Inventory Management Helpful in Recession: Report

MARK HAMSTRA

NEW YORK — Moody's Investors Service here said Tuesday that retailer investments in inventory technology might have helped some of them get through the recent recession without defaulting on their debt obligations.

"We think investments in inventory-management technology in the years leading up to the recession, coupled with a disciplined mindset and rational competitive behavior, made retailers more efficient when they entered the 2007-09 recession than they were during the last recession," the ratings agency said in a report. "Days inventory on hand, a measure of efficiency, was about 84.5 days in 2009, down from 92.4 days during the 2001 recession."

Moody's also cited favorable lending terms ahead of the recession that allowed retailers to enter new credit agreements with better terms.

Overall, the default rate of retailers with speculative-grade debt was 5.1% in 2009, "sharply lower" than the rate in previous economic downturns, the agency said. It projected a default rate for speculative-grade retailers of 1.9% a year from now.

It also cautioned that default risk will depend on several factors, "including government stimulus, financial policies and creditor behavior."