The challenge

With assistance from CFGI, a popular grocer was sold to a new private equity firm, granting it a fresh opportunity to bring healthy food to its devoted customers.

  • Saved hundreds of jobs.
  • Renegotiated and exited unfavorable leases.
  • Improved company profitability.

A chain of organic grocery stores, which was owned by a private equity firm, started running into liquidity issues. Soon, the problems were piling up. The company was past due on its bills, and vendors had stopped shipping products to the business. As time went on and the situation escalated, the grocer was running short on inventory and facing significant obstacles meeting even its most essential financial obligations, including payroll.

CFGI was tasked with helping support an out-of-court restructuring process by preparing cash flow projections and repairing relationships with vendors. Once we got to work, we were able to implement new solutions to help restore profitability and get the business back on its feet. Ultimately, the company was able to become acquired by a new private equity firm after regaining credibility with vendors and improving its cash flow and financial feasibility.

Once CFGI became involved, we helped this retailer reevaluate a wide variety of factors to improve its overall financial forecasts, leading to greater profitability and making the business attractive to new investors. Our wide-ranging support left no stone unturned as we scoured for details related to which items were turning a profit and what leases were no longer ideal for the business.

Compounding problems make it difficult to make ends meet

Over a period of several months, the business’s financial troubles began to snowball. A crucial factor was that vendor relationships had begun to deteriorate due to previous nonpayment issues. Without an adequate supply of saleable inventory, stores were less able to generate the revenue required to correct course and return to a more prosperous status quo.

Eventually, money became so tight that the company’s owner had to personally provide substantial cash infusions to the organization just so it could meet its payroll obligations.

Clearly, this situation wasn’t sustainable.

CFGI was brought on board to help the company find a path through its mounting challenges. Our experts reviewed the details and were asked to evaluate the circumstances so we could advise the business about its potential restructuring alternatives. Over the next several months, we stepped up to the plate to provide assistance with vendor relationships and more.

The CFGI solution

Getting vendor relationships back on track while improving profitability and reducing costs

The CFGI team quickly dove into the finances, working diligently to prepare weekly and long-term cash flow projections for the client.

During the course of this work, the restructuring experts also began to analyze the profitability of various product lines that were offered by the grocery store chain. This process allowed the team to make careful recommendations for which stock-keeping units (SKUs) should be eliminated because they weren’t turning a profit for the business.

Our experts also reviewed the company’s various lease agreements for its different storefronts. CFGI discovered that several of these contracts were now priced at above-market rates, largely due to changing circumstances in regions surrounding specific stores. New space had become available in several areas in the time since the leases were initially negotiated, driving down overall prices. With this information, our team was able to renegotiate the terms of some rental agreements while exiting leases in other instances.

Crucially, we helped assist with the grocer’s continuing inventory challenges. In some circumstances, we were able to work out plans with suppliers to pay off past-due invoices while receiving products by providing cash on delivery (COD) for the time being. Where this wasn’t achievable, we were able to help the client find alternative suppliers that were willing to give the business a fresh start.

The outcome

A new path toward success for this organic grocery chain

Through this multipronged strategy, the company was able to gain a more solid footing. Its lease agreements were more viable, shelves were well stocked with profitable product lines and relationships with vendors were improving. With the support of CFGI, these out-of-court restructuring solutions ultimately allowed the grocery store to save hundreds of jobs that could have been lost, had there not been a successful resolution.

With a right-sized cost structure and enhanced profitability, the store was ultimately able to be acquired by a new private equity firm. Cash flow projections have improved and the future is looking bright again for this dedicated supplier of healthy and nutritious food.

CFGI’s restructuring services team is prepared to help distressed companies of all sizes, and in a wide variety of industries, explore their options as they manage difficult financial circumstances. Our experts offer a wide breadth of experience as they work directly with clients to help them uncover new solutions, free up cash flow, negotiate with suppliers and more. With the support of our team of professionals, your company can weather the issues ahead by participating in an out-of-court restructuring program or, if necessary, a formal bankruptcy proceeding.

Reach out to us today to find out how we can best support your business during times of financial distress.