Rundown: Walmart and StockX deal, Nordstrom's takeover bid, Rite Aid emerges from bankruptcy

0:03Hey, everyone. Welcome back to the Modern Retail Rundown. I am Gabby Barco, Senior Reporter Reporter Modern Retail. And this week, I'm here with Editor-in-Chief Kale Guthrie-Weissman. Hey, Kale. How are you today? I'm doing great, Gabby. How are you? I'm doing good. Yeah, we are transitioning into Q4, as we call it here. I mean, I think Q3. Oh, okay. Okay. I guess I just mean end of year, which is when we kind of start to get hectic. That's true. It's true. I feel like we exited Labor Day and already, like this was a short week technically but we've been bombarded with news and ideas and things like that so the summer is officially over and we are just like driving forward we have we have a lot to do i always measure it by how many holiday stories i've already written by september so fun stuff coming up but yeah let's talk about this week's show so uh first up we're gonna talk about this new partnership that Walmart struck with StockX.

1:07Really interesting partnership there that's coming together because Walmart seems to really be betting big on sneakers, streetwear, and all that. We'll talk a little bit about that. After that, we are going to recall this story that we talked about a few months ago, which is that the Nordstrom family is bidding to buy out the company. There's been rumors of this for months now. So I think we'll finally get a sense of what's going on there and whether it will go through. And finally, speaking of another retailer going through a lot of changes, we are going to be talking about Rite Aid. You know, it's almost a year since they filed for Chapter 11, and they seem to be slowly but surely coming out of bankruptcy.

1:51So we'll go over all the changes that they've made and, you know, what the privately held company looks like now. All right. So first up, let's talk about this new partnership that Walmart has struck with StockX. As I said, you know, sneakers seems to be and collectibles and sort of rare items seem to be a big area of focus for Walmart just in the last few weeks alone. So starting next week, StockX listings will essentially be cross promoted to Walmart.com to Walmart's marketplace. And according to Walmart, it's scheduled to launch on Tuesday, I believe, with hundreds of coveted pre-verified sneakers.

2:36Some of the brands are Nike Jordan 1s, Jordan 4s, Jordan 1, Travis Scott's, New Balance, Asics, all the hip brands. What are your thoughts on this? I mean, I think marketplaces, you know, we always talk about how they're constantly shifting and booming, but Walmart's marketplace has just been going through a lot of changes this year. Yeah, we're seeing a bunch of updates right about now. There were some other updates last week or the week before about Walmart beefing up its e-commerce marketplace. Those were more focused on sellers and fulfillment. But with Walmart, it sees a major growth engine from the e-commerce marketplace, which isn't surprising, but the e-commerce marketplace has been around for a very long time.

3:20This is not something new at Walmart, but now it is really saying we have to go in and invest in it. In many ways, it is a way to, I think in most ways, to compete with Amazon. And we had a story a couple of weeks ago, which pretty much just enumerated all of the recent updates, not necessarily this one, but some other ones that maybe I'll talk about in a few minutes, that seemed to really crib the Amazon playbook in terms of how to grow an e-commerce marketplace and make it something that sellers want to invest in and create a flywheel, et cetera, et cetera. On this front with the StockX, it's really interesting because it's also kind of taking aim at other e-commerce marketplaces, I would say, like eBay has been really going towards collectibles.

4:01And so this is a way for Walmart to expand the way that people think about it in terms of the types of products they buy and what they would go online to buy. But it's also just a smart way to sort of remain in the zeitgeist because StockX has been a pretty popular place for sneakerheads, as we call them. There are some numbers that we have, which is Walmart's marketplace grew 30 % during the last four quarters. And it just shows that Walmart really wants to have more items. I think most people think of Walmart marketplace as sort of an extension of Walmart overall. So you would go there maybe to buy groceries or maybe to buy house goods that you get at Walmart, but that's not what the company wants.

4:42It wants it to be a much fuller e-commerce marketplace where you can get anything and have it delivered relatively quickly. And so this is a really interesting development to that. Yeah. And in the announcement, StockX did say that this is also going to be helping them reach this new customer base because the Walmart customer, maybe it doesn't necessarily always overlap with the StockX bidders that are watching the site all day. So that'll be also interesting. As you said, the 30 % growth in marketplace, I mean, this seems to be a trend across a lot of retailers that are trying to grow out their marketplace.

