Rundown: Nordstrom may go private, Unilever spins off ice cream biz & Shein's new revenue stream

0:06Hey, everyone. Welcome back to the Modern Retail Rundown, our weekly news recap show. I'm senior reporter Gabby Barco, and I'm here with our editor-in-chief, Cale Guthrie-Weisman. Hello, Cale, and welcome back from Vegas. Hey, Gabby. Yes, I was just in Vegas earlier this week, got back yesterday morning for Shop Talk. And if I saw any listeners there or, you know, you didn't say hi to me, but maybe you listened anyway. It was great to see you all. All right. Well, let's get into this week's news. First up, we have a report about Nordstrom's founding family wanting to take the company private. That will be interesting if it goes through.

0:52Unilever is spinning out its ice cream business into a separate company. And last, we are going to talk about Shein, which is reportedly going into supply chain services. So just digging deeper and deeper into the retail industry. All right. First, the Nordstrom family wants to essentially regain control of the company. So what's being reported this week is that the family, including CEO Eric Nordstrom, are trying to take the public company private. They asked Morgan Stanley and Centerview Partners to reach out to private equity firms and can gauge interest about a potential deal. Well, this is not the first time this has been attempted.

1:43They tried kind of something similar in 2017, but that did not go through. But they do collectively, the family members, own about 30 % stake in the company. So I guess theoretically it can happen, but this is, we're going to get into it, but this is obviously also a pretty intense time for Nordstrom itself. Yeah. I mean, it's an intense time for Nordstrom. It's an intense time for, you know, department stores. And Nordstrom isn't the only department store, which we'll talk about probably in a few minutes. It isn't the only department store that is dealing with, you know, considering this type of going private move, I guess I'll say.

2:27And so moving it back to Shop Talk, where I just was, you know, there were a bunch of bigger companies, including like Macy's, etc. were there that essentially everyone knows that their businesses are not doing as hot as they should be or ones were doing. And now they're trying to pitch themselves as able to talk about the future, able to reinvigorate the brand. But also a lot of them, or at least a few of them, are thinking about doing these types of moves because the public markets aren't working. Yeah, I mean, there was some excitement around it. The Nordstrom shares spaked about 12 % when the news broke and gave the company about$3.2 billion market value.

3:13So, yeah, it's a lot going on. But we can actually, speaking of, you mentioned performance. Earlier this month, Nordstrom did report its earnings that included holiday sales, which were okay. But they are warning their outlook is declining sales essentially in 2024. It said that revenue, which includes retail sales and credit cards, will range from 2 % decline to a 1 % gain compared to last year. And of course, like a lot of retailers, they are attributing it to price conscious customers, which explains why Nordstrom Rack, the off price chain, is doing a little bit better than the flagship stores.

4:00So, yeah, what does this all mean for Nordstrom? You just mentioned this is a big topic right now with the department stores. There's privatization, I guess, has been a pretty big theme lately. We just talked about it with Macy's. Also, you know, the activist investors trying to do something similar. But if these do go through, obviously, they would change the structure of the company. But what are your thoughts on just the trend? Like, is this just kind of like generating headlines while things are going on in the background? No, I mean, I think that all of these companies have spent years trying to, you know, reinvent their business model, come up with a new way so that they can actually grow.

4:44Like, I think it's, you know, Nordstrom's a great example where passable headlines are great headlines. So, like, you know, you said that they did decent holiday sales, but I was looking and for the entire year last year, Nordstrom sales fell 5.4%. So like overall, these companies are losing or, you know, are losing the traction that they once had. And even when we say they once had like that itself is relative because, you know, you and I have been covering this for a while and most department stores have not been doing amazingly, except for a few like Nordstrom, who saw some some good pandemic, you know, pandemic bumps.

5:20But all of this is to say is that it is much easier to do drastic changes as a private company than it is to do as a public company. And, you know, pretty much what these companies want to do is, you know, be able to become multi-billion dollar businesses once again. But when you do that on the public markets, it's much more difficult. So ideally, you know, this is a way that they can, without having, you know, a bunch of shareholders, you know, watching over them, deciding what's going on, they can make drastic changes. if, you know, in a couple of years, be able to either IPO again or do some other business move, you know, at a, you know, at a much better price.

