The challenge permalink
Our client was a company that designed and distributed high-end clothing for infants, toddlers and pre-teens. The business was highly dependent on company stores and wholesaling to specialty shops using catalogues and in-person consultative selling. They were battling reduced foot traffic at owned stores, and reductions in the number of specialty stores, driven in part by Amazon and Costco, put over 30% of their revenue at risk. Additionally, design tastes evolved away from the brand's core and stores began sending back dated SKUs. Working capital pressure plus the need to deploy cash for material buys in Sri Lanka put the company into severe distress.
The Virtuoso approach permalink
We built a restructuring plan designed to address product and distribution repositioning, human capital and operational optimization:
- Initiated aggressive staged discounting program to reduce exposure to slow-moving SKUs and generate immediate liquidity
- Restructured the design team and created an initiative to repurpose fabric already on order to design lower-price point SKUs for club and mass channels
- Segmented owned stores based on revenue per square foot and profitability; closed the bottom third of stores and renegotiated contracts for the remainder
- Reduced size of warehouse and leased unused space to outside parties
The results permalink
- Reduced breakeven point of business by over 20%
- Cleanup of inventory allowed for more room on the RLOC, which eased working capital pressure
- New lineup of lower priced SKUs led to negotiations and placement at Costco
- The smaller footprint and revenue diversification drew interest and led to a sale to a strategic buyer
Now is the Time permalink
Virtuoso Strategic Group is a boutique consulting firm formed to deliver extraordinary value to its clients. We pride ourselves on alignment with the fortunes of our clients and an unwavering commitment to their success. We welcome you to start the conversation today.