Jim Chim, CTA
TOC Discovery Limited
D’Andre N. Davis, CTP
Huron Consulting Group, LLC
Jacen A. Dinoff, CTP
KCP Advisory Group, LLC
Glenn D. Eisenhuth, CTP
Abrams & Jossel Consulting, Inc.
take timely markdowns. This is why
several large retailers, including Wet
Seal and Deb Shop, filed Chapter 11 in
January of this year, after spending
December shoring up cash.
• Balance Sheet as an Afterthought.
This is a common issue for advisors
working with retail management.
Because the retail industry is
multifaceted and rapidly changing,
management often ignores the
staggering debt and growing
fixed costs accumulated while it
struggles to adapt to a world of
online shopping and dropping foot
traffic numbers. When negotiating
with suppliers during the preholiday timeframe, retailers often
fail to consider seasonality issues
and lead times to get product in
prior to or during a crisis, any push
back of goods, etc.; variable costs;
and inventory mix assessment
(priority items to flag that are still
attracting margins) to bring in a
positive inventory valuation prior
to the crisis management process.
These all-too-common issues
played out in the decline of Best
Buy, RadioShack, and Tesco.
Often, and particularly in retail
engagements, a turnaround manager is
brought into a crisis too late. The earlier
an advisor is brought in, the better the
position the retailer will be in when
negotiating with suppliers, reducing
both fixed and variable costs (including
labor and rental), and refinancing
with key lenders and stakeholders.
Obviously, financial statement analysis
is key in shoring up cash, renegotiating
financing, and working with vendors
and suppliers to maximize cash
flow and pay down existing debt.
The earlier a turnaround expert is
brought in, the quicker he or she
can update management on the key
tools necessary to track spending,
cash, and expenses. The 13-week
cash flow model is an essential
tool involved in this process.
Finally, managing expectations at
both the corporate and store levels is
an incredibly important part of the
turnaround process. A dissatisfied
labor force at the ground level will
often hurt sales and, in turn, delay
the turnaround process. Getting the
entire organization to buy into the
turnaround story is incredibly important
when driving a retail turnaround.
Looking to 2016
The retail turnaround world is a
fascinating and continually evolving
one. Interestingly, it is also one of the
last sectors to acclimate to the idea
of bringing in turnaround advisors.
National and regional retailers alike
that attempt to turn around their
businesses often refuse to bring
turnaround professionals on board until
the last minute—when it is often too
late. Instead, distressed retailers focus
too much on the retail experience—
as opposed to turnaround and
restructuring—in the crisis management
process. This trend can be expected
to shift in 2016 as debt continues to
mount, interest rates start creeping up
(given the impact on banks of increased
capitalization requirements), and
legacy retailers maintain their struggle
to adapt in a world moving away from
the mall and toward the internet.
Furthermore, it is obvious, given
changes in spending, demographics,
and technology, that 2016 will be
another difficult year for retailers and
their suppliers and vendors. Many
retailers currently in distress—including
apparel retailers Bebe and GAP and
several grocery store chains—will
continue their downward slides.
TMA congratulates the following individuals for
achieving the Certified Turnaround Professional
or Certified Turnaround Analyst credential:
Steven F. Agran, CTP
Brian E. Ayers, CTP
CBIZ MHM, LLC
Kevin M. Burke, CTP
Burke Advisory Services, LLC