Retailers like Peloton and Saks keep paying vendors late, signaling possible ‘financial distress’

Products You May Like

In this article

In the months before Bed Bath & Beyond declared bankruptcy last April, the former home goods titan was trapped in a crushing cycle. The retailer had been failing to pay its vendors on time, if at all. During the pivotal holiday season, some began requiring payment when goods were delivered or refusing orders altogether, which left Bed Bath unable to stock shelves. 

Running low on cash and needing a strong holiday quarter, the retailer’s position — and in turn its relationship with vendors — only got worse. The cycle continued until the big boxer succumbed to bankruptcy, and was liquidated a few months later. 

Similar dynamics accelerated the demise of other once-ubiquitous retailers, such as RadioShack and Toys R Us. While the factors that led to their downfalls varied, failing to pay vendors on time is often a sign of financial distress or an early indicator of bankruptcy risk, experts have told CNBC.

Retailers including Peloton, Saks, Express and Bath & Body Works have often failed to pay their vendors on time in the last few months, according to new data from Creditsafe, a business intelligence platform that analyzes companies’ financial, legal and compliance risks.

Plenty of companies, including many that are healthy, leave bills unpaid for weeks or months. But when companies have sudden fluctuations in unpaid bills, at the same time their sales fall or debts rise, late-payment rates help to build a picture of which businesses could face financial risks in the coming months and years if their operations don’t improve.

In some cases, Peloton, Saks, Express and Bath & Body Works were later on their bills than usual, indicating they could be struggling to manage cash flows or planning for revenue fluctuations.

“It is generally a telltale sign of financial distress,” Perry Mandarino, the head of restructuring at B. Riley Securities, told CNBC in an interview. “It’s either they have liquidity issues, or they don’t care.” 

A person walks past a sales advertisement at Saks Off 5th department store ahead of the Thanksgiving holiday sales in Washington, D.C., on Nov. 21, 2023.
Saul Loeb | AFP | Getty Images

To be sure, late payments don’t always signal financial troubles. Some large retailers with many vendors could have a healthy balance sheet, but because they have leverage they could decide to pay their suppliers when it’s convenient to them, said Mandarino. Those instances are bigger issues for vendors than for retailers.

In other cases, inconsistent payments could indicate cash flow issues, especially when companies aren’t profitable and have high debt. It’s not unusual for a business to pay a vendor 10 days late, if that’s what it typically does. But if that cadence suddenly changes, it’s cause for concern, said Mandarino. 

Creditsafe’s insights are based in part on companies’ payment history with suppliers, collected through its “global network of partners and trade payment contributors.” 

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.


The connected fitness company paid most of its bills on time in November, but the percentage of late payments spiked in December. It dipped in January, before jumping again in February, according to Creditsafe’s report.

“When the number of late payments increases like this, it’s often indicative of financial challenges and poor cash flow forecasting,” Creditsafe said.

Peloton has consistently failed to reach positive free cash flow, it said in February when announcing fiscal second quarter earnings. CEO Barry McCarthy, who previously told employees that “Cash is oxygen” and “Oxygen is life,” aimed to achieve positive free cash flow by February. But the company has said it now expects to meet that goal during its fiscal fourth quarter, which concludes at the end of June. 

The company is struggling with cash flow partially because it’s not selling enough of its exercise equipment, which is costly to make, according to an analysis of Peloton’s securities filings. Demand has fallen since Covid-19 pandemic lockdowns ended.

In the three months ended Dec. 31, Peloton reported a net loss of $194.9 million, while sales fell to $743.6 million, down 6% from a year earlier. The company is trying to return to growth by June, later than previously expected.

Peloton makes plenty of money from subscriptions and could increase cash flow “somewhat immediately” if it focuses on sustaining its customer base rather than growing significantly, Simeon Siegel, senior analyst at BMO Capital Markets, told CNBC.

“My view is, you can have a brand that’s simply a good brand that generates a lot of cash and none of us will ever complain about liquidity, but that’s not what’s happening, they have to want to do that,” said Siegel. 

Siegel said he’s not concerned about Peloton’s burn rate. But if the company cannot boost sales or cut costs, his view could change next year when it will need to make payments toward its term loan, Siegel said. Peloton’s term loan requires it to pay down at least $800 million of its convertible notes by next November to avoid triggering an early maturity, he said.

A Peloton spokesperson called Creditsafe’s data “inaccurate” and said it doesn’t align with the company’s own payment information.

“We have excellent relationships with our vendor partners and do not see the same fluctuations or monthly drivers in payment times that are being reported,” the spokesperson said.

Peloton uses a metric known as days payable outstanding (DPO) which it deems as being more accurate, the spokesperson said, and shows that payments are “timely and consistent.” The metric, which can be approximated with a simple formula using information from a company’s public filings, shows on average how long it takes businesses to pay bills and invoices. Peloton’s DPO was largely consistent over the last six quarters, but the number has ticked up until it jumped to 104 days in the three months ended Dec. 31, according to CNBC estimates. The DPO was 95.5 days in the year-earlier period.

The spokesperson added that Peloton is not facing a liquidity crunch.

