What is this thing called 9Stucks?
9Stucks is a dynamic business diagnostic tool. It identifies nine distinct yet interrelated business challenges that cause a company to underperform.

“SportsCo” (Private-Equity Backed Retailer)

The Diagnosis

Quick Facts:

  • Industry: Retail, Consumer Products
  • $125 million revenue
  • 12 locations in SE US, a classic ‘rollup’ of separately owned retail companies
  • majority owned by 2 private equity groups
  • The Stucks (5): DitchSlow LaneFogMazeRough

What I Heard From the Leadership Team:

  • we need an objective outsider to do an in depth look at the business
  • rollup synergies and profitability never realized
  • limited growth
  • very tight cash
  • shareholder value dropping

What I Found After Digging In:

This was a failed rollup: unclear business model, operational and financial synergies not realized, poor systems and controls

DITCH

  1. Original management team that had completed rollup had been replaced with both permanent and interim replacements
  2. PE groups dealing with conflicts/legal challenges from minority investors

SLOW LANE

  1. Overall senior management team was weak, lacking key skills in important areas
  2. High turnover at retail locations, especially with store managers
  3. Each retail location had separate culture; not properly integrated into one company culture
  4. Some of the 12 store locations were geographically located far from corporate office, hindering close oversight
  5. No coordinated training for store associates

FOG

  1. Multiple product lines created unnecessary complexity
  2. 5 of 12 stores were losing money
  3. Stores had similar product mix, others were very different; this added to company’s overall complexity, inventory challenges, training, etc.
  1. The senior lender was upset with poor cash flow, growing inventories, low profits
  2. Weak financial controls
  3. Weak financial reporting
  4. Spare parts business hurt by shrinkage (theft)
  5. Excessive SGA spending, particularly at corporate level

ROUGH

  1. Old IT systems; not integrated across stores nor at corporate level
  2. Outdated processes that did not meet customer expectations
  3. Stores dated in appearance, inconsistent floor plans