5:20But Walmart's in particular is really popular because it's starting to almost mirror, I don't want to say exactly Amazon, but it is almost getting there. As far as the type of seller that's cross-posting a lot of products, I see it all the time where if you look at something on walmart.com you realize that maybe this was the same seller that's on amazon that's posting it but then you know i think a lot of brands are also trying to take advantage of it so the idea that this is going to be this curated uh site that looks pretty differently than you know the groceries and essentials that walmart.com usually shows uh will be really interesting but maybe we could talk a little bit about the assortment that walmart is trying to build out which is, you know, it goes beyond sneakers.

6:06So this announcement actually comes just a couple weeks after Walmart announced another marketplace update with collectibles. I think you were hinting at that at the beginning. So secondhand items, premium beauty, there's like 20 brands that are going to be participating in that program. Again, this is sort of like when you see the bigger picture, it makes a lot of sense why something like StockX would be a fit there. Well, yeah, and it's really interesting. And I've been thinking about this a lot recently, where it's clear that Walmart wants its marketplace to be associated with higher end ticket goods and things that aren't what you would necessarily go to Walmart for.

6:46And so collectibles is somewhat in the same vein, not the same shopper, but a similar idea to StockX, where it's people who are looking for things that are accruing value. You know what I mean? Something that is no longer being made, but isn't pre-owned, for lack of a better word. Something along those lines. Then you have the premium beauty. And I thought this was super fascinating, where Walmart is essentially saying that it wants to sell high-end beauty products and has a bunch of brands that signed up. I think about 20. They include Beach Waver, T3. And it's like you can have a branded store on walmart.com.

7:22And like that is taking pretty much tearing out a page from Amazon where Amazon has been growing up. It's trying to get more higher end, especially beauty brands onto the marketplace. Walmart, in my opinion, kind of has an edge. I'd be interested to know your opinion about this because the reason why Amazon is working so much on the brands is that it has historically had an association where, the reason why Amazon has had difficulty with brands is because it's historically had an association with brands not being able to control their image. There could be counterfeiters. There could be unauthorized sellers.

7:53And Amazon has been trying to say, no, no, no, no, no. If you are a higher-end brand, you can sell here. You can make a branded page. Come and sell on Amazon. Walmart, by comparison, is probably an easier pill to swallow for brands to join in on. So if you're a nicer beauty brand, you have probably no problems with selling on Walmart. That's an okay thing. And now you would just get a branded thing on walmart.com. And similarly, you see brands that have never sold on Amazon, like Nike has never sold on Amazon. But now you're going to see that type of product on Walmart's marketplace with StockX.

8:29It's not necessarily new, but it is showing that it's a nicer sort of assortment of goods that differentiates it from the competitor. So that's ultimately my point. Yeah, I think the beauty aspect is really interesting, especially going into in this premium direction. It just got me thinking, actually, that this is probably pretty smart because Target has the Ulta partnership. So they've had, you know, they have a really, really robust online and in-store beauty program, both premium and drugstore, whereas Walmart is not necessarily known as a destination for that. So I think having these hip, younger brands like Solo Wave, for example, is, and I'm sure it'll be at competitive prices, will definitely, you know, give them an edge.

9:16But what are your thoughts on the collectibles? I think for the last few years we've seen, you mentioned eBay. you know there's like comic books and sports memorabilia trading cards all of these collectibles that people are really into are really taking off and going for a lot of money and so this incentive that walmart is putting out is uh there's a zero percent commission that they're taking through october 31st i think they're just trying to sort of kickstart the program there but i guess to me it feels a little bit late especially with the resale aspect um compared to some other marketplaces, but I have no doubt it will probably grow pretty quickly.

9:54Yeah, I mean, it's definitely late. And we've seen a bunch of others companies, you know, do this, I think eBay is pretty much the number one, Amazon does sell collectibles for what it's worth. Although I have spoken with sellers who sell collectibles who have had less than seller experiences, specifically with Amazon, as it relates to price matching, because I don't know, I won't go down this rabbit hole, but if you are selling a collectible, that means it's at a higher value. It means it's no longer being made. And some have said that Amazon has done price matching for the MSRP of when it was first released 15 years ago.

