Renaissance Partners is a leading performance improvement / corporate renewal firm specializing in retailing, consumer products and its supply chain (manufacturers, distributors, service and technology providers), manufacturing and service sectors (hospitality, restaurant, racino and racetrack operations, real estate) Owned and staffed by successful experienced operators, the Renaissance team has been creating value in and restoring health to stagnant or mature businesses since 1979. Renaissance partners and principals do the work in a timely and cost effective manner. The firm maintains solid relationships with lenders and business partners who are knowledgeable in the retail and retail related industry.
The retail/consumer products industry faces a maturing US economy, increased unemployment, higher food and fuel prices, increased taxes and insurance costs, social security concerns, rising medical costs, a time stressed society and most recently extreme volatility in the housing (including lower housing prices), credit, equity and global markets. Performance influencers include fast paced fashion cycle changes, over-storing and over-capacity, tightening of credit by lenders, the Wal-Mart and consolidation effects and growth in internet retailing. Competitive changes continue as the large players get bigger and stronger. Indirect challenges are posed by large retailers in many merchandise categories and the effect of thrift-chain growth. Private equity and hedge fund investments are furthering consolidation in many segments of the retail industry and demonstrating unwillingness to reinvest in troubled portfolio companies plagued by excessive leverage. The issues affecting consumer businesses trickle down to most sectors of the US and world economies.
To address these changes companies must look introspectively. Management must not be in self-denial and must assess their business objectively. Directors, Owners and Managers must be active and motivated to take intense action to evaluate and reinvent their businesses. Thinking outside the box and aggressively testing before being in financial distress is critical. Concept, format, real estate, assortment, pricing, advertising, service level and use of technology all need to be assessed. Companies should develop networks to obtain reliable information and get objective input from customers, employees, suppliers and professional outsiders.
What Should the Troubled Business Do Now?
- Get factual, diagnostic information about the business as fast as possible;
- Access and assess customers, their likes, their dislikes, their shopping habits, their preferences as the authority for each merchandise classification;
- Access and assess people and their input regarding the customer and the business;
- Determine if the company has “brand significance”, or is it merely a distribution point for collections of goods (branded or otherwise) supplied by manufacturers;
- Understand the culture of the company and its relevance with regard to what needs to be done;
- Tap information about factors external to the Company – i.e., markets, competitors, products, services and service level;
- Understand and objectively evaluate internal factors that drive execution of the existing strategy and will be required to carry out future strategy – i.e., people, people/job/culture match, systems, merchandise inventory content and management thereof, improved asset utilization, customer satisfaction.
- Armed with hard facts commit management and stakeholders to definitive, logical action.
What and How Renaissance Brings Value to the Process.
Renaissance personnel establishes good chemistry with company ownership and management that starts with listening and interviewing senior management and staff to learn the business, establishes a non-threatening coaching environment, and provides a solution source for the business. Businesses respond favorably to the industry experience, technical talent and leadership/people skills of Renaissance personnel. Lenders respond favorably because it adds credibility to the borrower and their plans/projections, produces new relationships, retains existing relationships and fixes the issues causing relationship problems. Business owners/operators respond to Renaissance personnel because problems get fixed, operational and financial improvements result and organizational roles get refined and better defined. Often the lack of internal CFO talent is a major cause of the problems facing these businesses. Renaissance addresses that issue by providing:
- Interim or add-on CFO services support (part or full-time interim management)
- Defining the CFO role in the company
- Training and coaching the CFO, Controller or bookkeeper
- Conducting a CFO search as may be required
- Helping retailers face a dual challenge in today’s marketplace that even the best employers and executive search firms are struggling with:
- How to attract and develop talent – the succession management pool
- How to retain that talent through the development period and beyond
Renaissance Partners understands the causes of corporate financial and operational distress, and helps organizations enhance cash flow, profitability, processes, performance and strategic direction through advisory and financing services. The people at Renaissance Partners are time and performance tested through corporate renewal engagements over the past 30 years, most situations involved financial, strategic, and operational elements. Our people are career retailers spanning every functional pyramid of the typical retail organization, (finance and treasury, merchandising and marketing, store and field operations, information technology, merchandise planning and allocation, real estate, distribution, logistics and direct-to consumer operations).
