Grant's Failure For Bankruptcy

1550 Words7 Pages
In the mid 1970’s, one of the largest retail stores in the United States filed for bankruptcy after experiencing years of poor financial and managerial decisions. At the time of its bankruptcy, W.T. Grant (Grant) was in operation for 70 years with nearly 1,200 stores and 80,000 employees. The company also reported record sales of over $1.7 billion in its final year of operation. Prior to its bankruptcy, Grant implemented a vigorous business strategy which ultimately led to the company’s demise. This collapse shocked many people including investors, creditors, customers, and employees and left these individuals wondering how such a large company could fail so easily. Unfortunately, Grant’s failure should have been foreseen by the company’s…show more content…
During the years of 1969 and 1973, the company created majority of its 600 new stores in an effort to outpace its competitors; however, this period of rapid growth happened just prior to the company’s final year and was clearly a major factor that led to the company’s bankruptcy. On the company’s financial statements, it indicated that the fixed assets grew, on average, almost 15% a year during that time period between 1969 and 1973. This was substantially higher than the previous years’ fixed asset growth rates and should have been seen as a red flag by company executives and analysts. The executives and analysts at Grant should have questioned how the rapid growth rate in fixed assets was being financed, as well as figured out if the company truly could finance the growth. The company’s plan to finance the rapid growth will be discussed below. In order to appeal to a wider customer base, Grant had to do more than just open stores in suburban areas. The company had to create products that appealed to those customers living outside urban areas. Since suburban areas are filled with middle-class individuals, Grant decided to create a product line of higher end products, including appliances and furniture. As part of the approach to Grant’s new strategy, individual store managers were given more freedom as well. The managers were responsible for inventory and pricing decisions (mainly due to the fact that there was no centralized
Open Document