Modern Retail Rundown: Ikea's expansion plans, David's Bridal Chapter 11 redux & Bed Bath & Beyond's imminent bankruptcy

0:05Hello and welcome to the Modern Retail Rundown. I'm your host, senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie-Weissman. Good morning, Kale. Hey, how's it going, Gabby? Great. Yeah, good to have you back. Yes, it's been a while, but you and Ana did great last week. It was really fun to listen to. Thank you, thank you. It's some big shoes to fill. All right, so every week we break down the biggest headlines coming out of the retail world. This week, there's, of course, as usual, a lot going on. Ikea announced a new store concept for its U.S. market. And then David's Bridal's second bankruptcy is on its way.

0:45And finally, we have sort of an update on Bed Bath & Beyond, but who knows by the end. Let's start with Ikea. Yeah, so this is, I guess, relatively a new store concept. It's sort of in the vein of their design studios that they have popping up. But it's part of a big push for the U.S. market where they're investing$2.2 billion to expand. They're also adding just more of their regular store count. So a lot going on there. Kale, what are your thoughts? Because this seems like IKEA sort of going back to the drawing board and figuring out what Americans like about it or don't like. Yeah, it seems like it's kind of an unclear vision, I guess I would say.

1:31But it's also, you know, IKEA has always been such a global juggernaut, been so important, you know, in Europe and other countries. And now it seems like it's really trying to focus specifically on the U.S., which, I mean, it's a really big player in the U.S., but it's clearly not as big as it wants it to be. And so I think that it's interesting that now the company is saying, well, we're going to put$2 billion into reinvigorating sort of the new types of storefronts that we have in the U.S. So I think it's interesting. IKEA is clearly trying a bunch of different things to see what works. You know, they have, you know, they're big stores that everyone knows, but there are relatively few of them because they're so huge.

2:08And they've always been viewed kind of as a destination in the US. Like I remember, remember when the IKEA in Connecticut first opened up and I lived two and a half hours away. And but everybody where I grew up would drive there. And that was such a big deal. And like the early 2000s or late 90s or whenever that was. But I don't know. It seems like now it's trying to transcend that and go into something a little bit different. I don't know. Yeah. So I think it's clear that IKEA is saying that it needs to do a strategic rethink, but it isn't quite clear exactly what that is. Mm-hmm. And like you said, actually, the city's aspect is really what comes into play here because I think these smaller, they're called plan and order sort of, you know, pickup points that are coming.

2:53They're calling them an extension of the design studios that, you know, they're in cities like New York where they don't have, you know, the big, I mean, really the nearest Ikea is, you know, a train, a plane, an automobile away from most people. So having these small centrally located more of a design studio is what they were counting on. Although it's hard to tell how well those are doing. I think one of them here has closed already. But this is separate, we should say, than the eight more stores that they are adding to the 51, which are just their regular big box ones. But it seems like they are really, I guess, adamant about having this, you know, sort of like come in and spend a few hours and design your own kitchen idea.

3:44But it's just hard to tell whether it's sticking or not, at least for this market, which obviously seems important to them. And this is their biggest investment since they opened here in the 80s. Yeah, it's super interesting. And it's also coming at an interesting time when I would expect IKEA to make these moves maybe two years ago or, you know, when there was really a big boom in home goods. And that's when demand was through the roof. And now we're in an interesting time economically. And so it seems like in some ways, maybe IKEA, not that it missed the boat. I'm sure it's going to do fine.

4:16It's a huge company. It's really successful. But it's also interesting that now it's planning this expansion after there's already been a boom and a bit of a flattening out in terms of demand for home furniture, home renovation, that type of stuff, you know? Yeah, and of course, it's trying a bunch of different things. I think it's trying to really do resale or a more sustainable marketplace just like any other retailer. But yeah, this just kind of shows that they're ready to grow the actual footprint of the store, which, like you said, is hard to kind of figure out. Is it because there are so many more e-commerce players, the Wayfares of the world where people are buying their furniture very differently than they did even 5, 10 years ago?

5:06Yeah, I think that that's very true. There's also an interesting thing with Ikea, and I can't speak to this really, really intelligently because I only understand it at a very cursory level. But Ikea is different than a lot of other big box stores because it operates on a franchise model and it has fewer franchises. It's not like McDonald's where there are hundreds of thousands. I think there are only about 12 franchises of Ikea, but it means that there's not a centralized company that plots this out. And it has this very different type of format by which it expands and has people who owns those stores.

