Restructuring & Turnaround/Value-Up

Formulation of an earnings recovery plan for the revitalization of a domestic apparel manufacturer

Blinded by success, apparel maker A believed that whatever it made would sell, when sales suddenly dropped and it faced losses, unable to respond to the shrinking market. A’s bad loans were disposed of and a sponsor chosen to revive the apparel maker. That company hired us to create a rapid earnings recovery strategy and start the engine for future growth. We adopted a five-step revitalization approach. 1) Create a fact book: Through 50 internal interviews, we exhaustively identified factors behind operational waste and failure. We also quantitatively analyzed massive unused internal data. This revealed no P/L for individual products and that money-losing products had been ignored owing to unclear profit responsibility. Wasteful practices were also uncovered in the business process, from planning to sales. 2) Design quick wins: We analyzed costs and profits, suggested the closure of unprofitable stores, and calculated profit impact. Through factory visits, we reevaluated the planning and production system. We considered store closings, reevaluated unprofitable sales channels and sought encashment through inventory clearance. 3) Establish a set of goals: We created a five-year strategy covering plans for the reform of operations companywide and of the executive, as well as plans for each business. Based on a consumer survey, we recommended the client choose and focus on winnable businesses. We also set deadlines for each business to revive sales and cut costs, and identified new business areas for growth. 4) Design a roadmap: We created a detailed reform plan and framework for the front-line based on a companywide cross-departmental and cross-business perspective. We clarified short-term plans for quick execution and set the details (who does what by when). 5) Execution: We designed several cross-functional teams (CFTs), assigning such tasks as business process reform and creation of a personnel evaluation system, providing indirect operational support. Focusing on the client’s main activities, we also worked to ensure strategy execution, involving core people.

A is now rolling out this strategy. Its key businesses are profitable. New businesses are being started and will ultimately boost corporate sales. Meanwhile, deliberations are underway about withdrawal from unprofitable businesses, with the goal of rebuilding the companywide business portfolio. Front-line reform is progressing, with CFTs as key plays. Company A is getting back on track.

Hisaji Yoneda
Partner
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Takashi Hirai
Partner
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Keisuke Yamabe
Partner
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Martin Tonko
Partner
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Takashi Watanabe
Principal
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