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Discount Home Goods Retailer
A liquidation retailer selling discounted furniture, appliances and home accessories from national brands out of a 25,000 sq ft warehouse, at SDE margins above 40%.
Business Highlights
- SDE margins above 40%, sustained across the last two reporting years
- 25,000 sq ft leased warehouse facility
- Established liquidation sourcing model with fast inventory turnover
- Product from trusted national brands across furniture, appliances and home accessories
- Revenue has more than doubled over the last three reporting years
Considerations / Questions to Ask
- Liquidation retail lives or dies on sourcing. Who are the channels, are they contracted, and do they transfer with the business?
- 40% SDE margins are high for retail. Establish what is in the add-backs.
- What are the lease terms on the 25,000 sq ft facility, and how long do they run?
- Some revenue comes from customer financing agreements. Who carries that credit risk?
- Inventory is bought opportunistically. How much working capital does the business actually need through a cycle?
Opportunities
- Discount home goods hold up when consumers trade down, which makes the category counter-cyclical
- The sourcing relationships are the hard part and they already exist
- The business is single-site with no ecommerce channel, so both are open
- Fast inventory turnover means capital recycles rather than sitting on the floor