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CASE STUDY
Bigsby & Kruthers
Bigsby & Kruthers, a prestigious 3-store mens and ladies specialty chain in the Chicago metropolitan area, filed for Bankruptcy protection, with a plan to liquidate their inventories and other assets and to maximize returns to secured and unsecured creditors.
With store inventory only 28% of annual sales, a successful Going Out of Business Sale necessarily required significant augmentation of inventory. Gordon Brothers and Natelsons entered into a joint venture (GB/NAT) whereby Gordon Brothers would provide financial, professional and technical services and Natelsons would provide inventory augmentation and operational services.
Natelsons was able to satisfy a Bankruptcy Court requirement that any augmentation be similar in kind to Bigsby merchandise. The GB/NAT team outbid competing liquidators, offering to purchase existing Bigsby inventory for about 34 cents on the original retail value and paying Bigsby creditors a commission on augment sales, with a minimum guarantee.
The Bigsby executive team had left the company. After an immediate fact-finding trip to the stores, warehouse and corporate offices, Natelsons took steps to stabilize a leaderless operation with severe morale problems. They hired a former Bigsby warehouse manager and prepared an employee incentive package for the GOB period. They created an open-to-buy plan and began buying augmentation inventory. They developed a promotional plan and set a date for starting the sale. A store setup team was identified and setup logistics developed. There was, in fact, a model plan covering the entire period from the hiring of GB/NAT to store closing.
Bankruptcy Court approval did not occur until a full week after initial newspaper stories about the situation. Placement of orders and merchandise flow were temporarily delayed. Several hundred clothing units were distributed from the warehouse. Initial results were staggering. Within 10 days of the break, almost $2,000,000 of merchandise, including 1500 suits, was bought and delivered to the stores. Natelsons' ability to react quickly was key to realizing maximum return from store as well as augmented inventories.
Store sales personnel were highly motivated by the incentive plan, often utilizing their own customer call lists to bring in additional traffic and to maximize average transaction sales. With their efforts, approximately 6000 suits, 3000 sportcoats and blazers and 5700 slacks were liquidated, plus over 5000 dress shirts, 12,000 ties and 24,000 socks.
The Bigsby sale was highly successful, with return on store inventories far exceeding plan. Hands on supervision by GB/NAT field personnel working with sales people, warehouse and administrative staff proved to be a winning combination. Bigsby creditors received commissions of $250,000 on augmented sales – 67% greater than the guaranteed commission.
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