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Tuesday, May 30, 2023

Liquidators Making Lemonade

A recession means bad times for businesses, right? Well, Great American Group in Woodland Hills is one exception. For this 35-year old liquidation company, an economic downturn means big business. “We are counter-cyclical,” explained Scott Carpenter, Great American executive vice president and director of operations. “We had a banner year last year and 2009 will be similar.” Carpenter’s no psychic, but he can easily make such a forecast considering that Great American kicked off the New Year by becoming the liquidator of Circuit City’s $1.7 billion inventory. That’s quite a job for a company that started out with 15 employees. Now, Great American, founded by Gary Mintz, has more than 120 staffers: half are in Woodland Hills and the others work in Great American’s offices in Chicago, New York, San Francisco, Atlanta and Boston. “Since I’ve been with the company, we’ve expanded about four or five times,” said Carpenter, who has served in his role at Great American for 12 years. “We’ve grown from a little office to quite a large company.” Just last summer, Great American outgrew its facility on Variel Avenue in Woodland Hills and is now in a much larger space on Burbank Boulevard. Asked what was responsible for the company’s growth, Carpenter said, “We are very efficient in what we do. All of the bankruptcy and turnaround firms know us.” To win the job of liquidating the inventory of Circuit City’s 567 stores, Great American bid just under $800 million at an auction. Based in Richmond, Va., Circuit City filed for Chapter 11 bankruptcy protection in November. In mid-January, the electronics retailer announced that it would seek Bankruptcy Court approval to liquidate its assets. “The company had been in continuous negotiations regarding a going-concern transaction,” stated James A. Marcum, Circuit City’s vice chairman and acting president and CEO, about the company’s demise. “Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company.” The day after Marcum’s announcement, Great American took on the task of liquidating Circuit City. The process entails handling the company’s advertising and discounting of products. “We guide and direct all of the store employees, and we continue to discount the product until it’s all gone,” Carpenter said. At first, Great American officials thought that it would take eight weeks to liquidate Circuit City’s assets. However, after selling more than $450 million of Circuit City’s inventory since clearance sales started on Jan.17, Great American anticipates that the liquidation process should take just four or five weeks. The liquidation of Circuit City is just one of the high profile Great American has led. Last year, the company liquidated Linens ‘n Things, Mervyn’s and Shoe Pavilion. In years past, the company liquidated the assets of Tower Records, Montgomery Ward, Builders’ Square and K-mart, when that company closed 287 of its stores. “Every major liquidation that’s taken place,we’ve been involved,” Carpenter said. Engaging in the process can be emotionally trying. For one, the teams Great American assembles to lead the liquidation effort often must travel away from home at length. In fact, when Carpenter spoke to the Business Journal, he was at Circuit City’s headquarters in Richmond. “It seems like most of our clients, because they’re older retailers, tend to be on the East Coast. It requires a lot of travel on our part,” Carpenter said. In addition to the extensive traveling, it is never easy to work with newly displaced workers. “You’re going into a situation that’s very unfortunate for the employees,” Carpenter said. “There is a lot of emotion in the beginning when people find out their company is closing.” But he added that the positive side of liquidations is that they typically take eight to 10 weeks, allowing employees time to find another job. Carpenter went on to say that many Great American employees are the former employees of companies that went out of business. “Many of the people we hire know exactly what the people are going through,” he said. “They can be very helpful and empathetic.” Carpenter himself was once a displaced employee. He previously worked for Hechinger, an East Coast-based home center which closed stores a decade ago in the wake of competition from Home Depot, according to Carpenter. “That’s how I got into the (liquidation) business,” he said. “That’s how I came to know Great American Group, who was the firm we hired back then to help us close those doors.” Although Great American employs formerly displaced workers, the company is not without critics. “People seem to think that because of what we do we are the ones that cause the companies to have to close down, and we don’t have anything to do with that,” Carpenter said. “Whatever events took place that caused companies to have to close down is based on the company management and strategies or based on the company’s relationships with the banks that lend them money.” Criticism of Great American may continue, but the company is set on growth. In addition to its core business, the company has developed several sectors, including appraisal, real estate and wholesale and industrial divisions. “All of those grew out of the core business of helping companies close,” Carpenter said. At present, Great American also is developing its intellectual property division, which involves the selling of brand names. The billions of dollars in inventory it moves yearly combined with its growing business branches make Great American formidable, Carpenter believes. “It’s quite a sophisticated company,” he said. “It’s not a fly-by-night kind of operation. You can’t do (what we do) without having some level of sophistication.”

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