WEBVTT 00:00:00.000 --> 00:00:02.379 The smell. That is the first thing that hits 00:00:02.379 --> 00:00:05.040 me when I look at this topic. It's a very specific 00:00:05.040 --> 00:00:07.219 sensory memory. Oh, I know exactly what you're 00:00:07.219 --> 00:00:08.519 talking about. You walk through those automatic 00:00:08.519 --> 00:00:11.560 sliding doors, the blast of industrial air conditioning 00:00:11.560 --> 00:00:15.800 hits you, and you are immediately just assaulted 00:00:15.800 --> 00:00:19.320 by the scent of, what was it, cinnamon brooms? 00:00:20.699 --> 00:00:23.059 Synthetic vanilla. It was definitely potpourri. 00:00:23.140 --> 00:00:25.579 And maybe a hint of fresh cotton sheets that 00:00:25.579 --> 00:00:27.820 have been sitting in plastic packaging for... 00:00:28.350 --> 00:00:30.390 You know, six months. Yes. It's a very distinct 00:00:30.390 --> 00:00:33.810 olfactory cocktail. That's the one. Today, we 00:00:33.810 --> 00:00:36.649 are going back to a place that, for a solid two 00:00:36.649 --> 00:00:39.549 decades, really defined the suburban weekend 00:00:39.549 --> 00:00:42.130 for millions of people. I mean, if you needed 00:00:42.130 --> 00:00:45.049 a towel, a spatula, or a gadget to slice an avocado 00:00:45.049 --> 00:00:46.909 that you would absolutely never use. Oh, you 00:00:46.909 --> 00:00:49.340 had to have the avocado slicer. This was the 00:00:49.340 --> 00:00:51.619 place. We were talking about linens and things. 00:00:51.859 --> 00:00:54.140 It's a name that feels like a time capsule now, 00:00:54.240 --> 00:00:56.299 doesn't it? It just conjures up these images 00:00:56.299 --> 00:01:00.740 of beige walls and endless, endless aisles. It 00:01:00.740 --> 00:01:03.380 really does. But before we write it off as just 00:01:03.380 --> 00:01:06.219 another nostalgia trip, we have to look at the 00:01:06.219 --> 00:01:09.459 sheer scale of this operation. This wasn't just 00:01:09.459 --> 00:01:12.659 some mom -and -pop shop. At its peak, this was 00:01:12.659 --> 00:01:16.000 a retail empire. The numbers in the source material 00:01:16.000 --> 00:01:18.340 are actually staggering when you look at them. 00:01:18.359 --> 00:01:23.200 We are talking about 571 stores. 571. That is 00:01:23.200 --> 00:01:26.060 a massive footprint. They were in 47 U .S. states 00:01:26.060 --> 00:01:28.780 and six Canadian provinces. And the workforce, 00:01:29.000 --> 00:01:32.840 too. They employed over 7 ,300 people as of late 00:01:32.840 --> 00:01:36.200 2006. That is the size of a small town's population 00:01:36.200 --> 00:01:39.439 just on their payroll. Exactly. So the mission 00:01:39.439 --> 00:01:42.959 for this deep dive isn't just to, you know, reminisce 00:01:42.959 --> 00:01:45.159 about... buying shower curtains, is to figure 00:01:45.159 --> 00:01:47.680 out how something that big something that generated 00:01:47.680 --> 00:01:51.459 nearly $3 billion a year just evaporates. Well, 00:01:51.519 --> 00:01:53.340 it didn't just evaporate, though, and I think 00:01:53.340 --> 00:01:55.780 that is the key. It was dismantled. This is a 00:01:55.780 --> 00:01:58.319 classic, almost tragic case study of the American 00:01:58.319 --> 00:02:00.579 category killer. Okay, that term category killer, 00:02:00.659 --> 00:02:02.879 we're going to get into that. We will. Because 00:02:02.879 --> 00:02:05.420 you see the full life cycle here. You see the 00:02:05.420 --> 00:02:08.219 scrappy family founded beginning, the explosion 00:02:08.219 --> 00:02:10.979 into a corporate behemoth, the private equity 00:02:10.979 --> 00:02:14.520 takeover, and then this strange modern phenomenon, 00:02:14.919 --> 00:02:17.860 the zombie afterlife. That term zombie brand 00:02:17.860 --> 00:02:19.639 is something we are going to spend some time 00:02:19.639 --> 00:02:22.259 on later because it is fascinating and frankly 00:02:22.259 --> 00:02:24.719 a little dystopian. It really is. But let's start 00:02:24.719 --> 00:02:27.439 at the beginning. Because for a story that became 00:02:27.439 --> 00:02:30.460 synonymous with big box retail, the origin story 00:02:30.460 --> 00:02:34.539 is surprisingly... Well, small. It's incredibly 00:02:34.539 --> 00:02:36.939 humble. And to understand it, you have to kind 00:02:36.939 --> 00:02:39.460 of place yourself in the retail landscape of 00:02:39.460 --> 00:02:41.620 the late 1950s. It was a totally different world. 