Mattress retailer

SITUATION

Our client was a 250-store mattress and mattress accessories retailer that was experiencing complications from the industry’s 2001 downturn. The downturn, combined with an excessive number of stores in certain markets, resulted in a decrease in same-store sales and caused poor results in new stores. Additionally, the company suffered from rapid growth and had outgrown much of its management and practices. These factors combined to trigger a default in the senior debt, which precipitated the mezzanine debt to be blocked from payment, causing a cash crisis.

CRP’S APPROACH

Without delay, CRP assumed the role of COO and immediately began an assessment of the situation. CRP showed that the EBITDA could be quickly improved by more than 50% and therefore the need to block the sub-debt would be eliminated. The board of directors accepted the recommendations from CRP, which included a plan to reduce overhead, convert sales reconciliation from manual to an automated process, reduce turnover, increase training, adjust the product line, redirect the advertising, and implement an electronic metric monitoring program. The CFO position was filled by CRP, which subsequently led the restructuring of debt.

RESULTS

• The business improvements implemented by CRP and the management team resulted in a significant enhancement of operations in all areas.
• An operational improvement structure was installed that utilized the tracking of key metrics, the use of Pareto analysis to identify key opportunities and a team-based project management system to ensure implementation.
• All debt was restructured, margins increased by two points, customers responded positively to the new products, sales and warehouse turnover were cut by 60%, vendor relationships were strengthened and business processes were streamlined and improved.