Following the Slow Decline of Toys “R” Us

Why Your Business Data Shouldn’t Sleep

On Monday, September 18, iconic toy retailer Toys “R” Us filed Chapter 11 bankruptcy, as have many brick-and-mortar retailers. The filing occurred in an attempt to reinvigorate declining sales by gaining credit approval from suppliers before the holiday season.

If you’re a credit leader striving to manage slow payments while navigating strategic business relationships, the potential impact to your organization from a bankruptcy filing for a company the size of Toys “R” Us is high.

Bankruptcies and slow payments keep the best of credit leaders awake at night, and an endless stream of sources from the news to social media to SEC filings can offer instant snapshots of various components of business health. But, knowing which data sources to trust—and more importantly—when to trust them, is the key to success in credit management and business leadership.

Business Data Isn’t Always Business Intelligence

If you were one of the suppliers affected by Toys “R” Us’s bankruptcy filing, you could have discovered the news in a variety of ways. Payments had been slow, but Toys “R” Us hadn’t defaulted on many payments, according to Dun & Bradstreet’s data. A look at Toys “R” Us’s financial statements would have revealed a sizeable bond maturing next year. This would have pointed to higher risk, but may not have necessarily indicated a September bankruptcy filing. Watching the news events would have surely notified you, but not in enough time for you to manage the potential exposure.

Risk is multi-faceted. It’s no longer enough to look at one source of information, one story, or one set of data. We at Dun & Bradstreet believe strongly in the power of multiple data sources to tell the full story of risk. We currently cultivate over 30,000 sources of data and use that data to help our customers find truth and meaning in it to grow valuable business relationships. Our data includes sources from trade payments, suits, legal filings, private company financial statements, and even newswire data fresh off the press.

Predicting Toys “R” Us’s Bankruptcy

Beyond traditional data, Dun & Bradstreet’s proprietary global data collection system allows it to ingest, assess, and act upon data from multiple sources. Data points, when aggregated and analyzed over a period of time, generate “signals” that are used in building our best-in-class predictive models—and help with understanding the overall health of a company. In fact, Dun & Bradstreet was able to use these sources to feed its proprietary scores and indicators, such as the Dun & Bradstreet Financial Stress Score, to provide predictive insight into the Toys “R” Us bankruptcy. The Financial Stress Score percentile for Toys “R” Us was a 1, indicating the highest level of risk for months prior to the bankruptcy. Our Commercial Credit Score percentile was a 7 (very high risk) prior to the bankruptcy filing. Finally, the PAYDEX® Score indicated Toys “R” Us was paying its vendors 19 days past terms. All of these indicators showed that Toys “R” Us was under significant financial distress prior to filing for bankruptcy.

Bankruptcies have a systemic impact on the business community.  We see it as our mission to help our customers manage that risk well before it impacts their businesses.