Renaissance Partners believes to insure long-term viability and the prospect of future profitable growth companies must address the following:
- Cash Flow Management
- Unlocking Asset Values for Enhanced Liquidity
- Asset Productivity Improvement; Liquidation of Excess, Obsolete, Non-Core Inventory
- Cost Controls and Possible Expense Reduction Programs
- Contract and Lease Renegotiations
- Provide Actionable, Timely and Accurate Information from which to Run the Business and Properly Measure Performance
- Right-Sizing Infrastructure
- Real Estate Assessment and New Location Criteria
- Sourcing and Vendor Relations
- New and Alternative Financing
- Strategic Assessment, Planning and Acquisition Integration
- Consumer Research and Brand Building
- Implementing the Reinvented, Repositioned Business Model
- Taking Care of People including Incentive Programs and open, honest Communications
Our recent services to retailers, their lenders and equity sponsors have included:
- Due Diligence and Business Assessment
- Strategic and Project Consulting
- Turnaround, Crisis and Interim Management
- Consumer Research, Marketing, Merchandising and Brand Creation/Intensification
- Real Estate Evaluation / Selection Criteria, Negotiations, Financial Modeling and Rent Relief Parameters
- Management /Planning / Assortment and Open to Buy Systems – Develop, Install, Train, Monitor
- Cash Flow Controls and Systems
- Profit, Process, Labor and Asset Productivity Improvement
- Information Technology Assessment, RFP’s, Response Evaluation, Selection, Implementation, Training
- Develop, install and implement Inventory, Warehouse Management and Enterprise Solutions for Retailers
- Industry Research to Spot Potential Turnaround and Growth Situations Early
- Store Analysis – Assess New Prototypes, Measure Performance and Identify New Concepts
Renaissance understands retailing and is ready to help stakeholders fashion a winning strategy and implementation for improved financial performance. Renaissance has experienced personnel, across all functional lines, located throughout the US poised to provide timely and affordable services to our clients. Visit our website for more information about our team and accomplishments. Contact Raymond J. Miller, Senior Principal at (954) 288-0875 or (713) 789-2126 and/or Thomas H. Hicks, Managing Partner, at (954) 971-3555 or (954) 415-6369 to discuss your challenges and opportunities.
Case Study Summaries
Welcome Home – restructuring, new store design prototype, close non-performing stores, revamp merchandise assortments, install complete new integrated systems (STS) in record time of under six months including new POS rollout, establish management reporting to control business – stores, inventory, financials; install new management and streamlined organization structure – CFO, CMO
Belk’s – reinstalled new inventory management, assortment planning, allocation and distribution systems; reorganized and retrained merchandising, planning and allocations organization to better utilize new systems and enhance inventory turnover; strategic assessment of organization structure leading to consolidation of 5 divisions into central organization leading to dramatic profit improvement and positioning the company for internal growth and growth through acquisition of selected stores from Saks Department Store Division
Elder-Beerman Stores Corp. – complete business assessment and strategic plan review; reinstall new merchandising, planning and allocation systems and realigned and retrained organization to enhance sales and improve inventory turns; enhanced new small store middle market prototype for future growth; developed new prototype IRR analysis to evaluate growth opportunities; suggested and made management changes including installing our senior merchandising partner as CMO; reorganized merchandising function; enhanced EBITDA leading to subsequent merger with The Bon-Ton to create a leading regional department store chain with sales exceeding $2 billion
The Cato Corp. – complete makeover of this 625 store budget/moderate women’s apparel and accessories chain; closed under-performing stores; implemented significant management changes in the financial, credit, merchandising and store operations organization; moved company from branded to private label business; evaluated, selected and installed new financial and credit systems including converting in-store installment credit to private label revolving credit program, consumer research and strategic re-positioning based on research and competition review; developed new store prototype and began growth using that prototype; averted bankruptcy and began sustained sales, profit and cash flow growth that has been sustained for over 15 years and rendered the business totally debt-free. Upon implementation of new programs Cato generated 30 consecutive months of double-digit same store sales growth and led the NASDAQ for two straight years in stock price gains.