10:28And so Amazon is saying you can't actually sell this at a higher price when they're saying they should. But it just shows that that's not Amazon's bread and butter. That's not what Amazon is focused on, are these things that are accruing value and sort of one of a kind. But that Walmart wants to get that is interesting. It's smart. I think that that area is a big part of e-commerce that a lot of people don't talk about. People are looking for rare trading cards, memorabilia online all the time. And so this probably could grow the e-commerce business quite a bit. But I also think it's a way to sort of cement Walmart's e-commerce presence that it is doing something that isn't just about mimicking the big box retail experience.

11:10And so I think it's about warming up to these sellers, giving them no commission through October 31st and saying, hey, you should really try and sell here because A, we have a bunch of people who buy here. And B, we're trying to make this into a real, for lack of a better term, everything store like Amazon. We're trying to be something that is bigger than just what people think of as the Walmart store. So I think it's a smart move. And I would be really interested to see some data about maybe a year from now with the collectible specifically. Did that move the needle? Did that lead to an influx of new sellers?

11:43Did that lead to more people searching Walmart.com to find a comic book of some sort? But we'll see. Yeah. So this is resold at Walmart is the secondhand marketplace, which I guess is a little bit of a subdivision. So that will have 5 million items from 1 ,700 sellers, pretty decent amount to kick off this program. But the other thing I was going to say is I thought it was interesting timing that this is coming just as Amazon rebranded its own resale marketplace. Yeah, and this is something that we've been talking about. Yeah, it's so hard not to talk about them in the same sentence a lot. It's very hard, but also the rebranding of Amazon.

12:26We've looked into this and there have been very little details beyond it just has a new name. It doesn't seem like the overall program has changed. I don't get the sense, but someone, if you're listening, correct me if I'm wrong. I don't get the sense that Amazon is investing a greater deal, at least right now. Maybe we'll hear a few announcements in the future. Amazon has had a resale platform of some sort for a long time, and it just gave it a new name right now. I imagine the company will be focusing on it and adding new things down the line. But I do think in this case, Walmart might have the edge because it's not just giving it a new name or a name in general.

13:04It's adding sellers. It's adding these new programs associated with it. It seems like the Amazon one was just to remind people that they have it, and maybe they'll invest in it later on. And the resold at Walmart is expanding into a new category. Yeah. And then I think just to circle back to StockX, which is where we started. Yeah, I think these are all seem like these culturally relevant partnerships that, you know, for some, I think maybe like we said, maybe what should have happened or would have happened a few years ago. But at the same time, you know, the Walmart shopper is very loyal and, you know, they want to, if possible, buy most of their products there and get the good deals.

13:47But yeah, it sounds like it is the retailer is trying to expand beyond just value, I guess, which is kind of interesting because that is really their biggest positioning usually. Yeah. And one more just I was looking at some numbers just for StockX. It's probably a nice thing. We don't get many up-to-date business stats about StockX. I found something from 2023, so over a year ago. It said it had 12 million lifetime buyers. You know, 12 million is a lot. But Walmart.com, according to one stat that I found, has 37 million customers daily solely through Walmart.com. So that's a big difference in scale.

14:30And so that gives a lot more eyeballs to StockX. And it also means that Walmart gets to change the perception of what it's selling on its e-commerce platform. Yeah. Well, you know, I'm sure we'll see how much it's going to continue to grow in the next few quarters. It seems like it's going pretty quickly. All right. Well, let's move on to Nordstrom now. It's, you know, another set of news from them about the Nordstrom family that is making a bid to take the retailer private. it. Like we said, this is there's been whispers about this for a while. And we had a segment last March, I believe, about the family telling some banks to start reaching out to PE firms, figure out how they could pull this off.

15:13But it seems like maybe it could actually go through this time. Yeah. Do you have any of the details that maybe are giving people more hope, I guess, that it might happen? Well, I mean, a bid has been made. So that's one thing. So it's not just people associated or people with knowledge saying that they're reaching out to banks. So there's a bid been made, you know, depends on if the board accepts it, which is a big if. But here's what we know thus far. Right now, the Nordstrom family, which are, I believe, the grandchildren of the founders, if I'm not mistaken, they own about a third of the company, but it's also a public company.

15:47And they have collaborated, I guess you could say, or joined forces with a Mexican department store El Puerto de Liverpool for a$3.8 billion takeover of Nordstrom. Under their proposed thing, it would be the Nordstrom family would have 50.1 % of the business and Liverpool would have 49.9%. So almost half, but the family would have the edge in this. And so it's super interesting because you're right, we talked about this in March. And that was about A, the Nordstrom family saying, you know, hinting at them wanting to take it private to have more control to be able to make these decisions and trying to find different backers who they could work with.