00:02:41.740 --> 00:02:44.280 Right. We're talking 1958 specifically. Exactly. 00:02:44.280 --> 00:02:46.900 So in November of 1958, you have a man named 00:02:46.900 --> 00:02:49.819 Eugene Wallace Culkin. Now, Culkin didn't wake 00:02:49.819 --> 00:02:51.919 up one day and decide to build a massive superstore. 00:02:52.060 --> 00:02:54.020 The concept of a superstore didn't really even 00:02:54.020 --> 00:02:56.280 exist in the way we think of it now. Right. He 00:02:56.280 --> 00:02:58.639 started with something called Least Linen Department. 00:02:59.139 --> 00:03:03.710 OK, pause there. Least Linen Department. I feel 00:03:03.710 --> 00:03:05.849 like we don't see this model as much anymore, 00:03:05.930 --> 00:03:08.030 or maybe we just don't notice it. How exactly 00:03:08.030 --> 00:03:11.069 did that work? It's actually a very clever, really 00:03:11.069 --> 00:03:14.430 low risk way to enter retail. Imagine a large 00:03:14.430 --> 00:03:17.800 discount chain. In this case, the source says 00:03:17.800 --> 00:03:20.000 it was a store called Great Eastern Mills in 00:03:20.000 --> 00:03:22.460 New Jersey. Great Eastern Mills. They sell everything, 00:03:22.560 --> 00:03:25.199 but they don't necessarily want to manage the 00:03:25.199 --> 00:03:27.219 inventory and the logistics for every single 00:03:27.219 --> 00:03:29.719 category. I mean, it's a huge headache to source 00:03:29.719 --> 00:03:32.819 towels and sheets if your main business is, say, 00:03:32.979 --> 00:03:36.240 dry goods or hardware. So they basically outsource 00:03:36.240 --> 00:03:39.180 the headache. Precisely. They let an outside 00:03:39.180 --> 00:03:41.979 expert, in this case Kalkin, come in and rent 00:03:41.979 --> 00:03:44.439 space. He's basically a tenant operating inside 00:03:44.439 --> 00:03:46.560 their store. A store within a store. I see that 00:03:46.560 --> 00:03:49.659 now sometimes with, like, Sephora inside a Kohl's 00:03:49.659 --> 00:03:51.500 or something. That's the modern equivalent, exactly. 00:03:51.879 --> 00:03:54.680 He rents a corner of the floor plan. He brings 00:03:54.680 --> 00:03:56.780 his own sheets, his own towels, his own staff. 00:03:57.000 --> 00:04:00.280 He pays Great Eastern Mills either a cut of the 00:04:00.280 --> 00:04:02.819 sales or a flat rent, and he keeps the profit. 00:04:02.919 --> 00:04:04.979 And he doesn't have to build a building. He doesn't 00:04:04.979 --> 00:04:06.639 have to pay for the parking lot lights or the 00:04:06.639 --> 00:04:09.599 security guard at the front door. He just sells 00:04:09.599 --> 00:04:13.300 linens. He's just selling linens. It's a parasite 00:04:13.300 --> 00:04:16.259 model, but in the best possible business sense. 00:04:16.519 --> 00:04:19.079 He's drafting off the foot traffic that the bigger 00:04:19.079 --> 00:04:21.519 store already generates. Symbiotic is probably 00:04:21.519 --> 00:04:23.879 the term they'd use in business school. Symbiotic, 00:04:23.879 --> 00:04:27.480 yes. A much kinder term. But it allowed him to 00:04:27.480 --> 00:04:30.160 test the market without this massive capital 00:04:30.160 --> 00:04:32.899 expenditure. And he did this for a long time. 00:04:33.370 --> 00:04:35.629 The source points out he established this department 00:04:35.629 --> 00:04:38.970 in 1958, but the first actual store with the 00:04:38.970 --> 00:04:41.730 name Linens and Things on the sign didn't open 00:04:41.730 --> 00:04:45.310 until August 1970. Wow, that's 12 years. That 00:04:45.310 --> 00:04:48.269 is a long incubation period. It really is. He 00:04:48.269 --> 00:04:51.089 spent over a decade perfecting his product assortment, 00:04:51.189 --> 00:04:53.629 understanding the customer, and saving up capital. 