5:38And so that creates a whole new type of strategy when it comes to being a business unit that everybody knows and understands, but also having these sort of lower umbrella players also part of the mix who need to be a part of it. you know so next up we are going to be talking a little bit about the wedding woes i guess you can call them of david's bridal they uh you know filed for bankruptcy this past week it's their second in about five years they were just coming out of one in 2018 i believe and you know it's sort of like just as they were transitioning into you know more of an omni-channel company this is their words, not mine.

6:24And everything seemed to be doing really well, as far as we were concerned. I mean, we've been covering them for a couple of years and how they had really come back with this historic wedding boom that we're having. There's that very famous stat, one in four American Brides shop at David's Bridal, but clearly things are changing. And interestingly, they're blaming taste, really, which is interesting. I mean, you know, this morning I was reading the UK retailers are blaming the rain, which I'm like, hmm, don't you guys always have rain? It's never rained in the UK. This is a brand new thing for them.

7:05Yeah. So it's interesting. Where in this case, I mean, it kind of makes sense that, you know, younger brides are going for hipper, you know, just outfits, I guess you can call them because some of them are going for pantsuits or thrifted vintage wedding dresses. So they're not going for that big, you know, Cinderella ball gown that we think of when we think of David's Bridal. So yeah, why don't you run the numbers, Kale? Sure. I mean, well, you know, pretty much it all comes down to debt, I imagine. And so David's Bridal owes$27.5 million to vendors, which is a lot of money. You know what I mean?

7:49And so I think the taste thing is super interesting where I want to quote what they said because I just thought it was really funny. Or I don't know if funny is the right word. Like, I don't, but an increasing number of brides are opting for less traditional wedding attire, including thrift wedding dresses. These shifting consumer preferences have significantly exacerbated the company's financials and the demand for formal wedding dresses, bridesmaid dresses and related accessories has decreased substantially in the current environment. So pretty much it's saying it can't keep up with the times.

8:22The company is going to be laying off about 9 ,000 workers, meaning I think it's leaving only around 1 ,000 workers. So that's a pretty big deal. I don't know. It just shows that, you know, you mentioned how we've kept tabs on them. I feel like every couple of weeks as a retail reporter, we would get a new press release from David's Bridal about some new program they were launching, some new concierge service, some new customer service. And in some ways, it can mean that the company is doing well, but it also can sometimes mean that the company is not doing well and it's trying to throw things against the wall to get people to notice it.

9:00And that might have been what was going on for the last few years as it's been trying to struggle to keep up with the trends. Yeah. And some of that also wasn't just their own in-store services. They have tried to sort of merge a more modern approach, you know, with the e-commerce play. And then, of course, you know, their concierge chatbot like service. But they also made a really large acquisition last summer, which is Anamali, which is a custom wedding, you know, startup, I guess, direct to consumer startup. It's an undisclosed sum, but, you know, that was, I remember speaking to them about it.

9:38And it was supposed to be really their big play to attract the brides that are going the direct-to-consumer route or more of the e-commerce route. So yeah, it's hard to tell. But like you said, maybe the debt aspect really was outweighing or outpacing a lot of these, you know, the fruit of these investments. I mean, I think that's what it always comes down to.

10:07And was in 2018. And the company said that it owed between$500 million and a billion dollars to creditors. So hopefully that this debt load is less than that. But also, it's clear that it's a very capital intensive and debt heavy business that they have that they've have not been able to reorient. And so, yeah, even with the big acquisition there, it didn't it didn't quite work and they weren't able to make the financials even out. Right. Which I guess brings us to the question, can David's bridal, I mean, obviously it's weathered storms in the past and even lockdowns, but can they continue to remain the top dress seller in the country or even just wedding retailer in the country?

11:00Like you said, they've added prom, they've diversified outside of this industry. But I don't know who's to say. I can't speak for the wedding industrial complex. I imagine it's much more platform driven than it has been before. I think that, you know, it used to be kind of retailers and, you know, that would control that kind of stuff. You would, you know, you would, the first thing a bride would do would be get a wedding dress. But now I think that a lot of that kind of planning and work is being done by the bigger platforms like Zola, like The Knot, like those types of places. And I don't think that they necessarily control getting the dresses, but I imagine that that leads to a more diversified array of types of choices that a bride or anyone can choose to buy from.

