Rundown: Thrasio's bankruptcy, Warby Parker plans more stores & Celsius reports record sales

0:06Hello, everyone, and welcome to the Modern Retail Rundown, where we break down the most interesting retail headline news of the week. I'm senior reporter Gabby Barco, and I'm here with our editor-in-chief, Kale Guthrie-Weissman. Good morning, Kale. Good morning, Gabby. Of course, there's a lot of earnings that happened this week, but we'll try to parse out what we thought was really some of the most interesting tidbits. But on this week's episode, Amazon aggregator Thrasio has filed for bankruptcy, so we will break that down. Then we'll look at Warby Parker's future plans for hundreds of more stores while also trying to grow their digital presence more.

0:51And the last thing we're going to talk about is Celsius Drinks, which is now a billion-dollar energy drink company that's been around for like 20 years, which I did not realize. Yeah. All right. Well, first up, let's go with Thrasio, which filed for bankruptcy this week. And for those of you who aren't familiar, this is an Amazon aggregator whose whole model was to buy up brands that sell on Amazon. It was worth hundreds of millions of dollars, raised a lot of money, too. And it looks like they are in need of restructuring because of a lot of debt. And, you know, bankruptcies are pretty common nowadays, unfortunately.

1:34But, Cale, why don't you give us a little bit of a history of Threshio and how we got here? Sure. Sure. And first, it's not even hundreds of millions. This company was literally worth billions of dollars. It's just an insane fall. There are always bubbles. It's always super interesting. And this move is not surprising. It's been talked about for months. So I'll just give a little bit of a background. You set the table great. It was an Amazon aggregator, meaning it scooped up brands, would hope to flip them, bring them under its portfolio, and then use that to drive the business even more. Essentially, as many of these companies described it an updated version of like a P &G.

2:12You know, we have a portfolio of many brands, but Thrasio specifically was focused on the Amazon space. So the news that happened this week is it finally announced that it's filing for Chapter 11. This had been whispered about for months. In September, there were reports it was bringing in restructuring firms. Now we know what it means. The company said it's hoping to slash about$450 million in debts. It also said that it has received commitments from lenders to the tune of about$90 million. This has been a years-long process. This is not like yesterday things were great, today things are bad.

2:50Over the last two years, it's been pretty gnarly for a thrashio, and I will say for the entire Amazon aggregator space as a whole. in 2022 i believe it laid off about 20 of its workforce and its founder stepped down as ceo which sent a pretty stark signal to the industry that things were going south and then as i said earlier um in 2020 late 2023 there began there became rumors of um a restructuring firm coming in to kind of try and right size the ship but yeah that that's sort of where we are now the company is filing for bankruptcy. It is, you know, painting it not as an end, but a new beginning, which is what probably 90 % of bankruptcies say.

3:33But it's definitely an important chapter in this crazy industry that rose during the height of the pandemic. Yeah, I mean, I think that whiplash of companies that were just doing amazingly in 2020, 2021, and then just that steep drop-off is what we always talk about, which sometimes feels very surreal. But I mean, like, yeah, going from just the top aggregator to bankruptcy in the flat in a flat, what, four years, pretty much, is pretty, yeah, pretty crazy. I mean, why don't we get into what led to this? Because obviously, we know economically, you know, a lot of these e-commerce players aren't doing that well anymore.

4:19But I think this is a combination of a lot of different things, not just that. Yeah. So what led to this was pretty much the coming back down to earth post-pandemic. And so Thrasio was the leader in the Amazon aggregator space. It had a pitch that was similar to about a dozen other companies, which was they were going, you know, e-commerce was rising because people were stuck at home and buying their things online. And they were going to own and operate all of the individual atomized brands that sell on Amazon, and they can streamline these business operations because they can, because they're so big.

4:59And through that, they will make profit. And in the early days, that caught the eyes of a bunch of investors. And so, Thrasio, along with others, I can think of like Forum Brands, Summa Brands, the list goes on. raised, so Thrasio specifically raised$3.4 billion at least. We don't actually know. And it should be said, and this is probably what led to some of the problems, this wasn't pure VC equity. A lot of the money that Thrasio raised was debt. When debt's cheap, that's great, but the interest rates are rising. And so that leads to a bunch of problems. So that's definitely one issue that Thrasio raised.