00:04:53.850 --> 00:04:55.930 And even when that first store opened in East 00:04:55.930 --> 00:04:58.050 Brunswick, New Jersey, the wording in the history 00:04:58.050 --> 00:05:00.949 is very specific. It says Great Eastern Mills 00:05:00.949 --> 00:05:03.870 opened the first store. So he was still operating 00:05:03.870 --> 00:05:06.089 under the umbrella of this larger parent company. 00:05:06.269 --> 00:05:09.529 Right. A company called Dalen Inc. And that turned 00:05:09.529 --> 00:05:12.550 out to be a really dangerous place to be because 00:05:12.550 --> 00:05:14.970 the 1970s, I mean, they were just brutal economically. 00:05:15.230 --> 00:05:17.829 We talk about inflation now, but the 70s were 00:05:17.829 --> 00:05:21.110 a graveyard for retailers. A total mess. Stagflation, 00:05:21.230 --> 00:05:24.230 high interest rates. And Dalen Inc. was one of 00:05:24.230 --> 00:05:27.829 the casualties. So in 1975, the host body dies. 00:05:28.290 --> 00:05:31.769 Dalen went bankrupt. So. This is the moment of 00:05:31.769 --> 00:05:34.329 truth for Culkin, right? His landlord, his corporate 00:05:34.329 --> 00:05:36.529 parent, essentially, is going out of business. 00:05:36.709 --> 00:05:39.629 The ship he's been sailing on for 17 years is 00:05:39.629 --> 00:05:41.269 sinking from under him. Most people would have 00:05:41.269 --> 00:05:43.410 just packed up their towels and gone home. But 00:05:43.410 --> 00:05:46.170 Culkin did something very bold. He looked at 00:05:46.170 --> 00:05:48.430 the wreckage of Dalen Inc. and saw seven locations 00:05:48.430 --> 00:05:50.829 of his concept that were actually working. He 00:05:50.829 --> 00:05:52.769 realized that while the parent company was failing, 00:05:52.970 --> 00:05:55.470 his specific linen concept was still totally 00:05:55.470 --> 00:05:57.329 viable. So he bought them out of the bankruptcy. 00:05:57.839 --> 00:06:00.579 Correct. He extracted those seven units and incorporated 00:06:00.579 --> 00:06:03.759 linens and things, ink, as a completely independent 00:06:03.759 --> 00:06:07.660 entity. This is the moment, 1975, where the company 00:06:07.660 --> 00:06:10.259 truly begins its life as we knew it. It's no 00:06:10.259 --> 00:06:12.600 longer just a department. It's a chain. I love 00:06:12.600 --> 00:06:15.420 that pivot. It's the classic Phoenix rising from 00:06:15.420 --> 00:06:17.839 the ashes moment in a business story. It really 00:06:17.839 --> 00:06:20.720 is. And once he had control, he didn't waste 00:06:20.720 --> 00:06:23.860 any time. The source says they went from those 00:06:23.860 --> 00:06:28.360 seven salvage stores in 1975 to 55 stores by 00:06:28.360 --> 00:06:31.860 1983. Which for that era is incredibly rapid 00:06:31.860 --> 00:06:34.360 scaling. You have to remember, this is all pre 00:06:34.360 --> 00:06:36.740 -internet. Scaling meant physically finding real 00:06:36.740 --> 00:06:39.120 estate, negotiating leases, setting up distribution, 00:06:39.480 --> 00:06:41.819 physically stocking warehouses, hiring managers. 