The Turnaround

The record

1. 2009

   Morgan Stanley

   Held

   Whether to shift Morgan Stanley's earnings from volatile trading toward durable, fee-based wealth management

   • Pivot to fee-based wealth — Trade volatile trading revenue for durable, fee-based revenue via the Smith Barney JVchose this
   • Stay a trading house — Keep identity centered on capital-at-risk, balance-sheet-heavy trading revenue

   Stated reasonTo rebalance the firm's portfolio so a greater percentage of revenues and income come from balance sheet light and more durable sources

   What happened

   • 2020-02 Wealth/IM share of pre-tax profits: expected ~57% of pre-tax profits post-integration, up from ~26% in 2010
   • 2024 Fee-based client assets: reached $2.347 trillion at year-end 2024, up from $1.983 trillion a year before
   • 2025 Firm ROTCE: 18.8% for 2024, running above 20% for the first half of 2025
   Read the full analysis →
2. 2006

   Ford

   Held

   Whether to mortgage Ford's assets to raise a war chest instead of relying on a later federal bailout

   • Borrow against all assets — Pledge factories, IP and logo for a $23.5 billion facility.chose this
   • Wait for federal bailout — Follow rivals into bankruptcy and take government support.

   Stated reasonThe credit line bought the time to ride out 2008 and 2009 without a federal bailout while rivals could not

   What happened

   • 2008 Full-year net result: Full-year 2008 net loss of $14.6 billion, a record at the time
   • 2009 Full-year net income: Full-year 2009 net income of $2.7 billion, first annual profit in four years, on revenue of $118.3 billion
   • 2009 Quarterly special item: Q2 2009 pre-tax operating loss of $424 million yet net income of $2.3 billion, driven by a $3.4 billion gain on debt reduction
   Read the full analysis →
3. 2012

   Best Buy

   Held

   How to survive Amazon: fight on price or monetize the showroom floor

   • Fight Amazon on price — Compete directly on lowest online prices
   • Sell the floor to vendors — Charge suppliers for branded stores-within-a-storechose this

   Stated reasonBest Buy could not win a price war with Amazon, so it turned physical display into space vendors would pay for

   What happened

   • 2014 annualized cost reductions: beat $725M target, reporting $765M after one fiscal year
   • 2014 domestic online sales: rose 20% in fiscal 2014
   • 2014 total revenue: troughed near $39.8 billion in fiscal 2013 and recovered toward $42.4 billion in fiscal 2014
   Read the full analysis →
4. 2015

   Dell

   Held

   How should Dell structure and finance its acquisition of EMC?

   • All-cash purchase — Write a full check to buy EMC outright.
   • Cash plus VMware tracking stock — Pay cash per share and pin the rest to VMware's stock, absorbing debt behind a private-company shield.chose this

   Stated reasonDell could not write a $67 billion check, so as a private company it structured the deal to swallow the leverage and pay it down off-stage using VMware.

   What happened

   • 2018-07 gross debt paid down: Dell had paid down $13 billion of gross debt since the EMC merger
   • 2018-12 return to public markets: Shareholders approved the exchange with more than 61% in favor and Dell relisted on the NYSE as DELL without an IPO
   • 2021-04-14 VMware special dividend and spin-off: VMware first paid a special cash dividend of $11.5 to $12.0 billion to all stockholders, then was spun off entirely
   Read the full analysis →
5. 2022

   Abercrombie & Fitch

   Held

   Rebuild through buying discipline and set a formal turnaround plan rather than chase brand heat

   • Institutional buying-discipline rebuild — Fix inventory and margin discipline first, brand heat lastchose this
   • Chase brand reignition — Prioritize marketing and viral brand-heat revival

   Stated reasonThe problem was a company that had stopped reading its own customers, so it rebuilt inventory and buying discipline before touching marketing

   What happened

   • 2023 gross profit rate: Fiscal 2023 full-year gross profit rate of 62.9%, up approximately 600 basis points vs. prior year
   • 2023 revenue vs plan: Hit the top of the 2025 range - $4.3 billion - in fiscal 2023, two years early
   • 2024 net sales and operating margin: Fiscal 2024 net sales of $4.95 billion, up 16%, at a 15.0% operating margin
   Read the full analysis →
6. 2022

   Adidas

   Held

   Whether to write off the stranded Yeezy inventory or sell it down

   • Write off Yeezy inventory — Take the loss and dispose of stranded stock
   • Sell down Yeezy inventory — Liquidate remaining stock through managed dropschose this

   Stated reasonSelling the stranded stock turned a near-write-off into a profit stream

   What happened

   • 2024 net income: flipped from a €58M net loss to €824M net income from continuing operations
   • 2024 Yeezy contribution to operating profit: Adidas attributes roughly €200M of the operating profit improvement to Yeezy liquidation
   • 2024 North America revenue: full-year revenues fell 1.6% in reported terms
   Read the full analysis →
7. 2023