16:28And they found this department store that is one of the bigger higher end department stores in Mexico. It actually already owned a stake of Nordstrom. So it's not like they're completely new to the business. But, you know, it's definitely an interesting, an interesting joining of forces in this case. Yeah. And, you know, maybe we can talk a little bit about who Liverpool is. You know, it's a higher end department store based in Mexico. You know, they're known for apparel and cosmetics and tech products. It has over 120 locations. It seems to be, you know, growing pretty well, but it's kind of hard to imagine what it's going to look like exactly, you know, this goes through.

17:13But yeah, you know, it looks like we had covered Liverpool actually previously, but any thoughts on, yeah, what this relationship is like? Yeah. So in 2022, Liverpool took a nearly 10 % stake in Nordstrom and that sent up a lot of questions of who is this company? What are they doing? And why do they want to take over Nordstrom? And at the time they were like, absolutely not. No, that wouldn't, that would, we couldn't be further from the truth. And there's a lot of speculation about why Liverpool would want to. In 2022, at least, I haven't checked more recently, but its major focus was on expanding more into Central America, I believe.

17:53And so sort of like taking over other parts of the Southern North America and Central American regions. But it's been doing well. Its 2023 full year revenue was$9.9 billion. But clearly in the back of its head was maybe we can do something with Nordstrom, which is why two years ago it decided to get this stake. What exactly it wants to do, likely it'll just be a way for it to have a better view into how a major retailer in another region is performing. They can probably learn a few things, but you never know exactly what a company of like this wants to do until you actually see them do it. So that's the big question is, like, what will Liverpool's actions be if this deal goes through and it is, you know, does own 49.9 % of Nordstrom going forward?

18:47Yeah. And maybe we should talk about how Nordstrom has been performing and what led to this move, because there's a lot of context that is needed here to show why the family feels strongly about it. Like a lot of department stores in the US, they have had issues with growth, especially in this sort of post COVID slowdown of things like apparel and fashion. The Q4 revenue was 3.8 billion slightly up from a year ago, and 2023 full revenue was 14.2 billion. Just this last month, they posted some pretty mixed results. So it kind of, I think it's just a continuation of how they've been performing in the last year or two.

19:34Yeah, I was reading an interview with an analyst just talking about this. And Nordstrom of the other department stores in the US is generally considered in a better light. And the fact that it posted revenue growth, I think, is indicative of that. But still, it's just a really tough area to be in. There are a few brighter spots for Nordstrom At its most recent earnings, digital sales grew by 6.2%. It's seeing its gross margin expanding. Still, it expects full-year revenue to either be negative 1 % or positive 1%. So essentially flat, which is not really what you want to be seeing. And so I think we're seeing the family probably has big grand plans to transform the business, whether or not that's actually possible to do.

20:20but it wants to be able to execute those plans without having to deal with the board and probably would have to would save money on fees associated with being a public company, all that jazz. So pretty much I think the family just wants more control to make sweeping changes. Yeah. And, you know, it is part of this bigger trend of department stores that are going private in the last few years. We just talked about the SACS takeover from a couple months ago. So in 2020, JCPenney also went private, for example, where a group of mall operators actually bought it out of bankruptcy. Obviously, it was a very tumultuous time in 2020.

21:02But still, it's this wave that's happening where it is becoming – I mean, we even see it with Macy's constantly trying to figure out how to grow. It's tough to run a department store chain right now. And maybe being private, I guess, takes the pressure off a little bit. Yeah, absolutely. And I mean, one thing that I think is important to know is that we group department stores into one big sort of ball of businesses that right now aren't generally doing well in the US. But each of them have their own issues for why they're not doing well. A lot of them, like Macy's, like JCPenney, is real estate related, where they're just sitting on a lot of big spaces in malls that aren't doing great.

21:43and they're not being able to attract the right audience. Nordstrom isn't quite that. And so I think the idea with Nordstrom would just be to really rethink the overall merchandising and digital strategy. And so probably when you talk about JCPenney going private and Nordstrom going private, the strategic outlook is a little bit different. But I found this quote from when in the Wall Street Journal story about this latest move with Nordstrom, they're quoting Neil Saunders, an analyst we all speak to an awful lot. But he just said, the common theme is that department stores are facing myriad issues and executives are looking for alternative ways of running the businesses.