5:39And all of these companies, pretty much their entire value proposition was based on they needed to have a lot of money so that they could buy up these brands and then flip them and then bring them into their own systems. And so you need a lot of money. And the idea is when you reach a certain economy of scale, it will work. But that was all predicated on the e-commerce and the retail numbers that came out during the pandemic. And so a lot of these companies, when they were giving their pitches to journalists like me, or I assume talking to investors, would say, well, e-commerce is rising and it's going to continue to rise.

6:15You know, one stat that I found, which is pretty eye-popping when you think about it, but isn't the case anymore, is that Amazon's revenue in the first quarter of 2021 rose 44 % year over year. And that's because everyone was buying stuff on Amazon then. And so these companies were riding those coattails. But then e-commerce penetration, it still e-commerce still went up, but was not going up as quickly as people had wanted. and then inflation took a hold, retail sales started to kind of get kind of wonky. Pretty much there was a mixture of a lot of these companies had raised debt, which meant that they were gonna have to pay that back.

6:53People weren't buying online the same way that they were before. And also people weren't buying as much. The economy was a little bit more wonky. And so when you're not able to sort of have that, you know, hockey stick growth, that's when things go bad. And so we're seeing a lot of contraction happening here because essentially these companies were raising with the promise of a bubble and it seemed like a bubble and it was a bubble. Yeah. And at its peak, Thrasio was valued at$10 billion. Apologies, I said hundreds of millions. Very silly five minutes ago. But also for those unfamiliar, or Kel, do you want to give us an idea of what types of brands this aggregator or roll-up, you know, whatever we're calling them, was buying up?

7:45Because it kind of ran the gamut. I mean, of course, it's like things you'd buy on Amazon, but I just thought their portfolio was also really interesting. Yeah. And that's also, and this was one thing that Thrasio did at the time was its portfolio was really all over the place. So it was pet goods, it was home goods, it was toys. It really was a variety of different things. And the pitch that the company said was it had an internal algorithm or way of analyzing the – pretty much an Amazon brand would submit their financials to the company. It would analyze it and be like, we think we can turn this around and make a profit.

8:21it. So it went, you know, there were a bunch of different verticals. And, you know, the focus was just on if they think it would be able to reach a certain level of profitability that would work for its system, then they would go for it. Mind you, there are other aggregators out there who focused more on specific segments. And so, you know, there are certain aggregators who focused more on home goods, others that focused more on health and beauty or CPG. But Thrasio really was more or it didn't do everything, but it definitely had a bunch of different verticals and was trying to do sort of a very wide target of like, if you're on the Amazon platform, we will be able to flip you.

9:02Yeah. And because there's so many categories that it's covering, there's fitness gear, there's pet stuff. But I think one thing that's unique, obviously, to trying to grow Amazon brands is that it is so reliant on reviews and rankings and constantly climbing up those charts. And that's really hard to do when you have over 200 brands. I think that's what their site says at the moment. Yeah. And I think the idea was that Thrasio would be able to consolidate all of those expertise. So, you know, you don't need to have each brand have its own person focusing on Amazon SEO, for example, or you don't need someone who is working on the Amazon DSP for advertising.

9:44The hope was they would have these Amazon experts. And it should be said, one thing that Thrasio really did in the early days was poach a lot of ex-Amazon people. It had a lot of Amazon people in there so that a brand could essentially be bought, be brought into its system, and then they would use the resources already there to grow the sales. On paper, that looks like a good pitch, but clearly it was not able to reach the level of profits it needed to. And another interesting thing is that if you talk to other aggregators who are still around that have yet to file for bankruptcy, when you ask them what their pitch is now, it's very, very different from what they said before.

10:19Pretty much the pitch now, if you are still in the business, is we're focused on omni-channel growth. We want to get you into big box retail. We want to get you into other marketplaces. And we are being much more specific and diligent about who we bring into our portfolio. So it's kind of the opposite, where it's not just a pure Amazon e-commerce play. And if your balance sheet looks a certain way, you will fit. It's instead like, we're going to be really, really slow and judicious with whether you can be part of our group. And then what we can do is make you look like every other brand out there that wants to get a foothold in the retail scene.

