Rundown: Red Lobster's rebrand, Tapestry-Capri merger falls apart and Amazon expands telehealth services

0:04Hello, everyone. Welcome to the Modern Retail Rundown, where we break down the latest industry news. I am senior reporter Gabby Barco. I'm here with editor-in-chief Kale Guthrie-Weissman. Good morning, Kale. How are you? Good morning, Gabby. I'm doing well. It's getting cold in New York, so I'm trying to figure out how best to bundle up, but also apartments get warm. It's always difficult. This is uninteresting, but that's what I'm thinking about right now. No, it's true. Yeah, you got to break out the humidifier. I feel very dry right now. Yes, I feel dry as well, so it's coming out soon. All right.

0:40Well, on that note, let's get into our news of the week. First thing we're going to talk about is there's this Red Lobster rebrand that's happening. I'm excited to hear what you think about that. And then we're going to talk about there's a failed merger news that came out this week, which is Tapestry and Capri's very long contested merger. Okay, well, let's get into this week's news. So first up is a Red Lobster rebrand. So this is a big overhaul plan that the chain has going coming out of bankruptcy. So I'm excited to talk about that. And then we're going to talk about the failed merger. We finally have official news that Tapestry and Capri's merger will no longer go through.

1:29I feel like it's been a couple of years of litigations there. And then last, Amazon, Amazon's latest telehealth expansion. So the company's really been pushing into, you know, virtual care and pharmacy in the last couple of years. And this is just their latest push where essentially they will be competing with these wellness platforms that, you know, prescribe you hair loss, pills and skincare and even apparently lash loss or extension. Oh, wow. Yeah. So I'm very curious about it, but Amazon One Medical is really taking shape here. So first up, let's talk about Red Lobster. So this week, the company said that it wants to court millennial diners as it digs itself out of bankruptcy.

2:21But first, let's talk about how Red Lobster got here. So after filing for Chapter 11 earlier this year, of course, it was struggling for a while, like a lot of these national dining chains. Red Lobster is now restructuring under a new plan and a new CEO who also happens to be a millennial himself. So let's talk about the closures first, because there was a lot of streamlining and consolidation before all of this was announced. It's been a rough few years for Red Lobster. We've had, I think, at least one, if not a few episodes over the past few months about it. But the chain has closed more than 100 of its 640 restaurants this year.

3:04Now, Fortress Investment Group is investing$60 million to help overhaul its offerings and services. This effort is led by the 35-year-old CEO Damola Adama-Lakin, who came on board and joined Red Lobster in August, who is considered a general business wunderkind, I guess you could say, who's been doing a lot of interviews talking about rebranding Red Lobster. And now we're beginning to see how that will take shape. But it hasn't been good. There's some Placer AI data. Traffic at Red Lobster dropped 43 % year over year, according to this most recent data. And we'll go into this, but one of the big things that was a huge boondoggle for Red Lobster was these endless promotional tactics.

3:48There are so many stories written about how$20 endless shrimp put its business into the gutter. Now we're going to see what the turnaround plan is. So just to give a little sense, the endless$20 shrimp plate cost Red Lobster$11 million, according to court documents. So they have a lot of ground to make up, and that's what we're seeing right now. That's a lot of losses just to bring people in, which I saw a fun quote by the CEO saying that we're not doing that anymore because I can do math. Yeah, I was going to mention that. He just said that like earlier this week where it's like, yeah, why didn't earlier iterations of Red Lobster do the math?

4:30But I guess he's doing it now. Yeah, exactly. So he announced this new plan. You know, he's only been on the job for about three months, but he announced the plan this week that they're basically going to revamp both the restaurants and the actual menu itself. So he said, I quote, we want to make the restaurants more fun. We want to make this more energetic. And this week, he also announced this new menu that features nine new items. And they're also bringing back old favorites, because I think that's a pretty popular tactic, like their hush puppies are coming back. But with him, I think he's trying to very much revive or refresh the vibe of the actual place because it feels like maybe one of their issues is that feels pretty stale right now.