22:22So pretty much common thread is they're all not doing very well, and they want more control to make big changes probably more quickly. Yeah, so you know, this bid from the family still needs to be approved. So but you know, even if the company does go private, I think we probably won't really see any major changes for a while. Now, these things move at glacier paces sometimes. It's still another indication that I think the leadership will definitely be shaken up at the very least. But I think the idea that the business is just not growing as fast as they would like, and they think they can maybe do better is really interesting.

23:01Yeah. All right. Well, speaking of going private, let's talk about another retailer that is going through, you know, not the same set of changes, but also some downsizing and, you know, coming out of bankruptcy, actually. So we're talking about Rite Aid, which we have covered here, you know, in the last year, they filed for chapter 11. We'll go, you know, into why that was, but it seems like there's now, you know, they're emerging with some updates for us, like new leadership, new CEO, and a lot less stores. So yeah, what are your thoughts? I mean, this has been a long time coming, drugstores as a whole not doing great.

23:44But now I will be interested to see, now that it's emerging, what exactly it will do to try and change the business. I mean, a lot of this with Rite Aid had to do with debt. Rite Aid, when it emerged from bankruptcy said that it eliminated$2 billion of total debt. Another part of this is also that it faced a lot of legal bills. It had 1 ,600 opioid lawsuits filed against it. So a lot of this was to avoid being at the end of those penalties. But there are some big executive shifts. Its CEO and quote-unquote chief restructuring officer, Jeffrey Stein, has stepped down. He's been there since 2000, so been there for a long time.

24:29And then they announced a new executive vice president and CFO, Matt Schroeder. He is now the CEO. And so, you know, you'll see what will the plan be going forward. I don't know. I'll be waiting with bated breath, I guess I'll say. Yeah. So another update is that obviously a cash injection is much needed here at Rite Aid. We've seen a lot of those reports of their merchandise due to obvious reasons, like probably not paying their vendors, have been very dry. There's a lot of empty shelves, but they did receive$2.5 billion in exit financing as they're transitioning to being privately held. The ownership, I think, is being transitioned to a select few creditors.

25:16And, you know, it looks like, according to Schroeder, this is going to be this beginning of the next phase for the company. Maybe this is a good time to talk about why Rite Aid, I think, is just generally was struggling. But it is part of this bigger issue that drugstore chains have faced, especially in this like post-COVID vaccine world where, you know, they're no longer seeing that traffic boost and just additional revenue coming in. And, you know, they all have kind of their own issues, but we're also seeing it with Walgreens and CBS to some extent. Yeah, no, I think that this has been a big question and something that we've written about in various forms, like over the last three years, really, where they sort of received a lifeline when the pandemic hit because they had a lot of essential things like COVID vaccines and masks and tests and things like that.

26:08And now they're back to being the uninteresting drugstores that they've always been. And you've seen a lot of players, Gabby, I feel like you've covered this, where they've been trying to make their assortment a little bit more interesting, getting new startups, trying to rethink especially the wellness and better for you section so that people don't think about it as I need to get some Tylenol, I'll go there and buy that. But maybe I'll buy some other products that are a little bit more interesting and have a higher value to them. But Rite Aid has not been able to do that. And so I imagine we'll hear some update about them rethinking the assortment or rethinking the overall store format.

26:46But right now, what we're hearing is just store closures. And so it's closed 131 stores in 2024. It went from 2 ,000 locations to 1 ,416 locations. It's no longer in Michigan at all. So it's left some geographies completely. And it's just pretty much trying to cut costs to stop the bleeding, I guess you could say. Yeah. And then I think, you know, as far as getting back into growth mode, that will take actually having the right assortment or just assortments in general. But yeah, what you said about the sort of wellness and more general sort of holistic health products and services that these companies are trying to offer is interesting.

27:31With Rite Aid specifically, you know, they do have a lot of the brands that, you know, these bigger chains and even like Target and Walmart are now carrying sort of like these digitally native wellness brands, things like that. But it just never really from, you know, whenever I would speak to some of the brands, it was never, Rite Aid was never like a big account or priority for them. I mean, for obvious reasons. It's also like pretty much a regional chain just compared to CVS and Walgreens. So that's understandable, too. But yeah, it always kind of seemed like this a little bit of a black sheep, I guess.