Rundown: U.S. retail sales, Big Lots' liquidation & Vuori's new fundraise

0:04Hey, everyone. Welcome back to the Modern Retail Rundown. I am senior reporter Gabby Barco, and I'm here with editor-in-chief Kale Guthrie-Weissman. Hey, Kale, how are you today? I'm doing well, Gabby. We're almost to the new year, the holiday break, all that jazz. Just got to talk about some news. You know, it's exciting. Yeah, there's, you know, of course, there's always news coming in right under the wire, but we do have a few exciting stories this week. First up, we're going to talk about the monthly retail sales came out from November. So we'll look over those numbers that were relatively positive, I think, just compared to some expectations.

0:47On the other hand, we'll also be talking about Big Lots plans to actually close all their stores after an acquisition deal fell through this week. This was something that we discussed a few months ago when there were plans for a takeover, but that did not pan out. So we'll talk about the latest update on that. And lastly, we're going to talk about Viore in light of its latest venture capital round and new valuation. I believe it's around$5.5 billion. So naturally, all the IPO rumors are now brewing maybe in the new year. We'll see. We'll talk about that. But yeah, first up, let's talk about these U.S.

1:32retail sales figures from November that came from the Commerce Department, which reports them every week. They said that sales jumped 0.7 % in November month over month. And then I saw that online sales jumped 1.8%, which I thought was pretty notable because we did talk a lot and write a lot about e-commerce doing pretty well this past Black Friday. And I think that was definitely a big contributor. I mean, it definitely shows the general sentiment, at least from the coverage thus far, is that the economy, at least if you're looking at retail numbers, are doing okay, not like insanely well. It might be, you know, this last quarter's growth might not be as big as the quarter last year, but at the same time, it's still growing.

2:23And so the general sentiment you're hearing from analysts is, you know, cautiously optimistic things seem to be chugging along. Yeah, like the year over year growth is still there. So and it was also an improvement over October, which was a point five percent increase. But we could talk about maybe some of the categories that this came from. So interestingly, car sales actually were a really big driver of these sales. And some of that demand reportedly came from a lot of new cars being purchased after Hurricane Helene hit the southeast in October. That makes sense. I think a lot of people going out and buying new cars.

3:07And then the overall growth, though, is still cautious. I mean, we're seeing, you know, categories like grocery stores, apparel and bars and restaurants also fell in November. I think some of that I would speculate was probably due to this wonky schedule between like the election and then Thanksgiving being really pushed back or felt like it was really pushed back this year. So it kind of made November feel, yeah, like a weird month. And I guess some people move their spending based on that. Yeah, I think that that's exactly right. Right. And I do think the two major contributors to the numbers we're seeing is the auto industry, which you said, both people were needing new cars because they were destroyed.

3:51And also, I think a lot of auto dealers have been capitalizing on that and providing a bunch of deals and incentives. But also, deals were kind of the name of the game right now. And so, every major retailer has been – and you've written about this, I've written about this – everyone's just discounting. And so it was sort of to be expected that there would be some growth just because it's been such a value focused Q4. And I was reading some coverage that pretty much just said it that like, you know, that was one of the major contributors was that it's just that retail chains have been implementing big discounts.

4:23So that probably paid a big role as well. Yeah, it looked like, you know, people just couldn't help, I guess, you know, just across the board. I don't think it mattered, but people love a good deal. And Black Friday alone brought in$10.8 billion in just e-commerce sales alone. And it's a billion dollars over last year's number. So, yeah, people shopped a lot. And, you know, some people were maybe tracking it up to like retail therapy or just do shopping. But yeah, people are still buying, which actually brings us to the next point, which is that basically economists and the Fed thinks that the consumer economy is still growing pretty healthily based on all of these sales.

5:08But yeah, I mean, where does that put us, I guess, going into the end of the year and the speculation that they do expect retail sales to do relatively well and be solid for the holidays. We still actually have some of the biggest shopping days from the year coming up. They're very condensed towards the end of December. So yeah, there's hope that it will round out pretty nicely. But this is also coming at the same time where the Federal Reserve is going to slow down interest rates cuts that they've been doing consistently the last few meetings, I guess, because they think that while people are spending and we don't want to aggressively cut interest too much.