5:20But yeah, he did say that there should be some equal rejoicing on social media once you bring those factors back, basically. But yeah, what are your thoughts? I mean, some of the things he's named that he wants to refresh are pretty interesting. Yeah, I mean, it makes sense to refresh the menu, bring people in. I think it's interesting the fact that he's bringing up social media, because if there's anything that has refreshed the social media presence of Red Lobster, it is its failed endless shrimp thing. So if you scoured TikTok for the last year, you would see actually a lot of Gen Z people kind of making fun of it, but going in and guessing how many shrimp they would eat.

5:58There were social media things similar to what's going on with the Olive Garden. I don't know, I get these on my For You page. Maybe that's just because I'm a weirdo. But people say, go into Olive Garden, they say, how many, how many possibles are you going to eat? And they're like, I'm going to eat five. And then they cut to them looking disgusting and full being like, I only ate three. But anyway, my ultimate point is that a lot of these gimmicks actually did raise the social presence of Red Lobster and for that matter, also Olive Garden, but we're not talking about Olive Garden. And so it's smart that he wants to have it back be in the zeitgeist.

6:31It'll be interesting to see if there is a way that he can do it that isn't shrouded in irony and in sort of it being the butt of the joke. You know what I mean? Yeah. And also maybe profitable would be. Yeah. Yeah, exactly. Maybe they can be the butt of the joke as long as they're making money off of it. Right. Because$20 endless shrimp, I mean, but yeah, the math is not making sense to me. But he also said, you know, I think the decor itself, if we've ever been to Red Lobster, you know, it's just this like bright hospital-like lighting, right? From what I remember. But he wants, you know, he says he wants to improve it, make it more like mood lighting and revamp the decor and new music playlists.

7:13That'll be interesting to see how that pans out. But it's a tricky feat though, because right now 40 % of diners are over 55. So I don't know how you, yeah, I guess you want to revamp and modernize, but you also don't want to alienate the people who are actually making you money right now, which I think he basically did admit, like you have to shrink a balance so that they can bring in all types of age demographics. Yeah. And I do wonder, and this is something that I've seen Applebee's do over the years, which is, and I know it's not core to Red Lobster and actually don't even know what their drink menu is, but I feel like Applebee's as a way to court millennials specifically has done a lot of, in my opinion, kind of disgusting, but very, very newsworthy cocktail things.

7:58Remember, what was it, five years ago, I think they had an endless, some cocktail. I can't remember exactly what it was. But my point is that there are ways to bring people in that probably have better margins than endless shrimp, but it's about figuring out what is the offering that will actually, I guess, strike a chord, but also have reverberations outward. So it'll be interesting to see what he does. Yeah, I did see people asking about endless biscuits on social media. So maybe that is a little bit more profitable to do than shrimp. But yeah, yeah, we'll see. We'll see what their menu will look like.

8:33But, you know, I think you alluded to it with the other chains that have just really struggled, especially coming out of COVID, you know, closing a lot of doors and just streamlining and getting all of these injections of private equity money. But, you know, Red Lobster is struggling like a lot of these other players. I mean, TGI Fridays just a few weeks ago said it's closing 50 locations and also filed for Chapter 11. So, yeah, I think I do wonder whether the value play is not working because it's really being that energy and that oxygen is being sucked up by more of the fast food chains versus these sort of sit down places that, you know, most Americans, especially in the suburb, rely on for dine in.

9:22Yeah, I don't know. What are your thoughts? I mean, I think clearly the sale aspect itself, the deals aren't going to do it themselves. Yeah, exactly. I think it'll, you know, it's a total rebranding and it's one thing to bring people in once for a gimmick or for something else. It's another to actually create a new habit and have younger people rethink of these chains as something they want to go to regularly. So that's the task at hand. And we'll see. I don't know. Adam Alakem, he's done good things in the past. So I imagine he has a plan and I'll be interested to see how he does it. But it's a steep mountain to climb.