00:06:42.100 --> 00:06:44.519 A huge logistical upgrade. It's massive. So going 00:06:44.519 --> 00:06:47.300 from 7 to 55 in eight years is incredibly aggressive 00:06:47.300 --> 00:06:50.060 growth. It just proves that the core concept 00:06:50.060 --> 00:06:52.779 specialty home goods at a discount was really 00:06:52.779 --> 00:06:54.959 resonating with the American public. But 1983 00:06:54.959 --> 00:06:57.220 marks the end of what you could call the founder 00:06:57.220 --> 00:06:59.540 era, doesn't it? It does. And this is the first 00:06:59.540 --> 00:07:01.779 major lesson in our case study, the liquidity 00:07:01.779 --> 00:07:11.870 event. Kalkin builds this successful reach. Melville 00:07:11.870 --> 00:07:16.009 Corporation. That just sounds like one of those 00:07:16.009 --> 00:07:18.649 faceless conglomerates that owns everything from, 00:07:18.790 --> 00:07:21.709 I don't know, shoe stores to pharmacies. And 00:07:21.709 --> 00:07:23.939 you're not wrong. They were a massive player 00:07:23.939 --> 00:07:25.779 at the time. To give you some context, they owned 00:07:25.779 --> 00:07:28.500 CVS. They owned Marshalls at one point, KB Toys. 00:07:28.579 --> 00:07:31.379 They were a huge portfolio holder. So for Lenin's 00:07:31.379 --> 00:07:33.360 and things, this meant access to some really 00:07:33.360 --> 00:07:36.339 deep pockets. Exactly. They were no longer just 00:07:36.339 --> 00:07:38.819 a successful independent chain. They were now 00:07:38.819 --> 00:07:41.579 a corporate asset with serious capital behind 00:07:41.579 --> 00:07:44.019 them, ready to be scaled up on a national level. 00:07:44.220 --> 00:07:46.879 And that capital is what fueled the next phase. 00:07:47.199 --> 00:07:49.639 This is the era I really remember, the Superstore 00:07:49.639 --> 00:07:52.720 Wars. The late 80s and the 90s, the golden era 00:07:52.720 --> 00:07:55.319 of the category killer. Can we define that term 00:07:55.319 --> 00:07:58.019 category killer? It sounds so violent. It is 00:07:58.019 --> 00:08:00.639 violent, economically speaking. A category killer 00:08:00.639 --> 00:08:03.899 is a specialty retailer that focuses on one single 00:08:03.899 --> 00:08:07.519 category of goods like tools for toys are us, 00:08:07.639 --> 00:08:10.459 electronics for Best Buy, or in this case, home 00:08:10.459 --> 00:08:13.180 goods for linens and things. And they offer such 00:08:13.180 --> 00:08:15.839 a massive selection and such deep inventory at 00:08:15.839 --> 00:08:18.139 low prices that no small independent store can 00:08:18.139 --> 00:08:20.720 possibly compete. They just overwhelm them. They 00:08:20.720 --> 00:08:23.720 kill the category for everyone else. Your local 00:08:23.720 --> 00:08:26.720 mom and pop shop on Main Street might have, you 00:08:26.720 --> 00:08:28.879 know, three types of toasters. You walk into 00:08:28.879 --> 00:08:30.879 Linens and Things and they had an entire aisle 00:08:30.879 --> 00:08:33.620 of toasters, every brand, every color. You go 00:08:33.620 --> 00:08:36.899 there because you know they will have what you're 00:08:36.899 --> 00:08:39.360 looking for. It becomes a destination. It does. 00:08:39.480 --> 00:08:41.700 And the architect of this phase for Linens and 00:08:41.700 --> 00:08:44.820 Things was a guy named Norman Axelrod. He became 00:08:44.820 --> 00:08:48.419 CEO in 1989. And he is the one who really pushed 00:08:48.419 --> 00:08:51.419 the big box superstore format that we all remember. 00:08:51.639 --> 00:08:53.860 This is when they moved out of the smaller mall 00:08:53.860 --> 00:08:56.740 stores or strip centers and into those giant 00:08:56.740 --> 00:09:00.519 standalone boxes with the ridiculously high ceilings. 00:09:00.519 --> 00:09:03.620 Yes. The strategy was destination shopping. They 00:09:03.620 --> 00:09:05.220 didn't need to be in the mall anymore. They were 00:09:05.220 --> 00:09:07.039 the reason you got in your car and left the house. 