5:51Yeah. So I think the interest rate cut is interesting. And it likely, I don't imagine, would have a huge impact on retail sales. It will probably have an impact on Wall Street. I think when it was announced a couple of days ago, all of the stock indices fell by a great percentage. They're now, I think, doing a little bit better. But that sends a message to traders in Wall Street more so than it does to people spending money at stores. But I think that they both show just the weird space we're in economically. And the one thing that I'll really be looking out for, and I imagine you will, because I remember you wrote about this last year, is that everything is pointing to sales looking overall good.

6:29There's year-over-year growth. It's not as insane as it has been in years past. But what is it called? Q5, sort of what comes in after the New Year's. It's when everyone's trying to get rid of excess inventory. We've been seeing a lot of discounting. We've been seeing a lot of value. And that's probably going to continue through January. And so I think that's going to be a great bellwether to look out for to see, A, how steep are the discounts? Were retailers, were platforms able to go through their inventory up until Christmas? And if not, Were they able, you know, did they see more sales come for these other discounted days?

7:02So that's something I think we'll see how the numbers bear out in the coming months. Yeah, it's probably going to be maybe around mid-January that we'll actually get like the solid finalized numbers. So that will be interesting. And I'm sure, you know, increasingly, you know, the shoppers are being trained to expect the deals to continue, you know, after like famously the day after Christmas is actually a really big shopping day. So it's not like it just suddenly comes to a halt on the 26th. Well, yeah. And like people talk about people being trained for deals now. It's not a new thing. My grandpa would always say that you buy really big purchases right after Christmas up until the new year.

7:44Like whenever you need a new mattress, he'd be like, that's when you get it. Because that's when the real discounts are going to be, which is smart. You know, that probably the retailers are trying to go through things. And so I think this isn't necessarily a new behavior, but we're seeing more people talk about it. And it's become kind of a marketing jargon with like the fifth quarter and all that. I was going to say, it's just that we have buzzwords for them now. Yeah, exactly. Okay, cool. Well, from there, I guess on a less positive note, we can talk about Big Lots' last chapter, I guess. This is the big closeout.

8:17Let's talk about, I guess, what the latest deal is. But maybe we could start by taking a look at the latest update and how we got here, I think, you know, just to kind of give people a refresher from this deal that fell through. Sure. So we'll caveat this with it. It ain't over until it's over. So who knows what's going to happen in the coming weeks. But Big Lots this week issued a press release that said that the deal that it initially announced a couple of months ago with Nexus Capital Management, which is a PE firm that essentially fell through. So in the press release, this is what the company said.

8:51It, quote, does not anticipate completing its previously announced asset purchase agreement with Nexus Capital Management, though it continues to work toward completing an alternative going concern transaction with Nexus or another party. And with this announcement, it said it's preparing all of its stores. It has a lot of stores for a going out of business sale. It's pretty much just saying we're likely going to liquidate. Maybe someone will swoop in. Maybe Nexus will have a change of art, but we've not been able to reach terms that both parties agreed to. So we're just going to close up shop.

9:22So it looks like there have been so many instances in this entire saga where it seemed like Big Lots was going to close. If you remember six months ago, the company issued a statement saying that unless something big happens, it's just going to shut down. Then it announced that it was going to file for bankruptcy. It did file for bankruptcy. Then this PE firm came in and it seemed like things were going to be saved and it said it was going to save some of its stores. Now it all seems like it's gone back to the area where the company is just going to close and it's going to liquidate all of its assets.

9:52Right. It is a lot, right? I mean, these are just really big, no pun intended. They're really large scale stores. It is big bucks. But maybe this is a good time to talk about, I guess, the sales of the company and how we got here the last, I'd say like maybe about two years, right, that they've been at this restructuring attempt. Yeah, it's been, I mean, it saw, I think at the beginning of the pandemic, a little bit of a boom because people were doing home improvements. It was a different economy that wasn't as bumpy as it is now. But pretty much for at least the last two years, things have been going sour for big lots.