9:55Well, he has the PR down. So, you know, we go up from there. OK, well, let's move on to M &A this week. So Tapestry and Capri officially called it quits. I feel like it's been a couple of years right now where we've been hearing about this merger that was going to be happening. It was an$8.5 billion deal that is now officially just dead in the water. Yeah. So in some ways, this is a long time coming because the FTC has been fighting this for about a year. It was officially announced, I want to say, in August of 2023. Tapestry wanted to acquire Capri. Tapestry is, of course, who owns Coach and Kate Spade.

10:38Capri owns Michael Kors and Versace. They're both considered luxury, but they're at different tiers of luxury, which we'll get into in a few minutes, which was sort of the core of the antitrust claims. But the FTC led by Lena Kahn has been pretty much saying, this isn't good. This would create a monopoly. This would hurt competition. And the tapestry has been fighting it. A judge had ruled in the FTC's favor, which really did not bode well for the future of Tapestry's attempted acquisition. And now this week, the company said the two had, quote, mutually agreed that terminating the merger agreement was in the best interests of both companies.

11:18So that's where we're at now. Yeah. So why don't we go into the reasoning for the FTC block? So they've been sort of on a roll, as we hinted earlier, of just blocking these really big mergers of these big retailers, whether it's grocery, whether in this case, fashion, accessible luxury, as they're referring to it. But it really comes down to the FTC just believing that Tapestry is trying to control more of this retail segment. I think a lot of it is very focused on handbags in particular. But yeah, they did say that these nicer items that are like handbags, but they're more affordable than, you know, anything that maybe LVMH is selling.

12:06So you've got Coach, Kate Spade, Stuart Weitzman, I believe is another brand of theirs. But you know, they all sit in this mid-tier segment, but they're also, I mean, they've both had pretty, I mean, at least Tapestry has had some success lately. They've been pretty stable actually sales wise, which I thought is interesting because Coach is actually doing pretty well. They've done a good job. Speaking of, you know, rebranding for younger generation, but Gen Z seems to really be into Coach kind of just, you know, skews more affordable, but still very high quality. But I guess the concern is that while you've got, you know, Michael Kors where people kind of associate it also with this tier of handbag leather goods luxury, I guess maybe there's a concern over a monopoly over these department store brands.

12:57Yeah, essentially, the idea is that, as the FTC called it, it was, quote, accessible luxury, which you said before, which are still considered nicer items, but not as expensive as the top tier players. But they are all competing with each other so that they can still have these affordable prices. And so pretty much the FTC said, if they're all owned by one company, then there won't be as much price competition. And so there's this quote from Henry Liu, the director of the FTC's Bureau of Competition. He said when the FTC initially announced that it was going to try and block the merger, quote, with the goal to become a serial acquirer, Tapestry seeks to acquire Capri to further entrench its stronghold in the fashion industry.

13:38and essentially just saying that it's trying to own all the players in the space and that would likely, according to them, drive up the prices. And then the judge who ruled this, I believe, about a month ago in October, pretty much agreed with the FTC and said, quote, antitrust has come into fashion. So it pretty much the idea was that if one company owns all of these players, there's no reason why they would compete with each other and have more price competition. Instead, likely the prices would go up and up and up. And even as Tapestry is doing better, probably because it's been able to rebrand itself and cater to younger generations, it still wouldn't have any reason to not drive up the prices of its handbags anymore.

14:22Yeah. And then there's Versace, which is a question mark too, because obviously that sits on the highest end of things here. So yeah, I could see why they're concerned here. But this FTC does seem to be pretty, I guess, heavy handed with blocking deals. So right now, actually, they are also currently trying to block the Kroger Albertsons deal, which we've talked about, I feel like a couple of times on the show here. And so we're waiting for court rulings. And this is really coming under the wire. Because right now, you know, we're in amidst changing administrations. And I think we're expected to get a new commissioner of the FTC.