“Peloton is also adequately capitalized to execute our strategic objectives, and our access to capital remains strong. Our publicly reported cash and cash equivalents reinforce this,” the spokesperson said.

Creditsafe has classified Peloton as being at a “high risk” of failure.


The private department store chain came under fire late last year after numerous vendors said Saks hadn’t paid them, leading some brands to tighten orders or stop shipping products altogether. 

The rumors first arose on social media and were later confirmed by Business of Fashion. In a quarterly letter to vendors made public in December, CEO Marc Metrick insisted to his suppliers that the company has “sufficient liquidity and a sound balance sheet,” Women’s Wear Daily reported. 

“As we carefully manage our business against the industry wide softness in the U.S. luxury market, we are confident in our ability to continue meeting our financial obligations,” Metrick wrote, according to the outlet. 

Creditsafe’s data show a company increasingly behind on its bills. While Saks often made late payments last year, its on-time payments have dropped significantly since October 2023, the firm said.

The average number of days that Saks is paying its bills late has also fluctuated.

In response, a company spokesperson told CNBC, “We believe the numbers you shared are incorrect.”

To keep operations afloat, Saks’ parent company HBC secured $200 million in capital and amended the terms of its revolving credit facility in February. 

The liquidity infusion will be used for “growth initiatives” and “general working capital purposes,” the retailer said in a news release. 

Creditsafe has classified Saks as being at a “high risk” of failure.


The apparel retailer’s business has faced pressure as discretionary spending slows and it manages a mounting pile of debt.

The company’s operational spending rose in the first three quarters of its fiscal year from the prior year, according to its third-quarter earnings release. Express had about $280 million in debt as of Oct. 28, with just $34.6 million in cash and cash equivalents. Its cash on hand improved from the prior-year period, but its ratio of assets to liabilities was under 1 at the time, indicating it didn’t have sufficient assets to cover its liabilities, according to securities filings.

In February, The Wall Street Journal reported Express is looking to restructure its debt and could be headed for bankruptcy if its lenders don’t amend their repayment options or agree to give it more cash.

Preventing bankruptcy also depends on whether Express’s vendors will keep fulfilling orders without tightening payment schedules, which would only put more pressure on the retailer, the outlet said. 

Given the recent payment trends provided by Creditsafe, Express is already struggling to keep up.

The average number of days that Express was paying its bills past the terms of its vendor contracts grew from nine in January to 15 in February. The percentage of payments that were late also increased in that time frame.

“This constant up-and-down pattern with the company’s [payments] indicates that its cash flow isn’t stable and is likely being affected by revenue changes, debt and other factors,” said Creditsafe.

Executives told analysts on the company’s third-quarter earnings call that it’s banking on an infusion of cash from the IRS under the Coronavirus Aid, Relief and Economic Security (CARES) Act to help keep operations afloat. Express expects to get at least $48 million back from the federal government, interim finance chief Mark Still said.

He said the company is working with the IRS to move the claim forward “given the importance of this receivable to our liquidity.”

In the meantime, Express’s newly appointment CEO Stewart Glendinning, who took the helm of the company in September after CEO Tim Baxter resigned, said he’s working on recovering the company’s “full profit potential,” including by cutting more costs, he told analysts during Express’s third quarter earnings call in November.

As of Monday’s close, Express’s stock was down about 83% year to date. On March 6, it was delisted from the New York Stock Exchange because it couldn’t sustain a market capitalization of at least $15 million for 30 consecutive trading days.

Express has not announced a reporting date for its fourth quarter and full-year results, which it reported last year on March 24. 

Creditsafe has classified Express as being at a “high risk” of failure.

Express didn’t return a request for comment on the report.

Bath & Body Works 

The home and body care retailer has seen sales slump as demand for its candles and soaps normalized after a pandemic boom. But it’s regularly profitable, and had enough assets to cover its liabilities in the three months ended Feb. 3, securities filings show. 

Still, its payment patterns have been “erratic” over the last year, according to Creditsafe. While it may not face imminent risk of default, an unpredictable payment history could weigh against Bath & Body Works if it’s looking to shore up fresh financing or secure new suppliers, said Bhalla, Creditsafe’s spokesperson.

The average number of days that Bath & Body Works was paying its bills past the terms of its vendor contracts stood at 10 in September and October, and then grew to 22 and 28 in November and January, respectively. The percentage of payments that were late have also risen since December.

Bloomberg data shows the average number of days that bills remained unpaid fell slightly from 37.63 in fiscal 2022 to 36.93 in fiscal 2023.

“Bath & Body Works values being a good partner for our vendors,” the company told CNBC. “This is evident in our data — as reflected on reputable financial reporting platforms — which shows us providing consistent timely payment.”

Creditsafe has classified Bath & Body Works as being at a “moderate risk” of failure.

Products You May Like

Articles You May Like

Boeing shareholders re-elect departing CEO Calhoun to board
Walmart says more diners are buying its groceries as fast food gets pricey
Walmart surges to all-time high as earnings beat on high-income shopper, e-commerce gains
So-Called Strategic Tariffs Are Still Tariffs—and Still Protectionist
Netflix ad-supported tier has 40 million monthly users, nearly double previous count

Leave a Reply

Your email address will not be published. Required fields are marked *