10:57So it's a very different business offering than it was when the industry was for starting. Yeah. I was just thinking all those Amazon people, it's a really expensive payroll. Yeah. Explains the layoffs. So I think to zoom out, speaking of just the general aggregator space, this is not the first bankruptcy we've seen in the last few months. There's another company called Bantaggio, I think is how you say it. filed for bankruptcy last year. Yeah. And so, yeah, it just seems like a part of a bigger trend. Yeah. And we're also seeing a bunch of consolidation. And so this is not new. This began last year and even the year before that.

11:41But the company Seller X, which was another aggregator, it acquired Elevated Brands. Suma Brands, another aggregator, merged with the D1 group. Pretty much what all of these companies are trying to do is figure out a way where they can have enough resources and also enough money, like enough cash in the bank to continue doing this. Because right now, the big issue is that most of these businesses raise debt. And when you raise debt, that means you're going to have to pay it back. And if you aren't profitable, then you're kind of screwed. And so that's the place where a lot of these companies are now.

12:17I've also spoken with other aggregators, and they've pretty much said, you know, We're doing relatively okay, but we know that a lot of other ones are in distress. And so they're viewing this as a time to pretty much buy up cheap assets when they can. You know, with this Chapter 11, do we have an idea of where the company is going? I mean, of course, trying to eliminate debt. It's a lot of debt to try to restructure in a short amount of time. But I think we could probably expect more layoffs, more just cost cuts in general. Probably more cost cuts. You know, the app Blind already has people being like, oh, God, more layoffs at Thrasio.

12:55But, you know, for its part, the company says that it will try to continue doing business as usual. This is from its press release. The infusion of new capital is expected to provide sufficient liquidity to support the company throughout this process and beyond. In particular, the financing will enable the continued operation of Thrasio's brands, support ongoing business operations, and provide the company with access to new capital upon the emergence from Chapter 11 to support go-forward business operations. So essentially, the company is saying that if this is a successful restructuring, we'll be able to continue.

13:28We don't know if the business model is going to change drastically, but that's where we are right now. It's probably going to look different. and I wonder if they'll offload brands. I don't know. I'm just thinking out loud, but it'll be interesting to see or imagine what that's going to look like in a year or so. Yeah, and if you know anything, reach out to me, please. Hit up, Kale. From there, we can move on. This leads us to Warby Parker. Warby Parker is betting on hundreds of new stores opening to grow in the future. Of course, this is not going to happen overnight, but to give you an idea, eventually the company wants to have about 900 stores.

14:15And for context, it is right now at 237. I think what makes this interesting is that there's just, you know, a further and further push into physical retail for this company that, of course, as we know, started out as an e-com virtual try-on glasses D2C store. store. I'm just throwing out all the buzzwords. Yeah, all the buzzwords. It was e-com, DNVB, DTC. Yeah, I should have found an order to put them in, but you get the gist. But yeah, I mean, almost basically 10 years ago, and now it looks more and more like a vision center that you walk into that I think a lot of Americans now live near. But this week, the company reported earnings.

15:03And I thought what was interesting is that e-commerce is indeed shrinking while they invest really heavily in new stores. Did anything stand out to you as far as, you know, trying to compete with these physical vision places? I mean, what's interesting to me is that, you know, the company said it wants to open 900 new stores that will still make it less than, say, a LensCrafter, which has a thousand locations nationwide, but that still is putting it closer and closer to on par with that. So it's always very funny because when a company launches and it wants to reinvent the industry, but then as companies get into their adolescence and then into their mature older years, often they begin looking like the business models of the incumbents that they were trying to overcome.

15:58And so, you know, 900 Warby Parker stores, soon to be over a thousand if that works out. And that puts it on par with a model similar to what LensCrafter was, or at least the everyday consumer would think that. Maybe, you know, it's different maybe in the back end. So it's just an interesting thing where it's like, it started out online and now stores are the big area of growth. I find that super interesting. Yeah, and, you know, to be clear, I mean, the company has been pretty clear about wanting to do this. I mean, for a few years now, they've always known that glasses are more naturally purchased in store.