6:02But for a business as big as Nordstrom, for a business as big as Macy's, for any of these companies, you know, the lofty plans you have now that will, you know, set the tone and change the entire trajectory of the business, like, to actually be able to do that in a few years time is pretty, pretty difficult, if not, Not impossible, but I would be interested to see exactly what it would do and how a Nordstrom business would change as a private company. I guess that's what I'm thinking about. Right. And that's if the deal goes through. But you're asking for billions of dollars in this case. And so it's not easy to come by, especially these days.

6:41So, yeah, I think some of the analysts mentioned that it probably won't. But if it does, it'll be kind of interesting to think of as a family run business once again. I mean, maybe it's a family run business, but also it's you would have PE firms there. And so, you know, what would also happen is it would just be a lot of cost cutting. It would be, you know, it would probably be very, I guess, draconian, you could say, where it would be taking a hammer and chiseling out what isn't working and ideally finding, you know, some way to streamline and make the business more efficient. And, you know, historically, this has not worked out amazingly for other retailers when they've been trying to, you know, redirection the business.

7:26But, you know, maybe Nordstrom can do it. Who knows? Yeah, I guess we'll just have to see whether the deal actually goes through. Usually it's like the talks happen for months at a time. So we'll see. All right. Let's talk ice cream. Next up, we are talking about Unilever is spinning off its ice cream business into a separate company. The two big brands are Ben & Jerry's and Magnum, which will essentially just act as their own standalone company. And it's part of a bigger restructuring plan that the company kind of started a couple of years ago, actually, when they offloaded some of their other businesses.

8:07But yeah, the plan is going into effect pretty soon and be completed as of the end of next year. And it's expected to save like$868 million in costs. We'll talk about that a little bit later. There's a reason for that. But yeah, it's just going to be like a quote unquote simpler, more focused company. And it will mean that they'll have like four clear divisions across beauty, well-being, personal care, home care, nutrition. But I think, and we'll talk about ice cream specifically, why it is important. And it's also the biggest change that's happened under CEO Heinz Schumacher, who came on board last July.

8:55So what will this look like? Yeah, I guess, you know, consumers probably will make a big difference, but internally it is going to change a lot. Yeah, I mean, when this type of thing happens, it usually means that there will be layoffs. According to a company statement, Unilever is going to axe about 7 ,500 office-based jobs globally. And so that's probably the most material change we'll see for now. But also, it does show that Unilever does not have a whole lot of confidence in its ice cream division and now just wants it to be its own company and then save on those costs. We'll talk about the ice cream business itself.

9:39They generate about 7.9 billion euros in revenue in 2023. It accounted for about 13 % of Unilever's total revenue for the year. But ice cream is apparently not doing that well, actually, in the grand scheme of things, including these brands. A lot of this has to do with just prices rising, people pulling back on buying ice cream. But actually, Kale will get into this a little bit later. Trends in this frozen treats area, I guess you can call it, are also changing. So it's all contributing to, I guess, a decline, you could say. Yeah, no, there's definitely changing consumption patterns at play.

10:24You know, what I believe you're alluding to is that, I mean, like, this is not because of any trends, but I'm no longer eating dairy because of like health reasons. But also, I think that dairy is once again in the crosshairs of a lot of, you know, cultural health focused conversation. And so I think it's just no longer, you know, you're hearing a lot more about plant based things. And I'll also just note, and this is more anecdotal from my perception, but where you are seeing premium brands do well is when they are smaller and more boutique-y. And you're seeing just a bunch of new types of brands rise that are getting placements in major grocers.

11:00But if you look at the two brands that Unilever has, Magnum and Ben & Jerry's, they are old. I think of Magnum as a very European brand. And if you go to any European park, they will have a bunch of Magnum bars available. And same with Ben & Jerry's. If you go to any stadium or any event, they're huge, but they're also not considered as hip and cool and new. They're much more legacy brands. And so I imagine that makes it difficult when probably what people want are things that look a little bit smaller and more boutique-y and that kind of stuff, if that makes any sense. Yeah, especially because price-wise, they are essentially up there at this point.