Higbee’s – complete strategic and competitive analysis and plan development; extensive consumer research that led to re-merchandising of each store individually to align with consumers, demographics, market dynamics and real estate locations; closed under-performing stores and added replacement stores with higher sales/sq.ft., and 4-wall profit contribution; cleansed old and slow moving inventory; made management changes/enhancements; better utilized existing systems to improve financial and merchandising controls; restructured in-store food services and leased departments; led revenue gains from $190 million to $325 million with same store count; performance led to go-private transaction at $50/share ($75 million) versus $7/share at start of process; subsequent EBITDA growth led to sale of company to DeBartolo/Dillard’s joint venture in transaction valued at $165 million.
Buffalo Raceway / Flamboro Downs – financial analysis, business assessment, valuation and acquisition capital structure requirements of these two standardbred racetracks located in Buffalo, N.Y. and Dundas, Ontario, Canada on behalf of investor Max Hempt, CEO, Hempt Construction Co. and longtime horse owner, breeder and Director, United States Trotting Association
D.H. Holmes Co., Ltd. – comprehensive business assessment as representative of largest shareholder on Holmes’ board, and in-house strategic and financial consultant. Over a twelve month period advised management on action steps to improve business and cash flow improvement, and orchestrated successful sale of the Company to Dillard’s at a 22% premium to market value at time transaction was announced.
Retail Concepts Inc. (“RCI”, dba Sun & Ski Sports) – completed intense analysis of the business which had grown by expanding and broadening merchandise offering, real estate venues, store size and concept thereby negatively affecting liquidity and going-concern prospects of the Company. Renaissance developed a restructuring plan that was adopted by management and called for down-sizing to the Company’s previously successful core business size and concept. Accomplished in a timely Chapter 11 proceeding and with support of a new post-emergence senior lender, RCI emerged and has since performed successfully and has grown by greenfield expansion of its core store concept and by selective acquisitions.
The Walking Company (“TWC”) – served as CRO of Company initially appointed by private equity majority owner. Performed thorough business and financial assessment and subsequently restructured TWC in a successful Chapter 11 proceeding, emerging as a profitable core retail business of 77 stores acquired by Big Dog Holdings Inc. and banked by the pre-filing and debtor-in-possession lender. TWC has since steadily improved and grown its core athleisure footwear and accessories business, absent the add-on categories and expanded store size that caused its pre-filing financial difficulties.
Mars Music Inc. – Renaissance served as CRO, CFO and interim COO during the assessment, action plan and implementation process of this $350 million start-up musical instrument superstore retailer. In less than five years Mars burned through over $190 in capital seeking critical mass that it determined was required for an IPO. The Company was never cash flow positive and yet continued to grow and deviate from its initial southeast location clustering until venture capitalists refused additional financing. Mars single store model was flawed – stores too large, assortment too broad, and store within a store concept could not be affordably staffed – with average sales/door approximately 50% of that required to produce 20% IRR. Renaissance engineered a successful sale of each element of the Company in a Chapter 11 proceeding: liquidation of retail stores and warehouse inventory; sale of memorabilia on the Internet, sales of important real estate in an auction process; sale of Internet retail and Instrument Rental business units to industry players in a competitive bid process.
Ohio Industries Inc. – Renaissance served as CEO/CRO, engineering and implementing the merger of manufacturers Ohio Locomotive Crane Co. and Plymouth Industries Inc., liquidation of excess plant, property and equipment, downsizing workforce, enhancing original equipment parts marketing and sales after cleansing inventory and creating tools to manage inventory performance, initiating research and development focused on enhancing quality, performance and value of fork-lift product line and abandoning low margin, high capex joint venture for the manufacture of specialty cranes. Ohio Industries was able to pay-down its senior secured debt facility and satisfy other lender requirements.