16:32Whenever I've spoken to them, this was always the trajectory. But I do think it's coming at an interesting time right now where the stores are actually helping drive bigger AOV. We'll get into why that is. I think we all know what happens when you're adding things on in person versus a website. Services. Services, yes, exactly. Well, I think the eye exam business is obviously growing. And then they also have a lot of add-ons that you could add. Because the value prop of Warby Parker is that you could walk in and out with, I think it started at a$95 frame and lenses. I can assure you that is not the case anymore.

17:13It's a little bit more. But there's also blue light filters and all of coatings and all of these add-ons that do sell pretty well. And they're saying that I think one stat that stood out to me is that the average revenue per customer increased 9.3 % in 2023. And it's now at$287. So when you think about it, that's obviously not one pair of DTC glasses. They're likely buying even two pairs. I know they encourage that pretty heavily. So, I mean, I think this growth is also interesting because they're also, of course, they're also really focused on expanding products, getting as many styles as possible in the stores.

17:56They're doing a lot of fun collabs, including with celebs and influencers. I think they just had one with Emma Chamberlain. And so there's a lot going on. But again, a lot of this does drive the traffic to the stores, which will transition into this also helps save a lot of money operationally. You don't have to keep constantly shipping glasses back and forth and try-ons and all of that. You can kind of just shorten that process for the customer too. But why don't we look at the performance of e-commerce this week? And I think this is an interesting contrast. Yeah. Yeah, so you pointed this out earlier, but I think it's something that definitely stands out.

18:36And this doesn't mean the overall performance is bad. Like I think in the overall DTC space, Warby Parker is doing pretty well and has like proven to be able to roll with the punches about how consumption patterns change. But its fourth quarter e-commerce revenue dropped 1 % year over year. In contrast, its retail revenue grew 17.1%. For the full year, e-commerce revenue dropped 3.1%, and retail revenue grew by 21.7%. And so pretty much, you know, these are really interesting numbers when you think about what companies have been saying for the last year, which they want to open stores, they want to focus on Omnichannel, and they want to do all this.

19:16Warby Parker has been doing this for the last few years, and it is clearly, you know, it's clearly working. Like, the company is opening more stores, more people are going to its stores. That is at the cost of e-com, but this other channel is probably offsetting it. Right. Of course, we know that stores cost a lot of money to open. They are shrinking their losses every quarter, but they are still posting losses on their quarterly earnings. With the e-commerce shrink, this is, I think, really interesting, of course, is that like a lot of brands, they pulled back on marketing spend last year. That's part of the reason why e-commerce shrank.

19:56It seems pretty obvious. But I think that's something we're seeing with a lot of brands. It's not unique. You know, it should be said that the overall earnings for Warby Parker, like pretty much the reception from Wall Street was that they were not as great as they wanted them to be. So like its overall revenue hit$161.9 million versus unexpected$161 million. And just, you know, as you said, it still posted a loss. But at the same time, I don't know. It's clear that there is an overall somewhat strategy in place. And so I don't know what I'm saying, but it's just interesting to contextualize this with the overall business as a whole.

20:33Yeah. And they did mention on the call that they will continue to try to grow the digital experience, but it's being tweaked, right? It's not what it looks like 10 years ago. So right now, the virtual try-on service, they say still converting customers pretty well. But funny enough, customers are actually starting to prefer the stores more and more because you want your glasses, ideally, within a few days versus shipping them back and forth and trying different styles on. But yeah, the co-CEO, Dave Galboa, did say that going forward, you'll see us invest further in virtual experience. and advanced personalization while being more intentional in where and how we lead with the home try-on program.

21:23So yeah, I think this all kind of ties back to hundreds of more stores opening probably in the next decade. Yeah, it'll be interesting to see how this develops. All right. Well, from there, let's move on to energy drinks. Celsius Drinks also reported its earnings this week, and this was a record quarter for them. So let's get into that. I think a lot of people probably know what Celsius is. It's the healthy version of a lot of the energy drinks that are on the market. And their biggest thing is sugar-free, and they're really more aligned with the health and fitness community or consumers. So yeah, what stood out to you with this report?

