Report from Value Creation Strategies in Retail event, 4 October, Stockholm

Presentation by Heinz Weber, Chairman of Gordon Brothers Europe

Nils Åberg of TMA Sweden provided a warm introduction to Heinz Weber who is the Chairman of Gordon Brothers Europe. Heinz career has included roles in commercial banking, restructuring advisory and portfolio workout roles which has led neatly to his current role with Gordon Brothers. The 100 year old firm provides a service which includes advising lenders, owners and management teams on value realization strategies but also implementing those strategies and providing a guarantee of the financial outcome of their projects.

Heinz explained two themes which are driving distress in retail. Successful retailers are always tempted to expand abroad but retailing remains a very local business and this means that many retailers follow their international expansion strategy with a requirement to exit from the countries where they have been unsuccessful. The other main trend is the increasing digitalization of retail with shoppers increasingly using multiple channels (e.g. apps and physical stores) to complete their purchase or interaction with a retailer. Those retailers which are not adapting their business model either have to catch up quickly or will end up in serious trouble.

The critical factor which Gordon Brothers look for when assessing a challenged retailer is the brand. As long as brand value remains, there is a possibility to reinvent the business. After the brand, Gordon Brothers look to the value of the stock including stock which the retailer has not yet taken into its own premises but is sitting somewhere in the supply chain and intended for delivery to the retailer. Unlike traditional insolvency practitioners, Gordon Brothers will look to the potential value that can be realized from existing stock and by pulling through the stock which has not yet been delivered.

Critical to Gordon Brothers approach is employing experienced sales and operations staff who have to have been through a personal “crucible moment” – as Heinz so colourfully called it – where they have faced a crisis in their business and chosen the tough path of reacting and working through the crisis rather than walking away.

Heinz then told the story of a number of case studies across Europe and covering different types of retailers such as traditional department stores, DIY stores and fashion retailers. These cases ranged from maximising realisations from an exit to restructuring the business model of a branded clothes retailer to a virtual company which managed brands and franchise arrangements.

In his final remarks, Heinz summarized the Gordon Brothers approach in three points:

1.       Deliver superior operating results

2.       Asset realization – always beat the clients expectations

3.       Remove the volatility in the outcome statement for the retailer

Following this compelling presentation the members and presenters were generously provided with drinks and sustenance from our kind host, Jonas Rickardsson of PwC.