Rundown: Theft ring to pay back retailers, TikTok updates and VF Corp layoffs

0:05Hello, everyone, and welcome back to the Modern Retail Rundown. I'm editor-in-chief Kale Guthrie-Weissman. This week, I'm joined with reporter Julia Waldo. We're going to talk about all this week's retail news. How are you doing, Julia? I'm good. I'm good, thanks. Yeah, trying to stay warm. Got my coffee and everything. How are you? I'm doing good. I, too, am trying to stay warm. It's chilly this morning in New York and probably will be chilly for the next many months. On this week's episode, we're going to start off with a real yarn, a real investigative thing that we have a development this week.

0:36It involves a years-long, multi-million dollar retail crime theft ring. I'm excited to talk about that. Then we're going to go into the latest about TikTok, which has been, pun intended, a real TikTok of a situation. Just every minute there's a new development. And we're going to end with some reports about new layoffs at VF Core. Let's get right into it. So the first one, we have a leader in organized retail crime will have to pay the retailers back. Julia, can you just give a little rundown like what happened? Yeah, absolutely. So for this, it's probably a little bit helpful to start from the beginning.

1:14So the leader of a nationwide retail crime ring pleaded guilty last summer. She was sentenced to over five years of jail time for her crime. Now she's being ordered to pay the retailers back from whom her crime ring stole. Yeah, Cale, I know you have a little information about who she is. Could you kind of give us the rundown? Yeah, so I was doing a bunch of research because I saw like headlines over the last year, but I'm glad I finally dove into it because it's wild. So this woman's name, her name is Michelle Mack. She was arrested in 2023 for being the ringleader behind an organized retail crime group.

1:54CNBC did a bunch of investigations into her. She had accomplices around the country where they would steal products from major retailers, mostly like beauty products, I believe. So the big culprits were Ulta, Sephora, Bloomingdale's, also big names like Prada, supposedly. And she had a group of women around the country. They stole these goods, and then they resold them on Amazon. And according to CNBC, which has a bunch of different reports on this, Mac made millions of dollars reselling these products. And it lasted for many, many years. And so we have some new developments with it where she was, as you said, Julia, convicted last year.

2:38She's serving her jail time. An interesting thing is that both she and her husband were convicted, but they are serving their jail times non-consecutively because they have kids. And so I think she's in jail now for the next four years. And then when she's out, the father will go to jail. Anyway, can you give just the latest developments? Yeah, absolutely. So right now she has to pay the retailers back to the tune of$3 million. And, you know, to kind of help pay back some of that money, CNBC reports that she's actually going to be selling her California mansion. And then the rest of the money is going to go to restitution to the retailers.

3:21You know, California Attorney General Rob Bonta, he spoke about this. As CNBC reported, he said, you know, that she and her husband will pay back the remainder, quote unquote, over time. Not really sure what that means, but definitely they're going to be held accountable and they have to pay back the three million dollars. But, yeah, I mean, I know this raises some larger questions about theft. So, I mean, do you think this is an example of just one bad apple? What do you think is going on here? Well, I would say if you've listened to this podcast before where we've talked about this issue quite a lot, no.

3:58Like if you talk to retailers or retail lobbyists, if you say the word retail theft or the words retail theft, I should say, they will spend hours talking about how big of a problem it is. And it's been a major headline for recent earnings. It's been, in some ways, a scapegoat for poor performance, which we won't go into now. But it's clearly she is not the only one who is involved in organized retail crime. The NRF has said that retail theft over the last few years has risen precipitously. There's a survey that the NRF conducted last summer that found that the average number of shoplifting incidents increased by 26%.

4:39I can point to some of Modern Retail's reporting. I feel like, Julia, a year ago, you wrote a story about sort of the rise of retail crime and companies saying that that was an issue. We published one a few weeks ago, I want to say, that companies are continuing to talk about how big of a problem is and are trying to find new ways to deal with it. 2024 was the year where they didn't find a solution. So there's always been the locked shelves where you have to ring a button and then people come. We've talked about that a lot. Other ways that retailers are trying to do it are with new RFID, sort of tracking things.

5:11But the big issue is that there's an increase of retail crime. But then when you implement these more or less draconian measures that make it difficult for people to buy products, sales then go down. So retailers have not found a balance yet. And that's the big problem. And the question is, and this is where we don't have any data and we won't really know, but like how many specific rings are there like this woman? who like, I feel like a lot of the problems that the retailers like Walgreens talk about aren't necessarily organized, but just people shoplifting. Like that has happened for, you know, centuries pretty probably.