00:09:07.179 --> 00:09:09.149 But they weren't the only ones doing this. You 00:09:09.149 --> 00:09:11.149 absolutely cannot tell this story without mentioning 00:09:11.149 --> 00:09:13.389 the other guy, the one with the blue logo. Bed 00:09:13.389 --> 00:09:15.649 Bath & Beyond. The arch nemesis. They were the 00:09:15.649 --> 00:09:18.809 Coke and Pepsi of home goods, no question. And 00:09:18.809 --> 00:09:21.750 the source explicitly mentions that they were 00:09:21.750 --> 00:09:25.389 locked in a race for locations. This was a full 00:09:25.389 --> 00:09:28.590 -on land grab. It's true. If you drive through 00:09:28.590 --> 00:09:31.870 suburban America, even today, you will often 00:09:31.870 --> 00:09:33.789 see them right across the street from each other 00:09:33.789 --> 00:09:36.720 in the same power center. That was not an accident. 00:09:36.879 --> 00:09:39.320 Not at all. They were fighting tooth and nail 00:09:39.320 --> 00:09:41.940 for the same customer base. Usually that upper 00:09:41.940 --> 00:09:44.059 middle class suburban night who was decorating 00:09:44.059 --> 00:09:46.820 a new home or, you know, setting up a wedding 00:09:46.820 --> 00:09:49.039 registry. It brings up an interesting question 00:09:49.039 --> 00:09:51.799 about differentiation, though, because to me 00:09:51.799 --> 00:09:55.049 as a shopper, they felt. almost identical inside. 00:09:55.389 --> 00:09:57.750 Did the source highlight any real differences 00:09:57.750 --> 00:10:00.149 in how they operated or how they tried to position 00:10:00.149 --> 00:10:02.909 themselves? It's subtle, but yes. Bed Bath & 00:10:02.909 --> 00:10:05.490 Beyond became famous, almost infamous, for their 00:10:05.490 --> 00:10:08.110 coupon strategy. The big blue postcard. The big 00:10:08.110 --> 00:10:10.789 blue 20 % off coupon that never expired. People 00:10:10.789 --> 00:10:12.830 hoarded them in their glove compartment. My mom 00:10:12.830 --> 00:10:14.950 had a stack of them. Everyone's mom had a stack. 00:10:15.250 --> 00:10:17.549 Linens and things, especially in the later years 00:10:17.549 --> 00:10:20.470 under Axelrod, tried to focus more on an everyday 00:10:20.470 --> 00:10:23.590 low price model. That's the Walmart model, basically. 00:10:23.769 --> 00:10:26.190 It is. The idea is you don't need a coupon to 00:10:26.190 --> 00:10:28.309 get a good deal here. We're just always offering 00:10:28.309 --> 00:10:31.009 a fair price. They also tried to position themselves 00:10:31.009 --> 00:10:34.169 as having slightly more high end curated brands. 00:10:34.429 --> 00:10:37.269 But as we'll see, sticking to that strategy gets 00:10:37.269 --> 00:10:39.950 really difficult when you have shareholders breathing 00:10:39.950 --> 00:10:41.889 down your neck. And speaking of shareholders, 00:10:42.169 --> 00:10:46.539 that brings us to 1996. The IPO. The initial 00:10:46.539 --> 00:10:49.519 public offering. Melville Corporation, the parent 00:10:49.519 --> 00:10:52.279 company, reorganized. It became CVS Corporation, 00:10:52.700 --> 00:10:55.360 and they decided to spin off linens and things 00:10:55.360 --> 00:10:58.220 as its own independent, publicly traded company. 00:10:58.440 --> 00:11:00.379 Which means now they have to answer to Wall Street. 00:11:00.679 --> 00:11:02.500 They have quarterly earnings calls. And that 00:11:02.500 --> 00:11:05.620 relentless, insatiable demand for growth. You 00:11:05.620 --> 00:11:07.639 can't just be profitable. You have to be more 00:11:07.639 --> 00:11:09.940 profitable than you were three months ago. The 00:11:09.940 --> 00:11:12.019 stock market does not like a flat line, even 00:11:12.019 --> 00:11:14.200 if it's a profitable flat line. And for a while, 00:11:14.200 --> 00:11:15.940 they really delivered on that. I mean, let's 00:11:15.940 --> 00:11:18.200 look at the peak. The source cites the numbers 00:11:18.200 --> 00:11:20.539 from 2005, which was really their zenith. The 00:11:20.539 --> 00:11:23.480 peak performance year. In 2005, revenue hit $2 00:11:23.480 --> 00:11:29.340 .7 billion. $2 .7 billion. That is a lot of shower 00:11:29.340 --> 00:11:32.200 curtains and bath mats. It is a massive volume 00:11:32.200 --> 00:11:34.720 of goods, and the source defines their business 00:11:34.720 --> 00:11:37.559 strategy very clearly at this point. They wanted 00:11:37.559 --> 00:11:40.500 to offer a, quote, high -quality, brand -name 00:11:40.500 --> 00:11:43.799 home furnishings at exceptional everyday values. 