11:49And so I would be interested to know if that has made a dent in sort of the business aspects of where people are buying their wedding supplies. And like the fact that, I don't know, all of the updates that David's Bridal has made over the last few years have been very incremental and very, I don't know, like I was going through some of the stories, you know, they announced a chatbot, they announced a Pinterest-like way so that people could plan things. They announced that they were pivoting to prom a little bit. And these are all good, but none of them spoke to the core sort of shift in how people bought and the type of assortment they had and also in what maybe a modern wedding is looking for, you know, look-wise for their wedding, you know?

12:36Yes. I will add, though, they did, I remember them saying that they have been increasing, you know, less formal because that is what especially pandemic-era brides were looking for like shorter or, you know, kind of like I mentioned, a two-piece suit for their reception. So they were doing really well with that. But evidently, it was just not enough. Or I don't know, maybe everyone's just buying it on a website somewhere. Yeah, are people just buying it from a website somewhere? Are people, you know, every wedding that I've been to, and I don't think I'm a good subset. Like I live in New York when a lot of my friends are probably trying to cut corners, but like they've had thrifted wedding dresses.

13:17Or I had a friend who bought just a nice dress from Europe that wasn't a wedding dress, but said, this is my wedding dress. You know what I mean? Like, and so I think that the definition of what wedding attire is has definitely shifted. And it used to be much more on the fringes. And now it's seeped into the mainstream where I think people can do essentially whatever they want. And that probably is really hurting a business like David's Bridal, which is for one type of event, and that event is very formal, and there is a certain type of dress code, and it conforms to that dress code. And even if it does start making things that are a little less formal, that doesn't take away the cultural context of what David's Bridal is, you know?

13:57Next up is Bed Bath & Beyond's bankruptcy, or, you know, I guess the forthcoming bankruptcy, Will they? Won't they? This has been something we've just been sort of sitting on our hands and waiting for, but I'm not sure they're keeping us in suspense. Kale? I feel like we are a broken record, but we were duking it out whether to talk about this or not because we've talked about this two months ago or whatever. But I think it's important because this saga is just so drawn out and so weird. And while there isn't a whole amount of new information, the fact that – so pretty much the first thing that happened, I should back up, of course.

14:36The Wall Street Journal reported earlier this week that the embattled retailer said, the embattled retailer, of course, being Bed Bath & Beyond, said it needed to raise$300 million from share sales by April 26th to stay out of Chapter 11. April 26th is just around the corner, and it probably hasn't been able to do that. And as a result, the Wall Street Journal says within a matter of days, it likely is going to file for bankruptcy. This isn't the first time, as I'm sure listeners are aware. Gabby is certainly aware. Bed Bath & Beyond, two months ago, literally, was about to file for bankruptcy and then got this deus ex machina from some investors and got some new debt that pretty much let it pay off some of its vendors and stay afloat for just the time being.

15:23It was an interesting move. I think that they got something like$250 million up front and a promise of for as much as$1 billion. But I don't know. Clearly, that was two months ago, and now we're talking about bankruptcy again. And so it seems that this latest lifeline did not do what it was supposed to do. Right. And, you know, I think to even back it up a little bit further, this is coming off on the heels of Bed Bath & Beyond making a lot of investments. We've mentioned previously they have done store redesigns because that was, you know, one of their biggest faults to the public is that their stores are really messy.

16:06They're really hard to find. I feel like I'm always going in circles trying to find the SodaStream cartridges, but that's just me. I like that you're going around in circles. It's one of my favorite things about Bed Bath & Beyond. It is, yeah. And then, you know, when you find yourself by the exit and you're like, wait, no, I have to go back. So it's, yeah, it's a fun one to spend a Saturday afternoon in. But, you know, they've tried to kind of go the more minimalist routes. They added private labels. They work more with hip startups, the Caspers, the Bluelands of the world. But all of that to say, I think it seems similar to the David's Bridal story, which is that this is a legacy retailer that just can't seem to catch a break when it comes to profitability or debt.

16:52I also think that there is another really interesting David's Bridal parallel in the fact that I think Bed Bath & Beyond is really, really, I don't know, I don't know the exact numbers, but a lot of people have wedding registries on Bed Bath & Beyond, or they used to. And I imagine that has gone down as the business has been on the brink of failure for how long now. And also there have been a bunch of new players. I think most people probably have their wedding registries on Amazon and maybe Crate and Barrel. But I think probably Bed Bath & Beyond no longer plays as big as a role as it used to.

