“Leading up to its bankruptcy declaration in April, Bed Bath & Beyond faced a dire situation as it struggled to meet payment obligations to vendors. The home goods giant’s inability to pay vendors on time, or at all, led to significant disruptions during the crucial holiday season. Some vendors demanded payment upon delivery of goods or ceased fulfilling orders altogether, resulting in depleted shelves for Bed Bath & Beyond.”
“As Bed Bath & Beyond faced dwindling cash reserves and sought a robust holiday season to stabilize its finances, its strained relationship with vendors further deteriorated. The cycle of financial strain persisted, ultimately culminating in the retailer’s bankruptcy filing and subsequent liquidation a few months later.” “Similar patterns hastened the downfall of once-prominent retailers like RadioShack and Toys R Us. Experts caution that delayed vendor payments often signal financial distress or bankruptcy risk. Recent data from Creditsafe, a business intelligence platform, reveals that retailers such as Peloton, Saks, Express, and Bath & Body Works have frequently missed vendor payments in recent months.”
“Late payments can be common among companies, even those in good financial health, with bills left unpaid for weeks or months. However, when businesses experience sudden spikes in overdue bills alongside declining sales or increasing debts, it can signal potential financial risks in the future. Instances where Peloton, Saks, Express, and Bath & Body Works were tardy on their payments suggest potential challenges in managing cash flows or preparing for revenue fluctuations.”
“While late payments don’t necessarily indicate financial distress, they can be a cause for concern. Some large retailers, despite having a healthy balance sheet, may delay payments to vendors based on their leverage and convenience, which can pose challenges for vendors. However, inconsistent payments may signal cash flow issues, particularly for companies that are unprofitable and burdened with high debt. While it’s not uncommon for a business to occasionally pay vendors late, a sudden change in payment patterns could be indicative of underlying financial instability.”
The firm uses the data and other insights to determine a company’s credit risk. Investment banks also use the information when deciding lending terms with a company, or to gauge whether a business is in financial distress. The information is regularly updated, and the data used in this report was current as of last Wednesday.Creditsafe spokesperson Ragini Bhalla said payment data is only one factor the firm considers when assessing a company’s financial health.Though the data “doesn’t represent a company’s total trading behavior, analysis has proven that it is hugely predictive of a company’s financial health and creditworthiness,” Bhalla said.
