Appraisers and liquidators consider a wide variety of financial factors when developing recovery values and liquidation strategies for consumer goods. The relative importance – or unimportance – of each metric varies significantly between asset classes and intended customers. At Tiger, our appraisers know when certain metrics are vital to an accurate appraisal – and when others don’t come into play at all.
UNDERSTANDING THE COMPANY
We begin by learning how and why a company was founded, and how it has expanded since that time. We map the corporate structure and track shifts in core functions, inventory types and sales strategies. We also assess systems and logistics while identifying the company’s role in the larger context of its industry.
UNDERSTANDING THE CUSTOMER
The appraisal process embodies a deep understanding of how, why and where customers buy inventory and receive orders. We determine the value-add that a firm provides for it’s customers, assess the length and strength of it’s customer relationships with key customers, and flag potential risk factors.
FINANCIAL METRICS
• Aging: Newer inventory may be more desirable to current customers and opportunistic buyers, while older or out-of-season inventory can require additional discounting in a liquidation event.
• Demand Analysis: By comparing inventory on hand to historical sales by SKU, a liquidator can arrive at an estimate of potential inventory sell-through in the near future. It is generally a positive factor when the analysis shows that a significant amount of inventory would be sold within the following 90 days – while an extended supply of inventory in excess of customer demand can lead to low recovery values.
• Sales Seasonality: Demand for products can rise or fall significantly at certain times of year.
• Sizing: Common apparel and footwear sizes are easy to sell in liquidations, while odd sizes can require significant discounting.
• Sales Mix: Certain key product categories may drive sales for the entire company.
• Gross Margin: A high gross margin is generally considered to be a positive sign, but can signal a focus on volume over profit.
• Annual Inventory Turnover: High turns are generally considered to be a positive sign, though they can also indicate a retailer’s failure to anticipate sales trends.
• Sales Trend: Significant recent increases or decreases in sales can reflect customer demand in a liquidation.