10:30It's posted hundreds of million dollars of losses. I think in the last year alone, it had a huge loss and also owed over half a billion dollars in debt. And every year it would post sales falling. So in the last quarter, it reported, which was in June, it said net sales fell by 10%. In 2023, net sales fell by 14%. In 2022, they fell by 11%. So it's not going in the direction the company wanted. And it cited a bunch of different things, the same things that you hear from every retailer who's not doing well right now. So rising inflation, interest rates are higher, people are more cautious. But the truth of the matter is that Big Lots is largely seen as kind of a value-based retailer for what it sells, or it's not a premium retail experience.

11:19And so in many ways, it should have been able to brush off that connotation and get more people interested because of its alleged low prices, but it wasn't able to do that. Yeah. I mean, it is interesting because then you see, you would think off price, which kind of falls under that general category. I mean, it's doing really well, right? Like these other retailers like TJ Maxx, the TJ Maxx's of the world are doing well. So the fact that they're blaming, yeah, sort of inflation and consumer spending on the lack of sales, it's not really jiving, I guess, to me. I guess. But there's another interesting thing, which is some off-pricers are doing well.

11:59Dollar stores are not doing well. It's just so weird. There's no rhyme or rhythm. I think it's just the business itself. Are you able to provide a compelling reason for you to shop with me? What is the competitive landscape? And if you're not, then you're not going to see sales grow. So yes, it probably has something to do with the economy, but it also has to do with the way that you've organized and modernized your business. Yeah, and probably comes down to assortment. I think maybe the big lot shopper, there's obviously a lot of other players that came in and, you know, took over a lot of those categories.

12:31But I mean, I guess, you know, this maybe is a good time to move on to Nexus Capital. they've come up a lot lately I feel like when we're talking about you know as far as these big PE firms that are swooping in and trying to I guess save these failing retailers but they were sort of seen as this lifeline right like a few months ago when this deal was first coming through but it's it's interesting because their portfolio includes everything from like dollar shave club in Tom's shoes, which, you know, just doesn't seem like it really goes with these are like kind of digitally native brands that needed some, I guess, you know, cash injection.

13:12But yeah, this is a little bit of a different play for them. So I guess I just thought it was interesting that they were kind of counting on them for that for the saving. Yeah, I mean, I imagine Nexus saw this as, you know, PE firms have a reason to make an acquisition, which is they believe that they can fix a business and make a return. And so this probably seemed like a somewhat cheap way to buy a company with nearly a thousand locations and turn it around and then make a return on investment. But also when we reported a story a couple of months ago about who is Nexus Capital and the general sentiment from retail analysts was that of the PE firms looking to swoop in and buy ailing retailers, it seemed like an overall good player.

13:53It was likely not going to focus just on real estate and then probably do more of a leveraged play like we've seen with other retailers like Toys R Us. It seemed like the point was to try and actually regrow the business and figure out how to make it work. But clearly, that didn't work out. And you pointed to it too, but it owns just so many interesting companies. I thought this was really interesting. It owns the standardized testing company, ACT, largely known as the Midwest competitor to the SAT. And so just the The span of different businesses that Nexus owns is super interesting. We don't know the details of what fell through with the negotiations between Big Lots and Nexus, but I imagine Nexus thought that it was going to spend$760 million, just a lot of money, which was pretty much paying off all of its debts and then giving Big Lots $2.5 million in cash.

14:45But clearly, something got lost between the negotiations and it was unable to work out. So hopefully we'll learn more in the coming weeks about where they were not able to see eye to eye. Yeah. Yeah. It seems like there's just not really any details about the reason behind it. But, you know, this, I guess, just leaves us where they are preparing to close. They have 963 locations. That's a lot of stores to prepare for closure. I'm sure there will be these big blowout sales happening. It reminds me a lot of Bed Bath & Beyond. I feel like there was also this sort of Hail Mary attempt at the last minute, and then it still ended up kind of going through all the shutdowns.