Jillian’s Entertainment – Renaissance performed a comprehensive business evaluation for Jillian’s two private equity owners and independently developed a 13-week cash flow model to attempt to validate management’s projections. Upon acquisition by private equity the Company sought to grow store count and store size to build volume for a prospective IPO patterned after Dave & Busters. The development plan failed due to new units being too large, capital intensive, non-adaptive to multiple demographic audiences and conversion to an after-hours club setting at 11:00pm, and poor food quality. The company’s original neighborhood billiard parlor concept was the most profitable element of Jillian’s business. Renaissance provided specific recommendations that were not followed and Jillian’s later filed for Chapter 11 protection and some real estate was sold to Dave & Busters.
Sleep County USA – Renaissance performed an exhaustive business analysis of this unit of Simmons, for its then private equity owner. The Company operated two competing chains of mattress discounters in California and the Pacific Northwest, both of which were financial under-performers. Specific recommendations were provided including closing of poor-performing stores, enhanced inventory management and management reporting and management changes in selected functions. A senior Renaissance principal was installed as interim VP-Store Operations to upgrade and train field personnel, obtain consistent execution across all stores and implement metric measurement and incentive compensation plans at store level.
PCI Holdings Inc. – Renaissance was engaged to perform CEO, CRO services at this company that operated two small format catalog showroom chains, The Present Company and Save-Rite, located in economically depressed northeast markets. Private equity ownership provided all capital – equity, sub-debt and senior debt. After stabilizing the business, reducing cost and rationalizing merchandise mix and inventory levels, the owners elected to not support required store remodels and Renaissance successfully liquidated the business for the benefit of creditors out of court in a consensual arrangement, only filing a Chapter 11 proceeding at the end to dispose of real estate assets that could not otherwise be sold.
Central Tractor Farm & Family Centers – Renaissance completed a supply chain study of this agricultural-focus home improvement chain and catalog supplier of OEM and used tractor parts.
The Company, as a result of the study, relocated its central distribution center to better serve its east coast store base and closed multiple tractor parts yards and distribution points. Subsequently, the private equity owned sold a majority stake to another private equity player that owned another under-performing Midwest chain, Quality Stores. Quality Stores’ management unsuccessfully sought to consolidate the chains and Renaissance was engaged by the minority private equity player to validate company financial projections. Renaissance advised that the projections and business were flawed. Subsequently Quality filed for Chapter 11 protection and liquidated, selling its most viable stores to Tractor Supply Co.
Edwin Watts Golf (“EWG”) – engaged by EWG’s private equity owner, Renaissance performed a thorough business, competitive and financial evaluation to determine opportunities to improve performance and strategic alternatives. EWG faced competitive pressure from PGA Superstores, Golfsmith and Golf Galaxy and operated stores that were not uniform in terms of size, layout, merchandise mix and location demographics. The Company implemented certain recommendations concerning site selection evaluation, cost reductions and inventory management, subsequently selling the business profitably to another private equity firm.
