At the leading edge of the supply chain, the US retail industry was one of the first industries to be affected by the global economic recession. Since mid-2007, consumer spending has been cut sharply amid rising unemployment and the erosion of personal wealth created by significant declines across financial and real estate asset classes. 2008 and 2009 were among the most challenging years experienced by retailers in decades, and a wave of store closures and insolvencies swept across the industry. A lack of availability of commercial credit forced retail organizations, which are commonly thought to be built for growth, to rationalize inventories and reduce costs to maintain liquidity.
The current environment represents the most prolonged economic downturn to affect the industry relative to any other that has been experienced by retail management teams during their careers. However, with national unemployment hovering around 10% and consumer sentiment and discretionary spending at near historic lows, recent trends in the retail industry now point toward guarded optimism.
The industry appears to be at an inflection point. Any further economic deterioration could be devastating for industry participants as the pathway to additional expense and working capital reduction is less clear and more difficult to navigate. At the same time, any economic recovery will require access to capital to finance inventory replenishment and growth in order volume. Companies that are not prepared for these dynamics will face unprecedented challenges to their business models.
As the premier provider of restructuring services to the middle market, Conway MacKenzie has been engaged to represent retailers, consumer products companies and their constituents since its formation. Our focus in these situations is to perform critical analysis of the company, its business model and its current circumstances, develop plans to improve the financial and operational performance of the company, and implement those plans through working with relevant stakeholders.