11:45A pint of Ben & Jerry's at this point is upwards of$5. Their price hikes were about 8.8%. $5? That's cheap. I said upwards. Yeah, I think it's like as much as$10, at least where I live. Yeah, yeah. I know those late night runs are dangerous. They implemented an 8.8 % increase in prices in 2023, but then the volume of units sold dipped by 6%. So that's kind of how the picture is being painted is that they're actually not selling as much, but because of inflation, the revenue is still pretty high. And then we could talk about Ben and Jerry specifically and their relationship with the Unilever, which some analysts speculate that this spinoff is maybe part of that too.

12:35Ben & Jerry's is known as a very liberal, Vermont-based brand that sold to this big conglomerate 24 years ago, but has essentially operated as its own company, at least publicly. And yeah, with their stances on political, social news, all that. Yeah, no, they've made very, very vocal stances. And, you know, that has led some people to call for boycotts. Whether or not those boycotts actually, you know, resulted in material changes for Ben & Jerry's, I'm not sure about that. But I am sure Unilever was unhappy when, for example, Ben & Jerry said it would stop selling in Israel-occupied Palestinian territories.

13:23I'm sure Unilever was unhappy about, you know, other things that Ben & Jerry has said. They had the tweet earlier this summer, which I feel like Gabby will probably remember better than I because I saw this written. I was like, oh, yeah, but it was only a brief twinkle. But they tweeted, U.S. was founded on stolen indigenous land. And, you know, these are all things that you would not usually expect a major company to say. And especially if you're owned by one of the biggest conglomerates in the world, you know, it's pretty remarkable and interesting that, you know, Ben & Jerry's does do it. And it hasn't seemed to alter the business, although maybe now we are seeing what, you know, what might be an after effect of that.

14:04Yeah, that tweet, I believe, linked out to a blog post about how we should give back the land. And as you can imagine, it ruffled a lot of feathers on 4th of July. Okay. So, and then we could talk about, you know, we mentioned this a little bit earlier, but we could talk about how the ice cream category is just generally in decline in the U.S. I have some fun stats that I got for this, which is that according to the Department of Agriculture, on a per capita basis, Americans ate 22 pounds of ice cream in 2022. That's down from 27.5 in 2000. And like in 94, it was 29.4. So that kind of shows you the trend of this downward trajectory of just, yeah, dairy ice cream declining.

14:53And then, of course, that's coinciding with these better for you trends, kind of move away from dairy, all of that. Yeah, I found some Sercana data, which was less fun than yours, but just pretty much saying ice cream purchases by volume, they dropped by 8 % between 2018 and 2022. and at that same time, just unit sales as a whole. So dairy as a category, especially in ice cream, has not been doing so hot. Also a fun piece of data that I learned, which I believe I learned when I went to the Ben and Jerry's factory in Vermont, which if they're still open, I highly recommend going. I went when I was like a teen.

15:31But they always give their excess ice cream to pigs in the past year. And the pigs love ice cream, but they refuse to eat mint chocolate chip, I've been told. Well, the pigs have good taste. I have, I am not, yeah, I'm in chocolate chip person, but actually, you know, just to wrap up, Kel, I'm curious what you replaced. If you were a big ice cream person, what did you replace it with? You know, I guess now that you're not eating dairy. Yeah. What I've replaced it with is like non-dairy. I don't eat a lot of ice cream. I will start with that. Like the only time I usually eat ice cream is if I'm at an ice cream shop.

16:09And so I will see if they have some type of non-dairy replacement. I've tried other, like tipping to what I was saying before, more startup-y brands. In New York, we have Van Leuven, and they have a pretty good non-dairy pint that I bought that I'm sure was like$12. So I've only bought it a couple times. But I've been having that for my treats, and they've been nice. And I'm sure Ben & Jerry's does have a non-dairy ice cream. I haven't tried it, but maybe this will make me go and test it out. Who knows? Yeah. Not that you asked, but I've been really into like yogurt bars lately. I know it's not really ice cream, but I don't know.