Scotty’s – engaged initially by the Company with approval of lender Wachovia Capital Finance to assess financial and business plans and determine appropriate capital requirements and structure. The Company was anticipating sale of valuable real estate to Home Depot that would create liquidity despite weakening core business metrics. Renaissance recommended an additional minimum $2.5mm funding level. Subsequently, hurricanes destroyed certain locations, triggering building rebuild requirement in leases and interrupted revenues. Also Home Depot backed out of real estate transactions electing instead to acquire a package of Kmart sites. The lender became reluctant to fund and requested that Renpar again be engaged to assess the business and strategic alternatives. The Company was principally supplied by Do-It-Best Hardware that also controlled the Company’s point of sale and inventory replenishment systems. The Company also had closed certain stores and converted them to “flea markets” with booths operated by individual short term tenants. Management projected the flea-market outlets to perform well albeit it was too early to measure results. Do-It-Best was also demanding more current payments to continue steady merchandise supply. Renpar determined that the Company had limited prospect of selling the business or finding an equity partner, had insufficient resources to replace the Do-It-Best arrangement, and faced the likelihood of reduced advance rate on inventory, The Company’s merchandise mix was becoming unbalanced due to supply difficulties. The Company opted to enter a Chapter 11 proceeding, commence downsizing to its remaining profitable stores and certain outlets, reduce expenses, sell non-productive real estate and pursue alternative lenders. Renaissance interviewed and selected merchandise liquidators, real estate advisors and worked with creditors and their counsel to develop a consensual plan of liquidation. An alternative lender (CIT) was identified and a transaction structured that proceeded toward conclusion only to be stalled when Do-It-Best demanded full payables payments then the new facility could not support and still provide liquidity to the debtor. At that point full liquidation was executed.
FAO Schwarz – Renaissance was engaged by Wachovia Capital Finance to evaluate FAO Schwarz business plans and strategic alternatives in the context of a continuing financing arrangement between lender and debtor. Each business unit of the debtor was evaluated and likely scenarios for each were analyzed and presented to the lender pursuant to its deliberations.
Newport News / Spiegel Catalog – Renaissance was engaged by CIT Retail Finance to perform business and plan assessment of Newport News in conjunction with a proposal by Pangea Holdings to acquire it and subsequently move all sourcing, delivery, distribution and call center operations offshore. It was anticipated that a follow-on acquisition of Spiegel Catalog would subsequently occur. Renaissance also identified capital requirements and risk factors of the offshore moves and their affect on domestic inventory borrowing base and other capital structure elements. Subsequently the transaction was completed with Pangea bringing in Golden Gate Capital as its partner and their decision to postpone some of the offshore moves.
MC Sports – Renaissance was engaged by the Company and its asset based lender (LaSalle Retail Finance) to perform a comprehensive business and financial plan assessment of this profitable regional sporting goods retailer. The Company’s revenue growth has been sluggish as it faced increased regional competition from players such as Gander Mountain and Cabela’s in selective markets. Renaissance analyzed store performance, inventory levels and quality, merchandise mix, systems, supply chain/distribution/logistics performance, expense structure and customer relationship management and made certain performance enhancement recommendations. The Company steadily improved performance and successfully obtained an alternative ABL arrangement that increased liquidity cushion
BC Sports Collectibles – Renaissance and a business partner were engaged by the Company and ABL lender (GMAC) to assess the business, including store performance, real estate, inventory mix, quality, age and quantity, management reporting, systems and controls and competition, and provide inventory net liquidation values and scenarios. A major challenge was projecting valuation of a large “authentic” memorabilia inventory component that required professional authentication by a third-party and various methods of liquidating that inventory.
Graftec Electronics Inc. – Renaissance was engaged as financial advisor to this financially distressed distributor of electronics parts that was under pressure to restructure and/or liquidate by its senior secured lender. Renaissance prepared various analyses of inventory, receivables, liabilities, company performance, corporate overhead and industry trends and made specific recommendations to ownership/management regarding creation of additional liquidity and negotiations with the lender. The Company implemented certain of the recommendation and continued, with bank support, as a going concern while also seeking sale or equity from within its industry.
