In our world of shifting consumer behavior, increasing focus on mobile and electronic commerce, and a rapidly evolving retail landscape, rarely a day passes without news of department stores, specialty and other retailers, and brands facing financial hardship, with many heading toward bankruptcy while searching for a save-the-company solution. This article provides an overview of the current retailer restructuring environment, identifies strategies for maximizing retail asset value, and provides practical tips to optimally position retailers and brands to succeed, including via out-of-court or in-court restructuring.

Identifying Core Assets And Repackaging Value

Retail has moved past the days of simply assessing the “four-wall” profitability of individual stores. Successful strategic restructuring requires understanding a company's current and potential asset value—assessing the benefits of physical stores, online sales, licensing, and other branding opportunities. Value may present through different sources, often depending on a retailer's maturity. For example, brand value may be core to an established retailer, while proprietary technology may differentiate a newer one. Assessing the role played by discrete company assets can unlock additional value and inform the direction of reorganization.

Take Sharper Image, a company with substantial brand equity, which faced operational challenges under its traditional brick and mortar model, leading to its filing for Chapter 11 in 2008. After shutting all stores and liquidating its inventory and FF&E, the Sharper Image brand was sold and transitioned to a licensing model offered through an alternative distribution strategy, thereby reinvented as a robust online platform. This path recognized the reputational value and consumer goodwill reflected in the Sharper Image brand, and strategically repurposed these assets to drive sales.