W.T. Grant was once one of the largest retail companies in the United States. It had almost 1,200 stores, more than 82,000 employees, and sales of 1.7 billion. They differentiated themselves by building a reputation on sales of low-priced soft goods in urban locations. Unfortunately, with changes in the competitive environment, W.T Grant attempted to alter its business strategy but poor implementation resulted in the liquidation of the company in 1975. There were a number of reasons for W.T Grant financial problems; the first issue was lack of proper management and compensation plan. There were a number of changes among management within a maximum of 10 years and the overall decisions that were made were completely ineffective. Base on their income statement, W. T. Grant had no issues generating revenue, which increased every year from 1967, but it failed to convert its sales into cash. As sales increased, the cost associated with it was also increasing at an alarming rate, but management did a poor job of addressing potential risk. …show more content…
From 1963 to 1973, Grant opened 612 new stores and expanded 91 others. Base on their cash flow statements, Grants cash flow from operations was always less than their cash flow from investing. This required Grant to borrow money in financing to cover the expansion plan. This resulted in a significant increase in Grant’s short-term and long-term debt. Unfortunately, the expansion strategy was unsuccessful and Grant was unable to generate the cash inflow required. The average lease payment amounted to $599 million, which is significantly higher and was required for investing in the expansion plan of the company. Debt was further increased with the issue of debentures during 1971 worth $200