00:11:44.120 --> 00:11:47.000 There's that key phrase again, everyday values. 00:11:47.379 --> 00:11:50.620 It implies a strategy of consistency, not relying 00:11:50.620 --> 00:11:53.059 on sales gimmicks, but being a reliable place 00:11:53.059 --> 00:11:55.629 for good value. And the other part of the strategy 00:11:55.629 --> 00:11:58.289 was maintaining low operating costs. So, you 00:11:58.289 --> 00:12:01.049 know, run a lean and mean operation, sell billions 00:12:01.049 --> 00:12:03.230 of dollars of goods. It seemed to be working 00:12:03.230 --> 00:12:06.110 perfectly. If you froze time in 2005, you'd say 00:12:06.110 --> 00:12:08.190 this is a bulletproof business. They had fought 00:12:08.190 --> 00:12:10.590 the superstore wars. They had a huge market share. 00:12:10.690 --> 00:12:13.070 It looked like they'd won. But then comes 2006. 00:12:13.350 --> 00:12:15.789 And this is section three of our story, the private 00:12:15.789 --> 00:12:18.289 equity pivot. This feels like the moment where 00:12:18.289 --> 00:12:21.049 the music in the movie changes from a major key 00:12:21.049 --> 00:12:24.870 to a very ominous minor key. It absolutely is 00:12:24.870 --> 00:12:27.690 the turning point. In February 2006, the company 00:12:27.690 --> 00:12:30.049 is acquired by Apollo Global Management. Apollo 00:12:30.049 --> 00:12:32.429 Global Management. That sounds serious. They're 00:12:32.429 --> 00:12:34.570 one of the heavyweights. They are. One of the 00:12:34.570 --> 00:12:37.240 biggest names in private equity. And the price 00:12:37.240 --> 00:12:42.179 tag for this deal was $1 .3 billion. So this 00:12:42.179 --> 00:12:44.779 is a fundamental structural change for the company. 00:12:44.919 --> 00:12:47.779 They go from being a public company where you 00:12:47.779 --> 00:12:50.200 or I could look up their stock price every day 00:12:50.200 --> 00:12:54.500 to a private owned business, specifically a limited 00:12:54.500 --> 00:12:56.980 partnership. OK, we need to break this down for 00:12:56.980 --> 00:12:59.379 the listener because you hear the term private 00:12:59.379 --> 00:13:02.059 equity and it can just sound like jargon. What 00:13:02.059 --> 00:13:03.980 does this actually mean for the store on the 00:13:03.980 --> 00:13:07.100 ground? When a firm like Apollo buys a company 00:13:07.100 --> 00:13:09.779 like Linens and things, they aren't usually buying 00:13:09.779 --> 00:13:11.500 it with a suitcase full of cash they have lying 00:13:11.500 --> 00:13:14.360 around, right? Rarely, if ever. This is usually 00:13:14.360 --> 00:13:16.679 done through a financial maneuver called a leveraged 00:13:16.679 --> 00:13:19.500 buyout, or an LBO. Can you explain that like 00:13:19.500 --> 00:13:22.720 I'm 5? Or maybe like I'm 12? I'll try. Imagine 00:13:22.720 --> 00:13:24.440 you want to buy a house that costs a million 00:13:24.440 --> 00:13:27.299 dollars. You only have $100 ,000 in cash, so 00:13:27.299 --> 00:13:29.539 you go to a bank and you borrow the other $900 00:13:29.539 --> 00:13:32.019 ,000. You buy the house. Okay, simple enough. 00:13:32.159 --> 00:13:35.149 But here's the trick. In a corporate LBO, you 00:13:35.149 --> 00:13:38.330 don't pay that $900 ,000 mortgage from your own 00:13:38.330 --> 00:13:41.470 salary. You make the house pay the mortgage. 