5:47But like, I would be interested to know what's going on on the organized side of things. And, you know, how many like are these, it was interesting, she's reselling on Amazon. How many are these organizations that are telling people to go steal things from Sephora and then they're going to resell them, obviously for a profit because they got them for free on Amazon. So I think, you know, that's the big question that this raises is there are definitely others like her. There are definitely smaller scale retail thieves. But are there other rings to this magnitude? And I don't know. yeah absolutely yeah to your point i feel like a lot of the headlines when we you know hear companies talk about theft or you know see on the local news it's instances of you know one person or a very small number of people but this is you know this woman she was not going herself as you said so she was really directing this you know large number of people going to stores all over the place so um you know harder to catch her there because she's you know in the background so So yeah, it'll definitely see, to your point, what happens with other crime rings and if this is something that will continue.

6:51Exactly. She was not the person who was doing the shopping. In fact, she was not convicted or alleged to have done any shoplifting herself. When I hear retailers talk about crime theft rings, I've always wondered how that manifests and this is how it manifests. So it's nice to actually have a very concrete example of like, this is what they're talking about. And so it's definitely something to keep an eye on. For now, we have an example of a retail crime ring stopping and this ring being forced to pay restitution. I do imagine with this one example, even though it was in the millions of dollars, that it will change the current retail conversation around theft.

7:28But we'll see. And we'll be keeping an eye on any other developments, both with this and the retail crime problem going forward. Let's move on. So I want to talk about the latest on TikTok because that's all anybody wants to talk about these days. So can you, Julia, what's the latest? And I know that probably, you know, we're recording this on Friday. This is going air on Saturday. Who knows what's going to happen the next 24 hours? But what do we know right now? Yeah, absolutely. So, well, it's probably everybody knows, you know, TikTok went dark for a few hours last weekend. And actually, my roommate and I spent the whole day before the ban going in and downloading.

8:07Oh, wow. You were prepared. This was, oh my gosh, you don't even know. This was like a six hour affair. It was so stressful because some of these videos, you can save them. And some of them, we had to screen record them on our phones because they're, you know, the people who had posted the TikTok videos didn't, you know, turn on the ability to save them. So, you know, we had, you know, tons of TikToks from, you know, 2020 on that we felt very passionately about that we had to go in and save. But anyway, the, you know, the TikTok being offline and going dark that actually didn't last that long.

8:42You know, TikTok is back up and running. I don't believe you can download it from the App Store if you don't already have it downloaded. But, you know, and that I've seen some reports that, you know, phones that already have TikTok downloaded are now selling for a lot on eBay, which is. Oh, wow. Yeah. But, you know, it was a short reprieve, actually. You know, Donald Trump, he signed an executive order that gave TikTok an additional 75 days to find a non-Chinese owner. Just as a reminder, it's owned by ByteDance, which is based in China. So, you know, while you have TikTokers back on the platform, all eyes are on, you know, these possible players looking to take over the company.

9:23I know there are a few. Cale, could you kind of give us a rundown of who these people are? Sure. That's really interesting because it's a I guess it's a what's the word I'm looking for? Just an interesting crew of people from all walks of millionaires and billionaires, I would say. So we had one that we've talked about. We've written about him on retail and has been the headlines for quite a while, which is billionaire Frank McCourt said before the TikTok ban went into place that he was putting together a consortium of partners. This included Mr. Wonderful Shark Tank star Kevin O 'Leary. They reportedly or they said that they bid on the company before January 19th.

10:03Clearly nothing happened. I believe they are still in the running. They're trying to figure out what's going to happen with that. There are others now popping up too. President Trump has said that he would appreciate either Elon Musk or Oracle founder Larry Ellison, that they would be two good contenders. There's been other reporting, I believe, from both Bloomberg and the Wall Street Journal who have pointed to Musk as a very likely one just in terms of his relationship with Trump and potentially the investors he would be able to get to actually finance it. But there's a new one, which I think is especially interesting, which is YouTube star Mr.