16:49I kind of, if you don't really eat a lot of sweets, it feels like a treat. So there's that. No, those yogurt bars are good. I also, this is a complete digression, but I'm obsessed with the Ninja Creamy, which is very big on TikTok, which is an ice cream making machine that makes like creamy. And I don't know, like, I somehow, I don't know, I feel like that is a cultural moment that is happening. There have been a lot of like CPG brands that have been trying to cash in on that, especially dairy brands, like I see TikToks that have that, is it Fairlife milk? Going back to this conversation that we were having before, I think maybe this isn't like the dominant effect, but there's definitely a lot of at home play happening with, you know, TikTok, YouTube shorts of people making their own ice cream that could potentially be eating into big ice cream sales like Ben & Jerry's and Magnum because they're using a Ninja Creamy or something like that.

17:39I don't know. It's just something I've been watching and they're fun videos to watch. Yeah, that's interesting. Gen Z getting into Creamy's. I really want one now. Okay, so we could wrap up. We could rein it in a little bit. But then there's also some analysts that don't really expect this restructuring to make that much of a difference. They mentioned Unilever actually sold off their tea business in 2021 and didn't really seem to move the needle that much. And so who knows? Will the ice cream division make a difference? We will see, I guess. It's going to be happening pretty soon. Oh, yeah. We'll talk in a year and a half.

18:19Exactly. Now we're going to dive into Shein's latest pivot. There's been a bunch of them. They want to, or the company wants to sell its supply chain tech to other brands. All right, Kale, just give us an explainer on what's going on here. Sure. So essentially, the Wall Street Journal came out with a story this week. They got access to a letter that Shein sent to investors, pretty much saying that it wants to sell its back-end supply chain technology to other brands. You know, it's interesting. Shein has been the subject of a lot of conversations, a lot of headlines. I'm sure we've talked about it on the show.

19:05I've certainly written about it on the site. Shein's been trying to IPO, but it's also been contending with increased competition from the likes of Timu, etc. And so this is a way to really stand out and do something different than what any of the other companies are doing. So to back up, it's important to understand how Shein's supply chain works. It is very, very controversial, but it works. Shein says it's been profitable for years now and that it has one of the quickest supply chains out there. It calls it on-demand manufacturing, and it essentially means that Shein takes a bunch of data from its app about what people are buying, what people aren't buying, what kind of fits they like, etc.

19:51And then it then uses that to then make clothes, you know, an idea, a prototype of a piece of clothing that the company sends directly to manufacturers, to its, you know, hundreds of manufacturers in China. They then make a very small batch of it. They make maybe a few hundred. It takes days for these items of clothing to be made. They're then uploaded to the app. Shein sells it. If they sell from that factory, the company airfreights it back to the U.S., which is then sold directly to consumers. it can take as much as, you know, as little as a few weeks for an item of clothing to be concepted, manufactured, and then sold to someone.

20:29And, you know, people say that Shein makes as many as over tens of thousands of new items of clothing every day. Like, it's just the scale of this is insane. And so that was a lot of explanation, but it's really important to understand just like, you know, if you talk with other apparel brands and apparel retailers, it takes months, if not years to make a new line of clothing. You do research, R &D, you then have to do huge batches to send out to the factories, which then are sent to the stores or the warehouse. It takes a long time, but Shein cuts that down very, very short. You can do it in a few weeks.

21:04And now it wants to sell exactly that type of model to other brands. And so we don't know a lot of the specifics. I I imagine it wouldn't even be branded by Shein. It would just be a way for other companies to make pretty much knee-jerk changes to its assortment, test out small quantities of different types of clothes, and then go from there. But it's a really fascinating update that I will definitely be keeping an eye on. Yeah. And, you know, I think what's interesting about Shein is that the reason it even was a game changer for fast fashion is due to this model, which is essentially like the way it's explained is like if you see something on Shein and you like it, you basically have to buy it because you don't know if it's going to be there or if it's ever going to be restocked.

