A multi-generation family-owned discount retailer was experiencing significant sales decline over the preceding four years. Cash reserves were declining and the family suspected that additional capital would be required. The retailer operated 40 stores in 3 states, employing nearly 1,500 staff.
If action was not taken quickly it was likely the company would have to liquidate and/or begin bankruptcy proceedings.
Cash:
We developed a comprehensive cash flow projection to determine the magnitude and timing of a potential cash shortfall. Steps were put in place to mitigate the potential impact of a liquidity crunch, including aggressive management of receivables and payables, strict financial controls, reduced salaries for family members and a sell-off of non-operating assets.
Corporate Functions:
We benchmarked company performance against the industry as well as other discount and regional retailers.
We identified and implemented improvements in the supply chain, distribution and staffing levels. We also implemented an improved inventory management and tracking system, liquidated excess and obsolete inventory, consolidated freight shipments and better coordinated inter-store deliveries.
Stores:
We ranked each store based on profitability and identified specific areas of improvement, including merchandising, rent and staffing. We prioritized efforts and developed an action plan for each location.
We assisted management in articulating a formula for successful store operations and helped implement targeted strategies in the lesser-performing stores. Three of the lowest performing stores - which had no viable path to profitability - were closed.
Management:
We worked with management to assess talent, establish a leadership team and develop a palatable generational transition plan.
As a result of our work, sales growth stabilized and turned positive, from -6%/year to +2%/year. Inventory levels were reduced by $2 million, inventory turns improved by over 40%, and average distribution center throughput decreased from 3 weeks to 48 hours.
We also successfully renegotiated loan covenants with the bank, thus averting a bankruptcy filing.
Just as we helped this client find its Path to Profitability, we can do the same for you. If you would like to learn more, please give us a call.
Until next month, Point Your Business Where it Needs to Go!