17:27And that probably has not been good for the business as well. Mm-hmm. Well, I will say again, from personal experience, it is added, but it's part of, you know, now there's, if you create a registry on Zola, it lets you, it kind of reroutes everybody to whatever store. So it means some brides are making multiple registries, but Bed Bath & Beyond is always, in my view, like kind of at the bottom of the list. You know, I think for me personally, if it's available on Amazon, I'm sending it to you over Amazon. So like you said, but yeah, that was a big part of the just their overall business that seems to just kind of take a backseat to the other retailers.

18:06Yeah. And I mean, it all comes down to it's a capital intensive business. Like it's, you know, a big retailer that has hundreds, if not thousands of, you know, vendors and brands that sell in it. And they, you know, if they have not been able to have enough money to pay those vendors to sell those things, then they're out of stock. And it's it's sort of a a circular thing that's been going on for years now and is now finally catching up to them. And so it's not looking good. And I don't know what they need to do. And right now, what's really sad about it is that the ones who are getting hurt now are the employees.

18:40So they've been closing a lot of stores. They've been laying off thousands of people. And there have just been some really gnarly headlines about some of the shady things that have been going on in the background that have been leaving its workers out to dry. Yeah, yeah. We saw just recently in New Jersey, they laid off, which is where their headquarter, they laid off 1 ,300 employees. And then there was some sort of payment, right? Is that what it was? That they hadn't received yet. So it's, yeah, it's, and they're promising more closures. So we will see. What do you think that means for its footprint though?

19:20Like if they continue to close stores, I mean, where do you go from there? Do you just go sort of just a minimalist route? Yeah, I mean, I think that they're probably gonna have to close a lot of stores. If they're able to save money and rise from the ashes, they're probably gonna have to do a small footprint type of thing. I don't know. I think the name of the game for all retailers that had a very legacy business model that relied on certain types of consumer preferences that might be now outdated. You know, it's very analogous to like mall brands. Like they had really big stores. They were anchor shops in major malls.

20:00Malls are sort of important, but not as important as they once were. People aren't shopping the same as they were in malls. And so you're seeing companies like, for example, Foot Locker, that was a big store in the mall, or even Macy's. They're now really honing in their store footprint, thinking about where to open new stores, and they're avoiding the traditional types of formats they had before. Usually they're city centers. Usually they're smaller, they're more curated. And I'm not saying that this is exactly the same as Bed Bath & Beyond, but I think that if they were to stay afloat, file for bankruptcy, get a lifeline, they're going to probably have someone come in who's going to, with a huge axe, chop a lot of things and then say, here's what we need to do.

20:39We need to find the areas where there is the most demand. We need to find the products that most resonate with our customers. And we need to figure out how to curate our assortment and make our actual footprint much smaller so that we can have a store that's actually profitable, that actually, you know, sells through our products without it just staying there. And so that's what I imagine is going to happen if Bath & Beyond is to continue. But, of course, maybe I've said this on the show before. I've definitely said this to you, Gabby. But, like, remember linens and things? Like, this isn't the first time there's been a really big juggernaut in the home goods space that, I don't know, it was a household name in my house in the early 2000s.

21:17And that has completely ceased to be. And so it is quite possible that Bed, Bath & Beyond won't be around. I don't know. Right. Yeah. Linen things. Pier 1 Imports. Pier 1 Imports. Yeah. But yeah, I think this limbo that we're in will tell us a lot. Although, yeah, if Bed Bath closes, I mean, that leaves such a big hole because there really aren't any retailers left that kind of cater to the specific need. That's true. But I think that a lot of those needs are filled by Amazon, which, you know, isn't a good thing. But I think that really cut into Bed Bath & Beyond's business. or the more higher end bespoke.

21:59Like I think a company like the Container Store does sort of what Bed Bath & Beyond does, but at a more premium, yeah, curated premium experience. So I don't know. Right. So with that said, I guess we'll find out by the end of the weekend or by the time you're listening to this, we will have an update. But I think I read somewhere, it could be as soon as Sunday. So we'll look out for that. That brings us to the end of the show this week. You can write and give us a review on Apple Podcasts, Spotify, or wherever you're listening to us. Also, don't forget to subscribe to the Modern Retail Podcast to hear interviews with industry leaders every Thursday.

22:42Kel, who do you have on next week? Next week, we have a fun one. It's with Ari Bloom, who's the co-founder and CEO of A-Frame Brands, which is a brand umbrella for pretty much influencer and celebrity-run brands. Fascinating conversation. Please listen. That's right. Yes. We will hear more about John Legend's new skincare line, which falls under that. Very interesting. Of course, come back Saturdays for the Modern Retail Rundown. Thank you for listening.