15:05And I think probably going to start seeing more deals. I mean, who knows what that's going to look like in 2025. But this FTC seems to be a little bit more strict with antitrust rulings. Yeah, we've definitely, you know, there have been a few big attempts at M &A over the last few years, and a few of them have been blocked by the FTC. And that's because of its commissioner, Lena Kahn. Lena Kahn has been, for example, going after Amazon for its, quote, illegally maintaining monopoly power. And so this has been a big facet of this current administration. And it's going to end in just a couple of months.

15:43And so that's a pretty big deal. We're seeing these big deals officially be blocked, probably not going any further. But already, according to some reporting, Trump has created a list of potential people to replace Kahn. and most people believe that whoever replaces her will be much more deal friendly. And so we're gonna, this is sort of the last hurrah of this current administration going after these really, really big companies and trying to fight monopolistic power and we'll likely see a lot, many more bigger deals happen over the next four years. So that'll be interesting and something that we'll be watching for.

16:19Although we don't know whether these companies in particular will try again, right? Maybe in a few months. It's hard to see. Yeah, you never know. And I mean, all of these companies have attempted to make concessions to make it so that they didn't seem as monopolistic as they were. And maybe they will try and you never know what these companies will do. But these are the two big ones that we know are happening before the administration change. And people thought there would be a chilling effect, but I'm guessing there won't be a chilling effect because the administration is going to change and they're going to have a probably completely new outlook.

16:53Yeah. Well, on that note, we can start talking about Amazon, but in particular, their telemedicine ambition. So in the last few years, they've really been pushing into telehealth and pharmacy services. But this week, they announced that they're expanding Amazon One Medical with these new low-cost treatment plans. So basically, these will range from anything from hair loss, like I mentioned earlier, skincare, also beauty treatments like medication for motion sickness and eyelash growth. So the idea is that, you know, you can log on, especially as an Amazon Prime member, be able to, you know, I guess, identify or diagnose your ailment and then get your prescription for whatever medication you need.

17:44Pretty straightforward. I feel like this model's really taken in shape the last few years with companies like Hims and Hers and Rho, which we'll talk about a little bit later. But yeah, I mean, to me, it feels like a long time coming. Like, I'm actually surprised it took this long. But the One Medical acquisition happened in 2022. So it's been sort of gradually being integrated into Amazon. Yeah, I mean, this has been Amazon has been trying in various ways to get into the health space. One Medical was its biggest splash. And there have been other announcements here and there. But I agree that this likely was a long time coming.

18:24But also, Amazon is very methodical for the way that it will be able to really get a stronghold and get more people to join the platform. And I imagine it saw step one as being acquire a healthcare company that already has a bunch of members and then use that as a way to expand its stronghold. Because if you go to amazon.com, you're not necessarily thinking about getting an on-demand doctor treatment or something like that. But with something like One Medical, you probably are. And so this is probably step two or three in trying to figure out how to do over-the-counter medical care. And so now we're seeing it come to light, and so it'll be interesting.

19:03Yeah. So just to give an idea of what the price structure is. So the messaging, sort of, you know, typing messaging visits will cost$29. And then video visits with a medical professional will cost$49. And men hairs lost treatment will start at$16 a month. Anti-aging$10 a month. Erectile dysfunction care starts at$19 a month. And so all of these, of course, like I keep saying, you do have to be a Prime member. But then it kind of got me thinking into the fact that Amazon is really trying to optimize and drive, you know, I guess maybe showcase as much value as possible with Prime now that it's kind of spinning out a lot of those, you know, perks that a lot of Prime members have gotten used to.

19:53And, you know, the fact that the membership is now$139 a year. So, yeah, things like this, you know, being able to log on and get these medication delivered for you for free same day, that seems to be like the one direction it's going in. But I guess this, to me, also puts it in direct competition with some of the startups that we've covered for a few years now and have talked a lot about. Yeah, no, I mean, this is really puts a direct competition with hims and hers, Roe, as you mentioned earlier. Both of those players offer very similar types of treatment. And I imagine they've been very successful in rebranding what over-the-counter healthcare means to people.