00:13:41.710 --> 00:13:45.629 So the company, Linens and Things, suddenly ends 00:13:45.629 --> 00:13:47.570 up on the hook for the massive debt that was 00:13:47.570 --> 00:13:50.570 just used to buy it. In many cases, yes. That's 00:13:50.570 --> 00:13:53.110 the burden the source refers to later on. The 00:13:53.110 --> 00:13:55.049 debt from the acquisition is placed onto the 00:13:55.049 --> 00:13:57.919 company's own balance sheet. Suddenly, Linens 00:13:57.919 --> 00:14:00.120 and Things isn't just trying to sell enough towels 00:14:00.120 --> 00:14:02.460 to pay for the lights and the staff and the inventory. 00:14:02.940 --> 00:14:05.419 They have to sell enough towels to service this 00:14:05.419 --> 00:14:08.159 massive new interest payment every single month. 00:14:08.240 --> 00:14:11.309 That seems... Incredibly risky. It works if the 00:14:11.309 --> 00:14:14.049 economy keeps booming. It works if you can find 00:14:14.049 --> 00:14:16.470 new ways to cut costs and increase efficiency 00:14:16.470 --> 00:14:19.370 to generate more cash. But it leaves you with 00:14:19.370 --> 00:14:22.269 absolutely zero margin for error. It's like driving 00:14:22.269 --> 00:14:25.070 a race car at 200 miles per hour. If the track 00:14:25.070 --> 00:14:26.929 is perfectly straight and smooth, you're fine. 00:14:27.190 --> 00:14:29.769 But if there is one bump in the road... You crash. 00:14:29.889 --> 00:14:31.690 And we know some bumps who are coming in the 00:14:31.690 --> 00:14:34.570 economy. But even before that, you see an immediate 00:14:34.570 --> 00:14:37.710 leadership shakeup. Right. Norman Axelrod, the 00:14:37.710 --> 00:14:39.509 guy who built the Superstore empire for over 00:14:39.509 --> 00:14:42.710 a decade, leaves. He's out. And in comes a new 00:14:42.710 --> 00:14:46.940 team. Robert or Bob DeNicola. As CEO. You also 00:14:46.940 --> 00:14:50.279 have F. David Coder as president and Omer Fancy 00:14:50.279 --> 00:14:53.620 as EVP of marketing. New team, new playbook. 00:14:53.740 --> 00:14:56.240 And the source highlights a very, very specific 00:14:56.240 --> 00:14:59.360 change in strategy under this new Apollo ownership. 00:14:59.580 --> 00:15:01.899 They moved away from that everyday low price 00:15:01.899 --> 00:15:04.980 model that we just talked about. Yes. They pivoted 00:15:04.980 --> 00:15:08.440 to, and I'm quoting here. splashy clearance sales 00:15:08.440 --> 00:15:11.220 and product promotions. Okay, but why? If the 00:15:11.220 --> 00:15:13.899 other model was so successful for so long, why 00:15:13.899 --> 00:15:16.019 change it? I think it comes down to one word. 00:15:16.600 --> 00:15:19.340 Cash. When you have a massive debt payment due 00:15:19.340 --> 00:15:22.379 every quarter, you need cash now. And splashy 00:15:22.379 --> 00:15:24.639 clearance sales are a great way to drive a quick 00:15:24.639 --> 00:15:26.639 burst of revenue. It's like a sugar rush for 00:15:26.639 --> 00:15:28.669 the balance sheet. But it's a dangerous game. 00:15:28.769 --> 00:15:31.009 You get that short term spike in sales. But in 00:15:31.009 --> 00:15:32.870 the long term, you train your customers to never, 00:15:32.909 --> 00:15:35.169 ever pay full price again. They just wait for 00:15:35.169 --> 00:15:38.009 the next 50 percent off everything sale. It completely 00:15:38.009 --> 00:15:41.190 erodes the brand's perception of value. Instead 00:15:41.190 --> 00:15:43.470 of being a place for high quality everyday values, 00:15:43.769 --> 00:15:46.389 it becomes a place for cheap stuff that's on 00:15:46.389 --> 00:15:49.529 sale right now. It's a fundamental shift. So 00:15:49.529 --> 00:15:52.370 we have new owners, a new CEO, a new strategy 00:15:52.370 --> 00:15:55.149 and a mountain of new debt. Let's fast forward 00:15:55.149 --> 00:15:58.059 just a year and a half. We are now in late 2007. 