15:27Yeah, yeah. I mean, and that was – it did ultimately get bought in the end. So Bed, Bath & Beyond technically sort of exists as part of Overstock. It's also similar. You can point to a bunch of different examples. Bed Bath & Beyond, Pier 1, I think is a really interesting one, where I guess technically it still exists, but it exists with some holding company that has been trying to make it into a digital brand. But it's pretty much like Big Lots as we know it likely is not going to exist post-January. But that being said, its CEO, Bruce Thorne, is holding out some hope. He said in the press release, while we remain hopeful that we can close an alternative going concern transaction in order to protect the value of the big lots estate, we have made the difficult decision to begin the going out of business process.

16:15So essentially, he's sending a message to any other firm or even Nexus being like, you know, we're still open to this, but likely we're going out of business. Yeah, I mean, again, this is just, I guess, another cautionary tale, right? We've had a lot of bankruptcies and a lot of clothes. I think I saw a stat that was like, you know store closures is like an all-time high or just like rapidly the pace is really rapid right now this past year so it's not surprising but yeah it'll be interesting to see you know what yeah what shape they come out because it's these like large-scale stores yeah is it gonna really lend itself to something like e-commerce we'll see um but yeah i mean i guess you know on that note we can move on to Viore, you know, which just raised money in the last few weeks.

17:05And it is, for those who don't know, Viore is this direct-to-consumer athleisure brand that is essentially competing with Lululemon, Athleta, all of these establishment brands, if you will. But it looks like, yeah, its valuation just keeps going up and up. And it's an anomaly. You know, right now, So, you know, I write a lot about venture capital and they're just everybody says there's no money. But of course, there's always money for for these late stage brands that are just scaling really fast. But yeah, what are your thoughts on this latest round? It's$825 million. That's a lot of money for any brand, let alone a consumer one.

17:49Yeah, exactly. It's a lot of money. And it's been, you know, Viore has been raising a lot of money. It's also been for the last many years just on a store opening spree. And so I imagine it's using this money to pay for that growth. That being said, all of these latest rounds that the company has had has all been fueling the flames of the company, essentially planning to do an IPO, which it was supposed to do this year, according to one report. And so this is just another example of the company sort of holding off on doing an IPO, probably waiting for the market to be right while still, I guess, having the attention of investors who are willing to invest in the brand.

18:27Yeah, like I said, I mean, you know, when it comes to these IPOs, I guess the valuations are the big numbers everybody looks at. But it's a yeah, it's a 5.5 billion. And to give context, in 2021, it raised 400 million dollars and that put it at 4 billion. So we'll get into this a little bit later. But, you know, the whole valuation game is is also really interesting to talk about in the context of the current climate. But yeah, like you said, about a year ago, actually, Bloomberg reported that it is very is considering going public in 2024. obviously were coming up on the end of the year. So that probably is going to be pushed back.

19:06But of course, you know, these brands, they can, you know, people can report, people familiar with the matter could report on things and then they could, of course, change their minds. It's not written in stone, but analysts still seem really gung-ho about an exit that's coming for the brand. They're really excited about it. They say that it's taking market share away from these other companies like Lululemon is obviously the big one that people think about. Although I never really thought of Yuri as a Lululemon competitor doesn't really play. And I mean, it's not like a very yoga focused brand per se, same with Athleta.

19:40But, you know, it's kind of on that same sort of, I guess, under that same trend driven, you know, higher end athleisure under that guys. But anyway, yeah, you know, they talk a lot about their differentiators. I mean, we've talked to them a lot. They have been featured in modern retail a bunch. They say that, you know, comfort and their fabrics are really what their customers go for. But, you know, that doesn't it doesn't mean you're immune to all the challenges that specifically D2C players are still going through considering that, yes, they are opening stores. There are a lot of owned stores there.

