Rite Aid’s bankruptcy last week was the latest toll of a rising wave of American companies that couldn’t afford to pay their debt any more.
As inflation pushes many consumers to tighten their belts, companies are seeing softening earnings in 2023. That’s bad news for those with little free cash to pay for the coming debt. Over the past decade, companies could usually refinance their debt at ultralow rates and kick the can down the road. Among those, we further zeroed in on firms whose cash reserves have shrunk by more than 20% from a year ago—a sign that things aren’t improving. A few names stood out: WeWork , Sportsman’s Warehouse , Children’s Place , Sleep Number , and Funko .
A few specialty retailers are also struggling with draining cash reserves amid dwindling earnings, as consumers cut back discretionary spending. Many can still draw liquidity from their revolving credit lines, but borrowing more money now would mean higher interest expenses down the line.