   Adidas

   Held

   Whether to write off the dead Yeezy inventory or sell it and donate proceeds

   • Write off Yeezy inventory — Walk away from the Yeezy stock entirely, taking write-offs
   • Sell stock, donate proceeds — Sell remaining Yeezy inventory and donate a portion to charitychose this

   Stated reasonSelling the stock turned a feared liability into a salvage operation generating profit

   Committedover €110M (Adidas pledged over €110M in donations from Yeezy sales)

   What happened

   • 2024 Operating profit: operating profit jumped 398% to €1,337 million
   • 2023 Yeezy inventory sales: roughly €750 million in net sales and about €300 million in operating profit
   • 2023 Operating profit: Full-year 2023 operating profit landed at a positive €268 million
   Read the full analysis →
8. 1984

   Disney

   Held

   Whether to fight the raider or pay greenmail to end the takeover

   • Pay greenmail to raider — Buy back Steinberg's shares at a premium to end the takeover attemptchose this
   • Continue fighting takeover — Resist the raider's bid for up to 49% of the company

   Stated reasonThe company was broke and cornered and paid a premium to make the raider go away

   Committedabout $300 million (plus another $28 million for Steinberg's out-of-pocket expenses)

   What happened

   • 1994 Filmed entertainment operating income: $448.2 million for nine months ending mid-1994, up 32% year over year
   • 1984 Roy E. Disney board resignation and Miller ouster: Roy E. Disney resigned from the board in 1984, beginning events leading to Ron Miller's ouster
   • 1984 Management change: A bloc of shareholders controlling roughly 36% installed Eisner and Wells
   Read the full analysis →
9. 1993

   IBM

   Held

   Break IBM into autonomous units, or keep the company whole?

   • Break into Baby Blues — Split IBM into autonomous standalone units competing individually
   • Keep the company whole — Preserve the integrated giant to deliver end-to-end solutionschose this

   Stated reasonThe one thing nobody else could offer was the integrated solution customers wanted from IBM.

   What happened

   • 1996 strategic pivot: IBM pivoted into services and coined 'e-business' in 1996
   • 2002 market value: rose from $29 billion in 1993 to $168 billion
   • 2002 layoffs: more than 100,000 employees were laid off
   Read the full analysis →
10. 1999

    Hyundai

    Held

    Whether to post an industry-longest warranty as a credibility bond before the cars' quality was fully proven

    • Post the warranty bond — Offer industry-longest warranty to buy trust before quality is provenchose this
    • Fix cars first, then advertise — Improve quality before making any public promise

    Stated reasonA costly public commitment made Hyundai's confidence expensive enough to be credible, buying time for skeptical buyers to take a chance while the cars got good

    What happened

    • 2004 J.D. Power quality ranking: Sonata posted the highest initial quality in the midsized-car category, the first time a Korean brand beat both European and US brands
    • 2011 J.D. Power IQS ranking: Ranked 32nd out of 37 in 2001, rising to 10th out of 37 by 2011
    • 2025 J.D. Power IQS corporate ranking: Hyundai Motor Group tied for the highest ranking among corporations for the second consecutive year; Hyundai brand placed third overall
    Read the full analysis →
11. 1999

    Kering (Gucci)

    Held

    How Gucci should defend against LVMH's creeping stake — invite a friendlier giant in

    • Invite PPR as white knight — Sell roughly 40% of capital to PPR to block LVMHchose this
    • Let LVMH accumulate — Allow LVMH's stake to grow toward control

    Stated reasonThe white-knight capital let Gucci go on the offensive against LVMH and build a multi-brand group

    Committedabout $2.9 billion (PPR paid this for roughly 40% of Gucci's capital in March 1999)

    What happened

    • 2001-09 LVMH litigation settled: PPR bought out 8.6 million of LVMH's shares at $94 each, resolving the fight
    • 2004 ownership: PPR reached 99.4% ownership in 2004, at $101.50 a share
    • 2026 Gucci revenue: Gucci revenues fell 14.3% to €1.35 billion
    Read the full analysis →
12. 2002

    Levi's

    Held

    Whether to close U.S. plants and move production offshore to cut the cost base to match shrunken sales

    • Cut cost base offshore — Close U.S. plants and move production offshore to shrink costschose this
    • Chase growth via Walmart — Launch a cheaper mass-channel line to grow the top line

    Stated reasonTo take the cost base down to match its shrunken sales so a smaller business could survive

    Committedsome $200 million on employee benefits tied to the layoffs (spending associated with the plant closures)

    What happened

    • 2003 Total debt: total debt stood at $2.31 billion, with the rise attributed partly to higher inventories from the mass-channel entry
    • 2003-09 Credit rating: Fitch affirmed Levi Strauss at 'B' with a Negative outlook
    • 2004 Net sales: $4.15 billion in fiscal 2002, $4.09 billion in fiscal 2003, and $4.07 billion in fiscal 2004
    Read the full analysis →