22:07Because these numbers are kind of crazy. Yeah, well, let's just look at the numbers right now to set the table, as they say. So posted record revenue of$347 million, which was a 95 % increase year over year. And it had$39 million in net income. That was for the fourth quarter. For the year as a whole, it hit$1.32 billion, up 102 % from$654 million from the year prior. It's currently the number three drink in the U.S. with 10.5 % of market share. So those are some pretty staggering numbers. And this is, I mean, like, truth, I know Celsius. I learned about Celsius not that long ago because of a podcast, actually.

22:53But, like, it's rise, and, like, it's been around since 2006. It's been public since 2006. It's been public since 2006. This is not a new company, but it has clearly just been waiting in the wings for this weird moment we're in now with beverages where it's a mix of higher end assortments at stores and a focus on better for you and a mixture, this weird melange we're in right now, which is both weight loss, but make it sound healthy. And so it's sort of like it checks all the boxes for that, where it's like it's not, you know, one could say it's part of a growing group of weight loss fads, but it also presents itself as a healthy alternative.

23:37So not just pure whatever aspartame or whatever's in it. I don't know. It just is clearly the beverage that is working with where the cultural pulse is right now. And the numbers are showing that. Yeah, we'll get into that a little bit with the types of influencers, athletes, celebs that they work with. But right now it's behind Red Bull and Monster to give you an idea of where it is in the market. I think the CEO, John Fieldley, actually broke it down this week in an interview with Yahoo, where he essentially credited the health aspect, of course, and the fact that it is a premium brand. brand as their big ticket to success.

24:25Of course, the consumers obviously are just Americans in general shifting to sugar-free. That has helped a lot. But he also did say that the company itself has been really building on that momentum by working, expanding into food service. We did a story on their partnership with Jersey Mike's last year, and they expanded into over 3 ,000 Dunkin' Donuts locations, which I think is really interesting, a canned beverage brand that has such a big presence there. But with that said, he did mention this quote, I thought was interesting, is that the category is about to flip to where 50 % of energy drinks are going to be sugar-free for the first time in history, which I think is really interesting because sugar-free Red Bull has been around for decades.

25:12So there's just a lot of factors that are culminating in this for their success. Yeah. And I think, I mean, the retail partnerships make a lot of sense, but I also know that, you know, it's really trying to tie itself with health and fitness. It works with athletes, wellness influencers. They have a multi-year deal with Ferrari with F1, Major League Soccer, things like that. And it's kind of an interesting, I don't know, I'm dating myself right now, and maybe you remember this, but like Red Bull would have the little Red Bull cars that would go to high schools. My high school got the Red Bull person who is sending it.

25:48But now Celsius is, you know, I could see a world where Celsius drives its whatever Celsius golf cart to a yoga class or like something like that, where it's like, it's figured out who the target demographic is. And it's trying to build on that. And it seems like an interesting evolution of where the energy drink industry was 15 years ago. Yeah, no, I definitely remember the Red Bull cars. They were kind of controversial, I guess, looking back. Yeah, when you think about it, that would not fly today. No, you can't hand these high caffeinated drinks to high schoolers. But I think this all just points to Celsius.

26:26I do wonder, of course, they had such a crazy record year, but they do eventually want to top Red Bull and Monster, I'm sure. So it's not going to happen overnight. But I think right now they have the momentum. It's just going to come down to being able to build on that and doubling down on the healthier formulations because that seems to be where, yeah, their success is lying. Yeah, super fascinating company. And I mean, it's been around for a long time and I've seen it, but it's definitely getting its acclaim and prominence now. So we'll see how the next year goes, if it can still do 100 % year over year growth.

27:05Yeah. Yeah, we definitely thought it was a startup, I think, a few years ago. I thought maybe it was around for a couple of years. All right. With that, we can wrap up. That's all from us this week. You can come back on Saturdays to hear more weekly rundowns of the biggest retail news. You can rate and review us anywhere you get your podcasts. And on Thursdays, listen to interviews with Kale. He interviews industry leaders, a lot of brand executives. Kale, who do you have on next week? Next week, I'm speaking with Nancy Taylor, who is the co-founder of APOC Evolution, a higher end apparel brand that was recently acquired by Lola, which is a Quebec-based athleisure brand.