Liquidators of Failed Retailers Fast Becoming a New Growth Industry : Bankruptcy: The going-out-of-business sale nets the failed firm’s creditors the most bang for their buck.


National Lumber, Pacific Stereo and Gemco are a few of the local retailers that have gone belly up in recent years. In those cases and many more, either Albert Nassi or David Buxbaum was called in to bury the remains.

Nassi and Buxbaum are liquidators, who fly around the country to sell whatever inventory a failed retailer has left. It’s a profession some might not have mentioned in polite conversation a decade ago. Nassi, president of Sam Nassi Co., a Calabasas firm co-founded by and named after his late father, remembers his dad being described as a “corporate mortician.”

“Where are your emotions?” the younger Nassi recalled people asking his father. “They’d say, ‘How can you put these people out of a job?’ Well, somebody has to do it, and you might as well use a professional.”

More and more troubled stores--or their creditors or their bankruptcy trustees--are doing just that. Nassi, Buxbaum’s Encino firm, Buxbaum Ginsberg & Associates, and other liquidators are now viewed as savvy marketers who can get the stores’ creditors the most bang for the buck when they hold a going-out-of-business sale.


They’re also likely to be in greater demand over the next few years. Many retailers today are hobbling under piles of debt they incurred in the 1980s, often to avoid a hostile takeover. Throw in the recession now hanging over the economy generally, and Buxbaum said liquidation “is the growth business of the ‘90s.”

Nassi agreed. “A lot of retailers are making their last stand with this year’s Christmas, and I think that come January there will be quite a few more retail liquidations.”

Both men run private firms and declined to spell out their financial results. But Nassi is by far the larger, expecting to handle about $500 million worth of close-out sales this year, and it considers itself one of the largest liquidators in the nation along with Schottenstein Stores Corp. in Columbus, Ohio. Buxbaum will handle about $50 million in sales.

The firms earn their income in different ways. Buxbaum charges a fee, usually between 2% and 10% of the proceeds from the going-out-of-business sale. (That would give it annual revenue of roughly $2.5 million to $3 million.)

By contrast, Nassi often buys a store’s inventory for a certain price, then holds the close-out sale. Whatever cash the sale generates above what Nassi paid for the goods goes into Nassi’s pocket. (He’ll only say his firm’s annual revenue exceeds $10 million.)

For instance, Ames Department Stores, a Rocky Hill, Conn.-based chain that filed for bankruptcy reorganization last April, recently had Nassi and Schottenstein Stores jointly liquidate 221 of its 682 stores.

With help from their lenders, Nassi and Schottenstein first bought the inventory to be liquidated for $211 million, Nassi said. The stores’ close-out sales last August generated $240 million, so the extra $29 million was shared as the gross income, before expenses, by Nassi and Schottenstein. Of course, had the sales garnered less than $211 million, the liquidators would have taken a loss.

Why don’t troubled stores just hold a going-out-of-business sale themselves and save having to pay Nassi or Buxbaum?


Stuart Hershfield, a New York lawyer who represents Ames’ creditors, said “it’s generally a sound approach” to hire liquidators because in cases such as Ames, “they assume the risk of not being able to sell everything. It’s their problem.”

Good liquidators also know how to generate the most traffic for the sales--which typically last eight to 10 weeks--and how to keep costs down in the meantime, Buxbaum said. Both mean more money for the creditors after the store closes.

“We can do it for less cost because we don’t have the sentimental attachment” to the business, said Buxbaum, 64, who keeps his office in his Encino house because he’s on the road three weeks a month supervising sales.

Going-out-of-business sales inherently draw customers, because the merchandise is almost always marked down. But Buxbaum takes no chances.


A store’s top credit customers are often invited to a “preview” of the sale, catered with wine and cheese. Buxbaum also tries to generate publicity for the sale not only with advertising but by drumming up media stories if he can find an angle. Case in point: At a Wichita, Kan., store, he dressed its window mannequins with clothing made from newspapers. Local newspapers and television stations quickly made it a story, he said.

Sam Nassi formed his company with partner David Bernstein in 1971, and Bernstein remains chairman. Both were officers in California with the White Front department store chain, but when it went broke, they ended up liquidating their employer and then stayed in the business of closing stores, Albert Nassi said. Among their biggest liquidations was the W. T. Grant department store chain in 1975, which had $1 billion worth of merchandise and 980 stores.

Coincidentally, Buxbaum also got into liquidations because of the White Front collapse. He had been running discount health-food stores inside White Front stores. But when White Front went under, he was forced to liquidate his stores as well.

Buxbaum said he later worked for several other liquidators before starting his own firm in 1978. Eventually, his son, Paul, and former May Co. executive Ira Ginsberg joined the firm, and today each owns a third of Buxbaum Ginsberg & Associates.


Buxbaum said he knew in the late 1970s that liquidation “was going to be a big business” because he could see smaller, regional retailers being squeezed by large national department stores that had bigger marketing budgets and “superstores” that focused in one area--say sporting goods, home-improvement products or home electronics. Now, many of those larger chains, such as Ames, are in trouble as well and that probably means more business for the corporate undertakers.

“We used to be happy running one job,” Buxbaum said. “Now we’re running three or four jobs at one time.”