20:19If you've seen one, they're in a really expensive neighborhoods. They're really big and really nice stores. They don't do a lot of wholesale. I mean, they're very exclusive, I would say, still, right? It's like Nordstrom and a couple of specialty retailers that they partner with. But yeah, it's interesting to see now that there's like all this PE interest speaking of, you know, I guess there's some concern that is this going to get diluted. I mean, that's always a concern, right? But obviously, they seem to be really betting on their product to take them through. Yeah. I mean, there are a few things that I imagine are enticing to investors for Viore.

20:53One is that I was looking up, I think as of last year, it said it had over 50 stores. The company announced maybe a year or two ago that it plans to open 100 stores by the end of 2026, which is a lot of stores for just an individual brand. But again, if you look at the market, the landscape, the industry landscape, Lululemon has over 700 stores around the world. And so I imagine even if they aren't the same, investors compare apples to apples, and that's probably what they're saying. And then also the other thing that I think probably is very enticing to investors is the fact that Viore has said that it's profitable.

21:30And so the last DTC bust was because all of these companies were growing and had huge valuations, but their unit economics weren't quite working or they were spending too much money on marketing and they still were posting a loss. So, you know, ideally, if this company is still able to grow and is still posting a profit, that means that investors would likely make some sort of return. And so, you know, this all hinges on a bunch of things. The economy is still growing. There being increased demand for the space. The company not falling out of vogue with consumers. Like all of this is based on taste, really.

22:03So like Fiore is cool right now. What happens when it no longer becomes cool? We could look at companies like Allbirds, which, you know, was doing a similar thing, also went public, but now has been really flailing on the public markets and has had to like do a bunch of business changes because it just no longer had that cool factor anymore. Yeah. And also, you know, apparel trends change, you know, the pandemic, of course, was a huge boost for these types of brands. But like some analysts even in the reports were saying that in this CNBC story, I should say, we're like, you know, people are dressing up again and probably will return.

22:38You know, these things are cyclical. So, yeah. Is that demand going for what is it like maybe a hundred dollar lounge pants going to be there anymore? We don't know. One thing that still, yeah, they're profitable, but of course we don't have access to any of those figures. So that's, you know, we talk a lot about profitability seems to mean different things, different types of venture backed brands. But yeah, I guess I just can't help but think about, you know, we were both around for like that, you know, first wave of DTC exits. And yeah, like you said, all of those kind of either being taken private again, or just running into issues like digital marketing being really expensive, real estate, all of that.

23:21And so, yeah, I guess like an IPO, for me right now, I'm like, you know, we'll see if it happens. But I think of something like Skims. They are also they're huge. Of course, they have the Kim Kardashian factor, but they have been talking about or there's been rumors about them going public for a couple of years now, and they're still holding off just given the climate. Although we're being told that M &A is going to pick up in 2025. So we'll see. But yeah, I don't know. I guess any last thoughts on what this space is going to look like or what are some of the prospects for a brand like this? I don't know.

23:59I was looking at valuations for DTC companies that went public that have sort of busted. And so Allbirds, when it was IPOing, its valuation was north of$2 billion. Casper was over$1 billion. And those were largely considered the most exciting ones. And they've all sort of fallen from grace for various reasons. And so I think it's interesting that now we have Viore, which has a$5.5 billion valuation. And with the idea that it's going to go public, that's great for the company right now. But we'll see when it does go public, how the market responds and what actually happens to its valuation. I think that's what I'll be looking out for.

24:41I think what we're saying is that we both are usually skeptical when it comes to bloated valuations, but that's just a general, that's not a reflection of Viori's performance. It's just what I, you know, somebody who's covered D2C for a long time, think about a lot. But yeah, I mean, you know, we'll see whether this will go through anytime soon. Of course, we'll probably have an update on that. But other than that, we can wrap up. Just a reminder, we won't have a Modern Retail Rundown episode on December 28th, of course, with the holidays and everything. But we will have some special edition episodes that look back and look forward on the 2024 and 2025.

25:21So please look out for those. And we will come back in the new year. In the meantime, rate and review us anywhere you're listening to the show. and follow us on social at Modern Retail and come back when we return in the new year. Thank you.