RamcoTrading Company – Renaissance was engaged by the Company and its ABL lender (Bank Atlantic) to assess the business, its financial performance and plans and to determine strategic alternatives. Ramco was historically an importer and wholesaler of home décor and household items from the Far East, and the operator of a cash and carry retail store in a portion of its owned Miami warehouse. The once unique and profitable wholesale business subsequently weakened as imported, high margin goods became increasingly available to mid-sized retailers, and credit issues in Latin America and the Caribbean curtailed sales to those areas. New financial management from a consulting firm proposed moving the company into formal retailing and opened multiple store in south and central Florida, some of which were in locations and served customers that were different from customer of the successful cash and carry store. The Company had no experience running a retail dominated business, site selection, and in establishing metrics management systems to monitor performance. A liquidity crisis arose. Renaissance performed the CRO role and cut cost, closed non-performing stores, cleansed inventory and sought a buyer for all or a part of the business. Subsequently, a Chapter 11 filing was entered to liquidate undesirable real estate, reject non-required contractual obligations and initiate other liquidation activities that satisfied senior debt principal and provided an above projection return to unsecured creditors. Renaissance also functioned as liquidating trustee following court approval of the Liquidating Plan of Reorganization in less than twelve months after the filing date.
Off Main Furniture Inc. – Renaissance was engaged to guide this specialty chain of upmarket furniture and home decorative accessories through a liquidating Chapter 11 case. Renaissance sought multiple bids from merchandise and real estate liquidators, selecting those that provided the greatest upside potential to the debtor, and provided Chapter 11 administrative and accounting services to the debtor. Following a successful court approval of a Liquidating Plan of Reorganization in less than nine months after filing, Renaissance provided liquidating trustee services including disbursing agent and tax filing activities.
Luxury Ventures LLC – Renaissance was engaged as financial advisor to debtor in this successful reorganization of a specialty manufacturing jewelry retailer in a Chapter 11 case. Renaissance developed numerous financial models of go-forward and liquidation scenarios, managed the partial liquidation service provider selection process, reduced overhead, closed poor performing stores, assisted in negotiations of post-emergence financing and settlements with junior-secured lenders while also providing financial services to the unsecured creditor’s committee. The Company emerged from Chapter 11 in less than ten months after filing date.
USPG Portfolio Two LLC – Renaissance was engaged by the landlord to provide a complete analysis of the financial and operational information available regarding an outdoor sporting goods retailer’s performance prior to and during that Company’s Chapter 11 case in the Southern District of Georgia Augusta Division. Renaissance participated in preparations for depositions in this case and provided expert testimony at a hearing (the assumption of the real property lease during the pending Chapter 11 case) regarding the financial ability of the tenant to pay rent to the landlord given the tenant’s current operating performance and the competitive marketplace.
S&S Construction Products LLC – Renaissance was engaged as financial advisor to this insolvent importer and distributor to the beleaguered Florida construction industry. Analysis determined that the Company could not continue as a going concern and that funds were not available to finance a bankruptcy filing and liquidation. Therefore, Renaissance managed a process leading to auction of merchandise inventory, fixed assets and intellectual property, determination of a receivables collection agent and the providing of electronic files and support to them, dissolution of the corporate entity and wind-down services.
Bedford Downs Management Corporation – Renaissance was engaged as strategic and financial advisor to this entity which sought a horse racing and gaming license in the Commonwealth of Pennsylvania. Renaissance prepared numerous financial models, elicited industry support, worked with financial providers and other consultants in preparation and conduct of hearings before the Racing Commission, Commonwealth Court and the Pennsylvania Supreme Court. Renaissance analyzed various outcomes and probabilities and worked with the stakeholders on the sale of the Company along with a 250 acre site in western Pennsylvania to Valley View Downs, a competitor for the licenses for approximately $75 million. The principal owners of Bedford then retained over 300 acres of adjacent land for the eventual development of entertainment, hospitality/hotels, conference center, and retail, commercial and residential development.
Mercantile Capital Partners LLC – Renaissance was engaged to provide analysis and expert testimony concerning a failed and now liquidated portfolio company in which a refinancing initiative was delayed due to collateral securitization issues. The portfolio company was a leading player in an attractive, growing niche in which other participants subsequently created solid returns for their stakeholders.
Specialty Retailers Inc. – Renaissance was engaged due to its extensive retail industry experience to assess existing advertising systems and alternatives (new systems and/or enhancements to existing applications) with the objectives being improved advertising productivity and measurement, integration with financial systems, advertising planning and inventory management of key items with advertised price, placement and media type sensitivity.