THE PROBLEM

Problem Chart

 

Since 1990, more than two hundred retail companies have filed for bankruptcy. Among the most notable are Revco Drug Stores, Ames/Zayre, Crazy Eddie Electronics, Phar-Mor Drug Stores, Leslie Fay, Merry-Go-Round, Hills Department Stores, Macy's, Roses, Grossman's Home Improvement, McCrory's, Caldor, Service Merchandise, Filene's Basement, Nobody Beats The Wiz, Bradlees, Hechinger and Strawberries Records. Correlations should have been made to identify a troubled retailer in-the-making long before any of these companies filed for bankruptcy. But historically, there have been no financial advisors who had the resources and experience to make those correlations.

As the stories of these failures unfolded, institutional investors, investment bankers and numerous other shareholders began to ask questions, such as:

  • Was the company being operated in an honest and ethical manner?
  • Had management been reckless in operating the business?
  • Could the bankruptcy have been avoided?
  • Can the value of the business be salvaged?
  • How can the assets of the investors be protected in the future?
  • Had the business been operated with the best interests of the shareholders in mind?

 

THE SOLUTION

Solution Chart

 

Yake & Associates, Inc. predicted every major retail failure long before it occurred because, in every case, we recognized the telltale signs of a company-at-risk:
  1. In most cases, the inventory was overstated and/or manipulated to conceal operational errors, mismanagement and in many instances, fraud.
  2. In every case, losses were erroneously attributed to a vaguely defined category known in the retail industry as shrinkage.
  3. And most important, in every case, if there had been timely and proper intervention to identify the business practices that were contrary to the welfare of the shareholders, disaster could have been prevented.