Case History: Retail Exit Strategy/
Guided "Self" Liquidation

Jewelry & Gifts:
Jewelry Store

When strong management teams are in place, guided self-liquidations are extremely effective at helping monetize inventory for cash flow and paring-back store locations.

FIRST ENGAGEMENT

Situation

Family-owned and operated, Jewelry Store is a small-chain jewelry retailer offering quality, branded, and affordable jewelry in a “boutique-like” setting. Similar to how cosmetic departments operate, Jewelry Store is merchandised with each brand being represented with its own selling space throughout the stores, allowing customers to remain loyal to their favorite brands while also being exposed to others. What began as a brick-and-mortar operation has since expanded into an omnichannel operation. Unfortunately, Covid had a considerable impact on the business with decreasing sales trends from several of their locations averaging -46.3%. While negotiations were ongoing with their landlords, Fortis was brought in to launch Inventory Liquidation sales to generate cash flow with the option to convert to Store Closing sales if negotiations turned south. Because Jewelry Store has a strong management team, Fortis implemented a guided self-liquidation strategy.

Objective

Three of the five stores were the primary concern with an estimated total of $759,000 in inventory and projected gross sales of $320,000 over a 6.5-week period. The landlords were stalling, and part of the strategy with launching the sales was to bring the landlords to the table while generating cash flow. Two of the three locations were in compromised malls facing decreasing customer traffic, but Jewelry Store would entertain staying if the rent was reasonable. Fortis set up the stores and assisted in re-merchandising for liquidation, while immediately launching a high-impact marketing program that included a multi-market canvasing mailer, digital ad design, mass email campaigns, and social media.

Results

104.0% Actual Sales to Projected Sales average for all three locations

Successful negotiations finalized with two of the landlords leading to one of the locations converting to a Store Closing Sale

Due to the availability of the other locations, it was not necessary to complete a full liquidation cycle for the sole Store Closing location, thereby preserving margin and increasing cash flow

The location completed a successful exit and consolidation of any remaining merchandise into the other four locations.

SECOND ENGAGEMENT

Situation

After successful negotiations to stay in two of the three locations under modified leases, Jewelry Store had four remaining locations and a successful eCommerce store. Unfortunately, over several months, three of the locations had absorbed considerable losses as sales had continued to decline at an average of -31%. Also, talks had collapsed with one of the premier lines of merchandise represented in the stores, and the line was being pulled. This represented an additional potential -32% hit in sales revenue. With this level of decline, Jewelry Store recognized it needed to take action. After the successful sales from the previous engagement, Jewelry Store re-engaged Fortis to launch another guided self-liquidation on three of the remaining locations with the intent to shutter one, and potentially two of the remaining stores.

Objective

Fortis recast projections accounting for the trends in losses and exit of one of the premier product lines from the inventory mix. Based on expected results similar to returns from the initial engagement, Fortis estimated that total sales from all three locations over a 10-week period would be $554,000, and similar to the prior strategy, with the availability of additional locations, there was an option that the stores would not have to go through a full liquidation cycle. Cash flow was the highest priority. Fortis set up the stores and assisted in re-merchandising three stores for liquidation, while immediately launching a high-impact marketing program that included a multi-market canvasing mailer, digital ad design, mass email campaigns, and a strong focus on social media campaigns.