The sudden bankruptcy of Toys ‘R’ Us has retailers, especially those at the low end of the credit spectrum, reassessing if they too are vulnerable to a vendor squeeze around the holidays, according to a WSJ Pro Bankruptcy commentary today. The speed with which Toys collapsed into chapter 11 after its vendors tightened payment terms is a wake-up call to retailers to reassess their liquidity to avoid a similar fate, according to a report issued on Wednesday by Moody’s Investors Service. “We think this is part of a broader crisis of confidence that could start to spread to other highly leveraged, lower-rated retailers,” Moody’s said. Vendors are typically the first pressure point when a brick-and-mortar retailer’s finances are stretched too thin, according to the commentary. Most retailers’ shelves are well-stocked for at least the first half of the holiday-shopping season, Moody’s said, but what is unknown “and potentially very difficult to determine” is whether they will be able to maintain “reloading” relationships for the later stages.