10:40Beast is also throwing his hat in the ring. And he's made some lofty statements. Everyone thought it was a joke, but it turns out it's true. Yeah, yeah. Mr. Beast, actually, I walked by a billboard of him last night. Okay. He's everywhere. Yeah, he tweeted a short sentence on January 13th and said, okay, fine, I'll buy TikTok so it doesn't get banned. And that's it. Like he didn't share any other details. As you said, people thought it was a joke. But then CNN earlier this week actually said that the tweet was serious. And on January 15th, Mr. Beast posted a video saying he just got out of a meeting with a bunch of billionaires.

11:20I can't really say the same for myself. In the video, he said he was ready to make an offer to purchase TikTok. And, you know, this investor group that he's part of, it's, you know, led by Jesse Tinsley, who's the founder and CEO of employer.com. So yes, definitely, as you said, more developments by the second as the clock is ticking away. But I mean, I don't know, Kev, what do you think we do from here? Like what happens next? I don't know. Like it kind of, this feels like Groundhog Day where I really thought that when January 19th came around, then it would be done with, like either TikTok would be here or it wouldn't.

12:02But instead, the puck has just been placed forward. We have another 75-day extension. So with this deadline, we have more people submitting bids, but there's also the likelihood that TikTok could, again, go away if ByteDance doesn't accept any of these. Something interesting happened this week also, which the World Economic Forum is happening in Davos. All of the most important people are there, usually saying nothing, just giving platitudes about the world and why they're so rich. But General Atlantic CEO Bill Ford was interviewed at Davos. He's a TikTok board member, and he was asked about it.

12:40And he said that the company is considering options to stay online in the US without selling to another country. So I'm going to just give this quote because I don't exactly understand what it means. And so I'll let everyone else, you know, do it or interpret it. There are a number of alternatives we can talk to President Trump and his team about that are short of selling the company that allow the company to continue to operate, maybe with a change of control of some kind, but short of having to sell. So pretty much he's saying, I guess it would be a minority stake change is my understanding, but I might be wrong about that.

13:15You know, we'll see what happens with that. But clearly he's saying that ByteDance is not too keen on selling the entire company. Another really, really big question is just like how much TikTok will sell for, because it's worth a lot of money. And so I think both Kevin O 'Leary and Frank McCourt have floated around a valuation of around$20 billion. Nothing to sneeze at, a very big amount of money. But also there have been some estimates that said that TikTok's US assets minus its algorithm are worth between$40 and$50 billion. So that's like half, if not more, than what these billionaires are offering.

13:54So it's a really big question of whether ByteDance will take the bait, what's going to go on. And it seems like we're sort of headed into the same way we were just a month ago where no one knows what's happening and we just have a new impending deadline. Yeah, definitely. I mean, I know you mentioned the assets minus the algorithm being worth$40 to$50 billion. It sounds like the algorithm, you know, is going to be what's really, you know, contentious here in terms of deciding the price because that's really TikTok's secret sauce. You know, that's how they keep people on the app for hours and hours and hours before bedtime.

14:30So it'll definitely be interesting to see what happens with that. But, you know, it sounds like some change has to happen because you had all three branches of the U.S. government approve some sort of change in terms of ownership with TikTok. So it'll be, you know, interesting to see what we get next. Exactly. It'll definitely be keeping an eye out. And I imagine that TikTok is now taking it more seriously than it was before. It seemed like it did not really have a contingency plan in place. But, you know, that being said, we still have very little clarity of what's next. President Trump has pledged to keep the social media app available in the U.S.

15:06But again, it'll all depend on A, who the bidders are. They can cough up enough money and if ByteDance ultimately agrees to it. So we'll be keeping an eye. Never a dull moment when it comes to TikTok. Absolutely. Absolutely. All right, let's move on to our last item. This one is about VF Core. It's the owner of Vans in the North Face, Timberland, a bunch of brands that we've written about people who are listening probably wear. And they are conducting layoffs due to a larger quote unquote reorganization. So Julia, what do we know right now? Yeah. So VF is enacting these layoffs as part of this larger turnaround strategy that it announced at the end of 2023.

15:52I should say we don't know the number of people who are affected by these layoffs yet. You know, the company has not said, but they did say that the changes are related to, you know, what they're calling select commercial functions. A spokesperson told Fashion Dive that this decision will, quote, result in a stronger foundation supports the company's growth and value creation objectives, end quote. But as I said, this is really part of this, you know, larger transformation plan. You know, in 2023, VF was really struggling to make sales, you know, in large part because shoppers were pulling back on discretionary spending.

