Michael Appel, who has made a career in retail turnarounds, sees his workload picking up pretty soon.
“There will be a wave of restructurings, but I don’t think you will see it until after Christmas,” said Appel. “Some companies as they were navigating through COVID[-19] also started to fix their business model at the same time. Others just coasted and we are going to see the results of that.”
Last month, Appel joined Getzler Henrich & Associates, a 54-year-old corporate restructuring and operations improvement firm that specializes in middle-market companies, considered those under $1 billion in revenues. Appel was named managing director of Getzler Henrich’s retail turnaround and restructuring practice.
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Over lunch last week in Manhattan’s Flatiron neighborhood, Appel painted a not-so-pretty picture of the retail landscape. “Restructuring is quiet but we expect that to change,” he said. Businesses coming unglued positions Getzler Henrich to potentially pick up new clients and help them put the pieces back together.
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“The luxury businesses will be fine. Those customers have plenty of money. But the lower moderate to mass businesses are going to be under stress because consumers have less disposable income after really benefiting from the stimulus, interest rates are going up, and I don’t think capital is as easily accessible as it was,” Appel added.
“A lot of companies are still grappling with too much inventory. It’s correctible if your balance sheet allows you to do it. If you are over-levered, that’s going to be a problem. If you have too much debt and business is tough and you are cash strapped, that can lead to a restructuring. If you have a strong capital structure and have access to liquidity, availability on your ABL facility, you can get through it.”
Among the more challenged retailers, Appel claimed: “The poster child is Bed, Bath & Beyond. They completely changed the model without testing it. They certainly needed a refresh. A lot of the merchandise was stale. The remodels looked cleaner, but there was nothing to buy. They got rid of the brands. A year ago, I went in there. I needed a Dustbuster. Not only did they not have a Dustbuster, they didn’t have any knock-off versions. They were totally out of stock.
“Look at Old Navy. They made a big bet on size inclusivity, which didn’t work. Old Navy used to be terrific. It was exciting. They sort of lost that. Can they recapture it?
“Vera Bradley is under stress, and they’re seeking a new CEO,” Appel observed.
He said so far he has one client at Getzler Henrich that he declined to specify. He was more forthcoming on how he operates in turnarounds.
“When you go into a company that’s got problems you have to quickly assess the situation, get a game plan together, and fix the liquidity and operational issues in parallel,” said Appel. “It’s really hard for most managers to do both. That’s why the restructuring industry exists. Most people who operate businesses don’t know how to restructure businesses. Companies go into Chapter 11 and the balance sheet gets fixed, but the business doesn’t get fixed so you [eventually] end up with Chapter 22. You can’t just fix the balance sheet. You have to address the operating issues with a sustainable business proposition.
“We help our clients navigate through these challenges and at the same time, we are looking at what efficiencies and opportunities exist. What’s the low-hanging fruit? It’s all about liquidity. A lot of these retail business, they say they understand their customer and they have no customer research.”
Over the years Appel has managed turnaround efforts, often in interim chief executive officer slots including at Laura Ashley, HCI Direct, Wilkes Bashford and Baccarat. He also provided turnaround services for Kenneth Cole, Avery Boardman, Versa Partners and DW Partners, and was chairman and CEO of Rue 21 leading turnaround efforts there, among other assignments.
He maintains his own advisory firm, Appel Associates, to increase his exposure. Maintaining his firm isn’t a conflict with his job at Getzler Henrich. He serves on the board of Ashley Stewart.
Getzler Henrich, considered a boutique advisory firm, was acquired by Hilco a year ago. “I’ve had a long relationship with Getzler Henrich over the years. A lot of people at Hilco know me as well,” said Appel. “Hilco has had tremendous growth over the years. They do inventory liquidation, valuations, monetization of assets, retail advisory and asset-based lending.
At Getzler Henrich, “the focus is to maximize value for the stakeholders,” Appel said. “It could be a liquidation, or it could involve fixing the balance sheet, and there has also been a lot of operational improvement work in conjunction with that and that’s my background. I’m not a classic, restructuring CPA-type. I am an operational turnaround person.
“We are hiring financial restructuring professionals for my practice and also consultants that also have operational turnaround experience,” Appel said. “It will be a small but mighty team that understands the retail business.”