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Situation and Challenge
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.
Solution
Cash:
We developed a comprehensive cash flow projection to determine the magnitude and timing of a potential capital infusion. Steps were put in place to mitigate the potential impact of a cash shortfall, including aggressive management of receivables and payables, strict financial controls, reduced salaries for family members and 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 outlet based on profitability and identified specific areas of improvement, including merchandising, rent and staffing. We prioritized efforts and developed an action plan for each store. 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.
Results
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 successfully renegotiated loan covenants with the bank and averted 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!
Best Wishes,
Kelly
�2014, Soundpoint Consulting, LLC
Sound Consulting. Solid Results.
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