VIPER THOUGHT LEADERSHIP SERIES #6
By Diane Ellis, D.G. Hague, Tom Park and Monica Woo
Eight minute read
COVID-19 has upended many businesses, especially retailers reliant on brick-and-mortar stores. Most retail executives are fighting to maintain business continuity, or restructure for survival post-bankruptcy. VIPER EA CEO D.G. Hague seeks advice from two retail CEOs who are experienced in leading business turnarounds. Diane Ellis drove the Chico’s brand turnaround as its president. She had also transformed The Limited as its CEO, and accelerated growth and profitability as Brooks Brother’s president. Tom Park was the president of Kenmore, Craftsman and Diehard division at Sears Holdings Corporation. He led critical strategic initiatives and partnerships to monetize valuable assets and generate much-needed cash flow.
D.G. HAGUE: What advice do you have for leaders of companies in bankruptcy or turn-around restructuring?
DIANE ELLIS: Job #1 is to swiftly build an adequate financial runway to execute your company’s plan, whether in or out of bankruptcy. Eliminate all non-essential spend, and resist adding costs until you have solidified the imperatives for long-term survival. Identify low return assets and monetize where possible to fund your plan. Maximize short-term flexibility in SG&A by outsourcing the implementation of initiatives.
TOM PARK: Building on Diane’s point, agility in financial and operating planning is imperative. To speed up decision-making, I have relied on these actions:
- Rapid assessment. Pinpoint all the profit leakages by business unit, product, geography, store location, operating function, vendor, external partner, fulfillment and distribution center and strategic initiative. Evaluate opportunities to sell underperforming assets and inventory to generate cash. Maximize the profitability of assortment by rationalizing under-performing products, and focus resources on the highest demand and most profitable SKUs.
- Zero based forecasting. Historical financial plan and assumptions are no longer relevant during and post crisis. Retailers need to use dynamic forecasting based on multiple scenarios, to improve visibility in short-term and long-term revenue and cost outlooks.
- Contingency-based resourcing. I want to reinforce Diane’s advice of terminating non-essential spend. Use a stage-gate approach in resource allocation. Only release funding based on the achievements of KPIs, such as revenue, profit, customer retention rate and other success indicators. Review cash forecasts daily to control and prioritize payments.
DE: To implement what Tom has articulated will require time and labor to analyze data across store locations, digital and physical channels and functions. It is best to outsource this task to an expert in retail analytics like VIPER.
DH: Yes, VIPER does all the heavy lifting so that our clients can focus on operating. We collect and analyze massive volume of data throughout the enterprise, to swiftly detect hidden profit drained by systemic problems and operational deficiencies. Our proprietary Machine Learning capability supports dynamic and scenario-based forecasting.
DE: The pandemic and high unemployment have changed consumer behavior and motivations substantially. It is important to find savings, not only to fund the incremental expenses associated with safety measures for customers and associates, but also, to invest in research to better understand the changing consumer trends. Retailers must continuously monitor shifts in consumer behavior and their impact on selling channels, supply chain, marketing and merchandising, in order to establish the right strategic filter for resource prioritization.
TP: The pandemic has significantly expanded online and on-mobile shopping, and retailers need to extend their brands’ reach to digital channels. By creating Sears’ partnership with Amazon, we were able to extend the reach of Kenmore appliances and Diehard batteries to where our customers shopped. We were able to monetize our valuable assets even further by converting our competitors to become our allies.
DE: Tom, your insight on allies triggers another thought. In times of crisis, leaders must resist “hiding in the bunker.” Executives need to communicate consistently and thoughtfully with all stakeholders: customers, shareholders and associates. Based on the feedback from employees of various retailers, their employers’ lack of transparent and clear communication has been the most frustrating and demotivating aspect of dealing with the COVID-19 crisis. Provide clarity and guidance to your associates, and you can earn the trust and commitment to help turnaround the business.
TP: Yes, it is critical to communicate frequently and cross-functionally. I advocate not just monthly, but weekly and even daily stand-up meetings. With recommendations of the right remedial actions to take at the store personnel and product level, VIPER can field and corporate management determine which stores to close or retain, and how store fleet can be optimized. This hyperlocal advice is invaluable.
DH: Thank you for your insights. To help retailers during challenging times, VIPER is offering a $1 million Profit Improvement Guarantee™. We commit to achieving a minimum of $1 million in profit increase or pay the difference. We show you the money and guarantee the financial payout.
Diane Ellis is a board director and CEO of DME Advisory Group LLC. Previously, she was Brand President of Chico’s at Chico’s FAS, Inc., CEO of The Limited, and President of Brooks Brothers. She is an advisor to the Board of VIPER EA LLC.
D.G. Hague is the CEO of VIPER EA, has served as an operating partner/advisor of several private equity firms, and board member to a number of for-profit and non-profit organizations. Des was formerly CEO & President of Centerplate, President of IHOP and of Safeway Corporate Perishables.
Tom Park was previously the President of Kenmore, Craftsman, Diehard division of Sears Holdings, President of Disney Stores worldwide and COO of Belkin International. Tom is board director of Howard’s Appliance, TV & Mattress, and an advisor to the Board of VIPER EA LLC.
Monica Woo is the CEO of WooWorks, which invests in and advises digital commerce, AI and omni-channel retail. Previously, she was President of 1-800-Flowers.com and Bacardi Global Brands, and FreshDirect’s Chief Revenue Officer. Monica is an advisor to the Board of VIPER EA LLC.