A company designing, manufacturing, and wholesale clothing distribution to thousands of retail stores across the country was already struggling when the Covid pandemic occurred in March 2020. Their business essentially stopped. Sales dropped precipitously, and customer accounts receivable collections slowed dramatically.
On the senior lender’s recommendation, Cambridge Financial Services was retained to stabilize and guide the business to profitability. Cambridge assembled a team of highly experienced consultants to manage the engagement.
The company was a $40 million dollar business in 2019. However, it was clear that revenue for 2020 was going to be dramatically lower. The first step was Cambridge’s advice to right-size the expenses of the Company to fit into the smaller revenue model for the year. We also advised the Company to design and implement support programs for its distribution network and supply chain partners. A new ERP system was installed to better understand and manage the company’s business. Those strategies worked, and as retail stores began to reopen, sales were generated, and the Company began to cash flow positively.
For the year 2020, revenue was one-half of the prior year with losses. Ultimately, the Company’s financial performance turned around, and in 2021, revenue increased to roughly $33 million and to $54 million in 2023 with corresponding operating profits. Throughout this time, the senior lender continued to support the company with multi-millions in revolving credit and real estate loans.
However, in the first half of 2024, the Company experienced a significant decline in revenue and operating losses. Key bank covenants were breached, causing stakeholders to worry about the business’s viability.
Utilizing significant data from the new ERP system, the Cambridge team reanalyzed the situation and concluded that a combination of changing market conditions in one business segment and poor inventory management were the culprits for the downturn. According to Cambridge’s advice, the company implemented additional expense reductions and more advantageous inventory management. The company returned to profitability for the second half of the year.
Cambridge’s involvement also quelled the senior lender’s concerns to the point that they waived covenant violations, renewed the revolving credit and are continuing to support the company’s future.
It is noted that the two-time restructuring of this company was done outside of a bankruptcy proceeding. Keeping overseas manufacturing vendors’ confidence and lenders’ confidence was key to turning the company around twice now and saving the business. The Company continues to flourish moving into 2025.
January 2025