20:39So they created these ancillary services that people wouldn't be able to get from their primary care physician or might not be covered by insurance and made them into these one-off sort of services that people can pay for. hair loss, erectile dysfunction, other sexual health. And it seems like Amazon was seeing this and said that we can do this as well. And so there is one really interesting thing, which is that one of the big focuses for especially him and hers has been GLP-1, so weight loss prescriptions. I don't think Amazon One Medical offers that yet, but I imagine that will be a pretty big frontier.

21:15And if Amazon is able to offer that, that could really hamper the strategy and growth of companies like Hims and Hers, which I guess when Amazon made this announcement earlier this week, Hims and Hers stock dropped by 15%. So clearly, at least Wall Street is aware of the competition that's happening between them. Yeah, the GLP One services only really started in the past year on these platforms. But in the case of hims and hers, I mean, it actually helped them get over the line of actually, you know, achieving profitability, for example. So there's a lot of money to be made from these. And unlike Amazon, these platforms actually have a service fee that you pay every month on top of the actual consultation.

22:02I mean, for the consultation on top of all of the treatment and medication costs. So Amazon, that's what I meant by being able to undercut them. But yeah, I think with GLP-1, we're still on the forefront. Amazon, I thought, I was curious, they didn't announce it, even though they technically can because they have a pharmacy business. So there's no reason why they wouldn't be able to. Maybe they're just kind of drawing it out gradually. But yeah, I think it'll be interesting to see what that's going to look like and also how these other platforms will perform going forward. For example, Amazon Pharmacy itself actually also announced an expansion for same-day medication delivery to 20 more major cities in the US that's going to roll out in 2025.

22:49So they are very serious about becoming sort of this health and wellness hub. Yeah. And the other thing I'm thinking about, yes, clearly for the other telehealth players, this is big competition for them. Given that all of this is a way for Amazon to up its prime benefits and make more people dependent on prime, we've seen other players like Walmart make quiet forays into healthcare. And I wonder if this will get magnified over the next year because this is the new terrain that they're going to be fighting on. So maybe Walmart Plus will have some other OTC sort of healthcare aspect that it will be showing off to compete with Amazon Prime.

23:31Just something I've been thinking about. Right. Yeah, because with Amazon, they've really been able to build this out through acquisitions. So they acquired One Medical. before that was PillPack, which was an online pharmacy. That's basically what's servicing or powering their pharmacy now. So yeah, it's sort of been a long time coming for going on five, six years now. But clearly, they now have, I mean, when you do type in amazon.com, it feels like it is very much at the forefront with e-commerce now. But yeah, it'll be interesting to see how much it actually takes off and how they'll actually promote it.

24:10That's one thing with Prime is that I feel like a lot of benefits kind of get lost in the shuffle and people aren't really sure what's included. Like grocery delivery, that's a different fee, for example, whereas this apparently is included. Yeah. I mean, I think that that's the big issue that a lot of these companies are dealing with is adding more perks so that people use them, but also making sure people know about the perks and are using them and using that as a retention play. So yeah, much to watch. For sure. Yeah, on that note, we can wrap up. You can rate and review us wherever you're listening to us.

24:45And on Thursdays, you can come back to listen to the Modern Retail Podcast as hosted by Kale. He does interviews with industry executives. Do you have a preview for next week, Kale? Yeah, I'm talking with the co-founder of Mr. Black, which was a coffee liqueur that really rode the wave of espresso martinis. And so we talked about the rise of espresso martini. It was acquired by Diageo. We talked about all that. It was a fun conversation about the spirit space, and I had a good time. Yeah, I'm excited for that one. I'm very familiar with Mr. Black. And then you can follow us on social. We're at Modern Retail.

25:22And come back on Saturdays for the rundown.

25:31you