments (61-90 days) and delinquent payments (91+ days) dropped considerably in the last two months. Meanwhile, Nordstrom is faring better with a DBT that has been consistently below the industry average DBT. Plus, has its finances in good working order. Its DBT has consistently been below the industry average and its ability to pay bills on time has markedly improved in recent months.

Matthew Debbage, CEO of the Americas and Asia for Creditsafe, said, “If our analysis has proven anything, it’s that Accounts Payable management can improve cash flow and lower the risk of failure. But more than that, it shines a light on an important risk metric that many businesses aren’t aware of – Days Beyond Terms (DBT) – which indicates the likelihood that a company will become seriously delinquent (91+ days) on bills or that a company will go bankrupt within 12 months. As our report uncovers, retailers with higher DBT scores tend to struggle with making payments and are often plagued by declining sales, mounting debt and liquidity issues. Meanwhile, retailers with consistently low DBT scores tend to have their finances under better control. Understanding what factors influence a company’s financial health is critical as retailers face hard times ahead and consumer spending continues to decline.”

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