The Challenge
A well-established home furnishings and decor brand with four showrooms across Pakistan had a brand problem that wasn't really a brand problem — it was a capital allocation problem.
The business carried PKR 120M in showroom inventory, much of it slow-moving premium furniture that tied up cash for 8–14 months between purchase and sale. Revenue was growing at 18% year-on-year, but gross margins had compressed from 41% three years ago to 31% in the most recent year, and the business was carrying PKR 55M in short-term debt to fund the inventory cycle.
The founding family knew something was wrong but had never had a structured analysis of exactly what.
Our Process
We ran a full FP&A and business analytics engagement over eight weeks.
SKU-level profitability. We built a bottom-up profitability model for every product category — furniture, soft furnishings, lighting, decor, and tableware — incorporating purchase cost, landed cost, storage cost, markdown history, and days-to-sell. The results were stark: premium furniture was consuming 58% of working capital while contributing 22% of gross profit. Decor and soft furnishings had the inverse profile.
Inventory ageing analysis. We segmented inventory by age bracket: under 90 days, 90–180, 180–365, and over 365. The over-365 category represented PKR 31M in stock — most of it premium furniture that had been displayed on showroom floors but not restocked as a conscious business decision. It was frozen capital.
Digital catalog feasibility. We modelled a scenario in which the premium furniture category shifted to a make-to-order model supported by a digital catalog and sample showroom pieces, rather than full inventory stocking. The working capital release was significant — and the customer experience analysis suggested this model was actually closer to what premium furniture customers in Pakistan expected.
Debt reduction roadmap. We built a cash flow model showing the month-by-month path from current debt levels to a target of PKR 15M over 18 months, triggered by the inventory and margin changes. The model became the management team's operating plan.
Key Outcome
The insight that changed the business was the SKU-level data. The family had intuitions about which products were performing — but the data showed those intuitions were partially wrong. The product lines they thought were the prestige drivers were the margin destroyers. The product lines they had underinvested in were the profit engine.
Results
- ·Gross margin recovered from 31% to 44% within 12 months of implementing the product mix and inventory strategy changes
- ·PKR 38M reduction in short-term debt within 18 months, funded entirely from working capital release
- ·Digital catalog launched for premium furniture; made-to-order model adopted for 70% of the furniture category
- ·New showroom opened in Lahore — funded from cash flow, not debt — 14 months after engagement start
- ·Monthly analytics dashboard implemented: product category P&L reviewed by ownership weekly