16:33You know, VF, as you mentioned, Kale, you know, is the owner of Vans and the North Face and Dickies. And, you know, for, you know, people who are struggling to, you know, pay rent or, you know, fill up their cars with gas or get groceries, you know, buying apparel and shoes is probably on the back burner. So, you know, they had been struggling to, you know, stay relevant to, you know, keep people coming back to them. And actually, at the time that they announced the turnaround strategy, VF had just reported a 2 % decrease in revenue. And, you know, at the same time was under pressure from activist investors to cut costs by some$300 million and change its board leadership.

17:20So a lot going on. But there was one brand in particular that was, you know, posing a lot of issues for them. And, Kale, what was that brand? Vans, which is really, really interesting because Vans used to be so popular. And I think I own a pair of Vans, if I'm not mistaken. I do. But Vans in particular was really bleeding VF Core dry. Sales were down 21 % year over year. Others were also not doing hot. So there's Timberland and Dickies. So VF Corps made some changes. A new president for Vans created the role of chief commercial officer, updating the America's infrastructure to more closely mirror that of EMEA and APAC.

18:02And it vowed to deliver$300 million in cost savings by removing spending in what it called quote unquote non-strategic areas of the business. And perhaps most notably, and this was wild, and you wrote a great story about this, it sold supreme to Ray-Ban's owner Esther Luxottica for$1.5 billion. dollars. So that which it had just bought that in 2020 for two point one billion dollars. So that was quite a big shave. So so it made these things made these changes. It's seeing where the problem areas are, which sneakers are big. You write a lot about this, Julia, like sneakers are big. It seems like Vance should be doing better.

18:36So I wonder what's going on with that. But has the turnaround worked? I mean, somewhat, but the numbers are still not great. You know, VF is supposed to report earnings again in a couple of days. But the last numbers that we have are from October 2024. They basically said their quarterly revenue was$2.8 billion, which was actually down 6 % from the previous year. So not great of their key brands, the North Face, which historically has been a really big brand for them. That was down 3%. Vans still causing trouble, not 11%. I've talked to some sources who think it might just be time for VF to sell off vans, but that's a whole other thing.

19:22But VF did swing to a profit actually in the past quarter, which is important. And it did reduce its debt by like$446 million compared to a year prior. Now it should be said much of this is due to the sales Supreme, which we just talked about, even though they, you know, sold that at a loss, they did, you know, sell it for$1.5 billion. But, you know, the company still has a lot of debt. Its debt as of October was still at, you know,$5.7 billion. And, you know, now it's, you know, counting on layoffs to reduce these costs more. And, you know, it says it's on track for that$300 million in savings by the end of its current fiscal year, which ends in March.

20:05But, you know, we still have some months to go. I mean, these layoffs, they've had layoffs before. So this isn't totally new. No. I mean, every big company has layoffs. And a lot of it follows this track where their brands aren't performing well. There are macroeconomic forces. And also just they need to pay down their debts. That$5.7 billion debt is a lot of money. So VF Core specifically has had layoffs before. In November, its subsidiary VF Outdoors laid off 242 people at a distribution center in Virginia. It also cut 500 jobs worldwide in 2023 and 600 office-based roles in 2022. So we have, you know, nearly 1 ,500, like 1 ,300 people that have been laid off in the last, what, like three-plus years.

20:56So this is not a new playbook for VF Core. we'll see if it's able to continue these cost-saving strategies and bring itself back to growth. It's hard to steer a ship when it's the size of the Titanic, I imagine. Anyway, the news of these cuts, it isn't shocking when taking into account VF Core's financial picture. And, you know, to be fair, investors did react well to the cuts. While it has made some progress on writing its balance sheet, it's still not fully resonating with consumers, as we've talked about with Vans. Today, they have many brands to choose from when it comes to outdoors and footwares, and there's, you know, a million competitors out there, both new and old, and so staying relevant will remain the big challenge for VF Core going forward.

21:40It'll be interesting to see what they decide to do with some of these brands that are beloved but have been faltering of late.

21:50Well, that does it for us today. It was really fun talking with you, Julia. Thanks for joining. You too. Thanks for having me. Absolutely. And so please don't forget to rate and review us wherever you're listening. And also don't forget to tune in every Thursday with the Modern Retail podcast where I interview leaders of the top and most interesting retail companies in the world. Please follow us on social media at Modern Retail. We're on it all. And of course, come back next Saturday, every Saturday for the next Modern Retail Rundown. Have a great day, everyone.

22:27Thank you.