21:50And that's kind of part of this data-driven model. Whereas, like you said, even fast fashion companies like Zara and H &M do go by the traditional seasonal collections that they launch every quarter or whatnot. And then that's where you get into the excess inventory issues that we've been having, clearance on all of that. So I guess this on-demand model is supposed to kind of bypass that. But at the same time, obviously, it faces a lot of criticism due to the ethical nature of it. Yeah, no, there's a lot of criticisms that Sheehan has been levying over the last year plus. You know, there are two major ones.

22:29One is just the environmental impact that this could have. You know, they're essentially, you know, they're not making a huge amount of clothing that then goes to, you know, the dumpsters. But they are air freighting small batches. it seems like this has the potential to create a lot of waste. Shein, for its part, says it doesn't and has a bunch of letters it's signed and different certifications to prove that it is as sustainable as a fast fashion entity can be. But the big one is just who's making these clothes and how are they made? There have been a lot of allegations thrown at Shein about really poor worker conditions in the factories.

23:11One from last year said that workers spent as long as 18 hours a day making these items of clothing, and they earn as little as two cents per item. Shein has been trying to fight against that, saying that actually the factories have fine worker practices. They invited, I don't know if you remember this, they invited influencers to go walk through and take videos and show how nice it is. And then Shein has also said that That if it comes to light that any of the factories it contracts with are implementing poor worker conditions, they will stop working with them. And so, you know, this move is really a way to, I guess, to have essentially more brands use its supply chain and its mode of manufacturing, which is probably a way to take the heat off of it alone as a company that is using these types of factories.

24:05Mm-hmm. And then at the same time, maybe we'll talk about why they're heading in this direction. I do wonder who this side of the business is for because just generally speaking, even from a marketing perspective, even fast fashion brands are trying to move away from that connotation and try to be more sustainable or at least market themselves as more sustainable. So if you're the company that's going in and partnering with Shein on this type of production, that's kind of interesting because it kind of goes against that. Yeah, but I mean, there are two things. One thing, we're already seeing it, Forever 21 has a partnership with Shein that is doing just this.

24:50As part of, I believe, you know, the many different groups that own Forever 21, I think Spark Capital now has a stake in Shein. They now, Forever 21 and Shein, have a line of clothing together that uses Shein's supply chain, and they're co-branded. And so this isn't unheard of. I think Shein is trying to change the perception about it being wasteful and fast fashion. And if that does happen, other brands would like to take part in it. And also the really big thing is that a lot of these apparel companies haven't been doing so great, haven't been able to keep on trend and are seeing profits slip.

25:27And Shein is both very on trend. And allegedly, you know, we haven't seen the numbers because it hasn't been able to go public yet, but allegedly very profitable. And so that's something probably an apparel brand would love to have as well. Well, speaking of, I guess we'll be seeing all of that soon because the IPO is allegedly going to be happening sometime this year, I think. because, yeah, the company filed confidential application, previous stock listing late last year, and has reportedly yet to hear from the SEC. It's kind of interesting. Yeah, I think the SEC has not wanted to, has been worried about dealing with such a hot-button issue or a hot-button company, I guess you could say.

26:16And so you're hearing moves like this. I'll also add that Sheena has done other business changes to also change its perception. It launched a marketplace earlier this year where it was allowing brands to sell on its app. And all of this is a way to seem much more amenable and much more, I don't know if transparent is the right word, but it's not just its own opaque moat of a company. It's trying to work with other brands, which ideally would make it less of a controversial company to be on the U.S. stock exchanges. So, yeah, I bet you all of this is work towards changing the perception that, you know, it's some big, opaque, mysterious, scary Chinese company.

27:01Yeah. So we will see, you know, when the IPO actually happens. And we'll talk about that, I'm sure, again. So that's all from us this week. Please come back on Saturdays to hear more of our weekly rundowns. You can rate and give us a review wherever you get your podcasts. and then on Thursdays you can listen to Kale's interviews with industry leaders Kale, do you have a preview for us for next Thursday? Sure, I will just say that the next two weeks on Modern Retail will be interviews I had at ShopTalk with founders who were there I got them into a room and I had really fun conversations with them and so you get to hear about what's happening at ShopTalk, what's on these founders' minds, all that so stay tuned and you will not regret it great well thank you as always for listening and we hope you'll come back next week