RST Brands

Situation

Outdoor furniture wholesaler RST Brands enjoyed relationships with customers such as Wayfair, The Home Depot, Costco, Sam’s Club, Target, Lowe’s, Overstock and Amazon. It also sold DTC through RSTBrands.com. The company’s financial difficulties owed to:
• purchasing and inventory challenges created by the pandemic-era supply-chain crunch;
• managing inventory at the piece rather than set level, which created orphans (the stockout of a single coffee table SKU could short-circuit the availability of 10 different sets); and
• excessive and unprofitable inventory due to expanding SKU selection by more than 100 percent.

However, the central and most complex challenge was RST Brands’ struggle to prioritize inventory-management and pricing across multiple ecommerce and brick-and-mortar channels. If the company offered a discount on one channel but not another, the customer carrying the higher price would complain and threaten to cut off the SKU. The company tended to cater equally to such demands, even though some customers were more important than others.

Tiger’s Vision

Engaged by the lender, Tiger Advisory Services saw the opportunity, through analytics, to provide clarity on which SKUs and channels RST Brands should prioritize. Interim CEO Ryan Davis, Tiger Group Executive Managing Director, also believed RST Brands had laid off too many people and made strategic rehires to better position the company for the future.

Resolution

Davis and his team of quants solved one of the most complex inventory challenges in their careers. The result was a logic hierarchy of SKUs and sales allocations that maximizes asset value. In addition to strategic rehires, Tiger better aligned the responsibilities of some employees to their specific skillsets. Many SKUs (approximately 60 percent, effectively all indoor items) were cleansed through existing channels. Internally and externally, these moves were received with enthusiasm. Leveraging a new, more viable balance sheet, RST Brands received multiple bidders as a going concern. As a distressed business, the highest liquidation offer the Lender received was $4.0MM; Tiger netted the lender more than $11.0MM by operating the business and selling it as a going concern.