EZ Worldwide Express, based out of Elizabeth, New Jersey, recently announced it received permission from U.S. Bankruptcy Court Judge Stacey Meisel to put together a debt-repayment plan, according to The Wall Street Journal.
Result of a market downturn
The brick-and-mortar retail industry has taken a step back in recent years with the enticing draw of online shopping converting more people every passing holiday. The overarching effect of e-commerce is clear as day when looking at the National Retail Federation’s break down of 2016’s Black Friday shopping—108.5 million Americans hit the internet to hunt for deals, while just 99.1 million journeyed to the stores.
Consumer mainstays like Gap, Abercrombie & Fitch and American Apparel have all filed for bankruptcy in recent years, but lost in translation is the toll taken on the retail freighting industry.
EZ Worldwide Express was just one victim of the market downturn, and quickly found itself stuck in a tough financial situation after a less-than-satisfying fourth quarter during the 2015 fiscal year. The business, which normally enjoyed an operating revenue of around $50 million per year, suffered a slow holiday season at the time of year where typically 40 percent of annual revenue is processed, according to The Journal.
“Although the retail industry in general had a satisfactory season, the balance between in-store retail sales and online sales tipped dramatically towards online sales and direct-consumer delivery,” Ajay Aggarwal, company President, told Judge Meisel in court papers obtained by The Journal. “Since our businesses serve primarily in-store retail sales, we suffered accordingly.”
Aggarwal is specifically referring to his company’s relationship with Forever 21, which accounted for half of all revenue. The enterprise serves as a prime example of mismanaging money, as the business had invested $12 million into its operations shortly before the decline in business hit. This left it with a $1.2 million overdraft with PNC Bank, forcing the financial institution to demand the $4.2 million owed in loans, Law 360 reported.
Making tough decisions
Forever 21 had cut its business with EZ Worldwide Express considerably over a one-year span, according to Consumerist. After the retail shipping company had filed Chapter 11 bankruptcy, it slashed how many stores it would deliver to—from 171 to 34—and instead shifted focus to other customers with high-paying contracts, like Disney, H&M and Amazon.
Downsizing operations didn’t end there, however. The organization laid off roughly half of its 700 workers, sold half of its 300 delivery trucks, shut down eight of its 13 locations and slashed executives’ salaries by one-third, according to The Journal.
While drastic decisions were made, the decisive actions eventually allowed the company to emerge from bankruptcy protection. Debt repayment is already underway, with unsecured creditors set to receive $1.6 million spread across four annual payments moving forward.
EZ Worldwide Express has proved to investors that in just one year, shrewd decision-making when faced with consolidation and downsizing can give a company the relief they need to turn operations around, even in a down market. While executives at the company made excellent judgment calls, the experience brought to the table by the company’s lawyers was undoubtedly a factor in its successful emergence from bankruptcy.