Credit health of businesses in the retail sector falls below national levels

Credit health of businesses in the retail sector falls below national levels
As the holiday season approaches, retail businesses need to work to improve payment performance and decrease debt

Costa Mesa, Calif., Nov. 19, 2013 — Experian®, the leading global information services company, today announced that businesses in the retail sector had an average risk score* of 51.05 in Q3 2013, which is 12.7 percent lower than the national average.** In its quarterly Metro Business Pulse analysis, Experian looked at several key indicators of business health for the retail sector to better understand how these businesses are poised to handle the oncoming holiday season.

Findings from the analysis showed that, in addition to risk score, retail businesses scored below national averages in paying their bills beyond contracted terms (almost one day later), percentage of delinquent debt (with 9.2 percent more delinquent dollars) and bankruptcy rates (with 55.8 percent more retail businesses declaring bankruptcy than in other industries).

“With big shopping days like Black Friday, Small Business Saturday and Cyber Monday right around the corner, retail stores will look to ensure they have adequate resources available to take full advantage of the holiday rush,” said Joel Pruis, Experian’s senior business consultant. “During this time, it is also important for lenders and other companies to understand how these businesses are performing in terms of meeting financial obligations. While the retail industry typically expands inventories going into the fourth quarter to support its most important sales period, the decline in business health emphasizes the need to manage payment behaviors.  The key to continued credit availability is maintaining timely payments and appropriate management of balances.”

As part of the analysis, Experian also examined how retail industry businesses were performing at a metropolitan level. In terms of risk score, retail businesses in Honolulu had the highest score at 58.71, 15 percent higher than the industry’s national average. The remaining metro areas in the top five for risk score include Portland, Ore. (56.01); Pittsburgh (55.77); Tacoma, Wash. (55.52); and Fort Worth, Texas (55.30). Conversely, metro areas in Florida made up three of the bottom areas in terms of risk score for the quarter. Miami-area businesses had the lowest commercial risk score at 38.27, followed by Fort Lauderdale, Fla. (41.17); West Palm Beach, Fla. (43.74); Memphis, Tenn. (44.47); and Atlanta (44.69).

Commercial risk score

(Retail industry)

Top five metro areas

Bottom five metro areas

1.   Honolulu


1.  Miami


2.   Portland, Ore.


2.  Fort Lauderdale, Fla.


3.   Pittsburgh


3.  West Palm Beach, Fla.


4.   Tacoma, Wash.


4.  Memphis, Tenn.


5.   Fort Worth, Texas


5.  Atlanta


Regarding timely payments, findings from the Q3 analysis showed that retail businesses in Milwaukee (3.34 days), paid their bills the least number of days past due, approximately half the number of days it took the rest of the industry (6.59 days). Retail businesses in San Francisco (3.41 days); Seattle (3.81 days); Oklahoma City (3.83 days); and New York (3.97 days) were all in the top five. On the other side of the spectrum, Fort Myers, Fla., retail businesses took the longest to pay their bills at 22.30 days past due. The others in the bottom five included Las Vegas (17.61 days); Orlando, Fla. (15.53 days); Chicago (11.83 days); and Miami (11.12 days).

Days beyond contracted term

(Retail industry)

Top five metro areas

Bottom five metro areas

1.   Milwaukee


1.   Fort Myers, Fla.


2.   San Francisco


2.   Las Vegas


3.   Seattle


3.   Orlando, Fla.


4.   Oklahoma City


4.   Chicago


5.   New York


5.   Miami


Regarding the percentage of delinquent debt, Salt Lake City area businesses (1.05 percent) had the lowest percentage in the retail industry in Q3, 92.5 percent lower than the industry’s national average (14.08 percent). The other metro areas in the top five included Baton Rouge, La. (1.45 percent); Houston (3.40 percent); Tucson, Ariz. (4.03 percent); and Knoxville, Tenn. (4.05 percent). Conversely, retail businesses in Fort Myers, Fla., had the most delinquent debt in the quarter at 36.93 percent. The other four metro areas near the bottom of the list included Chicago (30.15 percent); Miami (30.04 percent); Cincinnati (29.08 percent); and Philadelphia (28.16 percent).

Percentage of delinquent dollars

(Retail industry)

Top five metro areas

Bottom five metro areas

1.   Salt Lake City


1.   Fort Myers, Fla.


2.   Baton Rouge, La.


2.   Chicago


3.   Houston


3.   Miami


4.   Tucson, Ariz.


4.   Cincinnati


5.   Knoxville, Tenn.


5.   Philadelphia


Finally, when looking at bankruptcy rates within the industry, businesses in Baton Rouge, La., had the lowest rate, at 0.50 percent in Q3 2013, compared with the national average of 1.48 percent. They were followed by Honolulu (0.58 percent); New Orleans (0.63 percent); Nassau, N.Y. (0.64 percent); and Miami (0.67 percent) to round out the top five. Conversely, retail businesses in major metropolitan areas in California had the three highest bankruptcy rates in the industry, including Sacramento, Calif. (3.75 percent); Riverside, Calif. (2.64 percent); and Fresno, Calif. (2.56 percent). The other two metro areas in the bottom five were Albuquerque, N.M. (2.49 percent) and Syracuse, N.Y. (2.42 percent).

Bankruptcy rates

(Retail industry)

Top five metro areas

Bottom five metro areas

1.    Baton Rouge, La.


1.   Sacramento, Calif.


2.    Honolulu


2.   Riverside, Calif.


3.    New Orleans


3.   Fresno, Calif.


4.    Nassau, N.Y.


4.   Albuquerque, N.M.


5.    Miami


5.   Syracuse, N.Y.


Complete findings from the Q3 2013 Metro Business Pulse, including detailed industry group analysis, will be presented in Experian’s Quarterly Business Credit Review Webinar on Dec. 10 at 11 a.m. Pacific time/1 p.m. Central time/2 p.m. Eastern time. If you would like to attend the event, click here.

Roslyn Whitehurst
Experian Public Relations
1 714 830 5578
Twitter: @RozWhitehurst

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About Experian
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*Based on a scale of 1 to 100 (with 100 being least risky); predicts the likelihood of severe delinquency (more than 91 days past due) within the next 12 months
**Based on all industries within the top 25 percent of metropolitan statistical areas