00:15:58.480 --> 00:16:01.440 This is Section 4 of the outline, the financial 00:16:01.440 --> 00:16:03.919 unraveling. We have a real snapshot here from 00:16:03.919 --> 00:16:07.740 their SEC filing the form 10Q for the quarter 00:16:07.740 --> 00:16:10.919 that ended on September 29, 2007. This document 00:16:10.919 --> 00:16:12.960 is like a health checkup for the company right 00:16:12.960 --> 00:16:15.269 before the illness becomes terminal. OK, so what 00:16:15.269 --> 00:16:17.110 did the numbers look like? Well, net sales were 00:16:17.110 --> 00:16:21.289 $666 .8 million. Now, interestingly, that was 00:16:21.289 --> 00:16:23.029 actually up slightly from the previous year, 00:16:23.110 --> 00:16:26.350 which was $658 .2 million. OK, so sales are up. 00:16:26.370 --> 00:16:28.049 On the surface, that sounds good, right? If I'm 00:16:28.049 --> 00:16:29.870 a casual observer, I see the line going up and 00:16:29.870 --> 00:16:32.620 I think things are OK. You would think so. But 00:16:32.620 --> 00:16:34.139 this is where you have to look behind the headline 00:16:34.139 --> 00:16:36.399 number. You have to look at the why. And the 00:16:36.399 --> 00:16:38.519 expert analysis, which the source of material 00:16:38.519 --> 00:16:42.179 includes, clarifies that sales only went up because 00:16:42.179 --> 00:16:44.039 they had opened new stores in that time. Ah, 00:16:44.220 --> 00:16:46.399 I see. So the total amount of money coming in 00:16:46.399 --> 00:16:48.559 is bigger, but it doesn't mean the individual 00:16:48.559 --> 00:16:51.500 stores are actually healthy. Exactly. It's artificial 00:16:51.500 --> 00:16:55.120 growth. And that is where the key metric, contrable 00:16:55.120 --> 00:16:57.600 store sales, comes in. For the stores that were 00:16:57.600 --> 00:17:00.220 open for at least a year, that number actually 00:17:00.220 --> 00:17:03.039 declined. So the existing stores were making 00:17:03.039 --> 00:17:05.660 less money than they did the year before. That's 00:17:05.660 --> 00:17:07.319 the real health indicator. That's the indicator. 00:17:07.539 --> 00:17:09.839 And here is the really concerning part from that 00:17:09.839 --> 00:17:13.480 report. The source explicitly attributes that 00:17:13.480 --> 00:17:16.640 decline to fewer customer transactions. Ouch. 00:17:16.720 --> 00:17:18.779 People just weren't walking in the doors often. 00:17:19.000 --> 00:17:21.660 Fewer people were coming in. Now, the average 00:17:21.660 --> 00:17:23.960 transaction value did increase a little bit, 00:17:24.019 --> 00:17:26.299 meaning the people who did come in spent a bit 00:17:26.299 --> 00:17:27.660 more. Maybe they were buying more because of 00:17:27.660 --> 00:17:30.680 those splashy sales. But you cannot sustain a 00:17:30.680 --> 00:17:33.359 retail business, especially a category killer 00:17:33.359 --> 00:17:36.460 that relies on huge volume if your foot traffic 00:17:36.460 --> 00:17:38.920 is dropping off a cliff. That's a five alarm 00:17:38.920 --> 00:17:41.400 fire. And meanwhile, while the sales are getting 00:17:41.400 --> 00:17:44.950 shaky. The losses are just piling up. This is 00:17:44.950 --> 00:17:47.609 where that debt burden we discussed becomes undeniable. 00:17:47.730 --> 00:17:50.809 The source says it plainly. The company was burdened 00:17:50.809 --> 00:17:54.069 with debt after private equity buyouts. Let's 00:17:54.069 --> 00:17:56.269 look at the specific loss numbers for that one 00:17:56.269 --> 00:17:58.750 quarter, the quarter ending in September 2007. 00:17:59.130 --> 00:18:03.529 The operating loss was $56 .6 million. The year 00:18:03.529 --> 00:18:06.319 before, in the same quarter, It was only a $17 00:18:06.319 --> 00:18:10.420 .9 million loss. Wow. That is a huge jump in 00:18:10.420 --> 00:18:12.759 the operating loss. It's massive. And then when 00:18:12.759 --> 00:18:14.279 you look at the net loss, which is the bottom 00:18:14.279 --> 00:18:16.400 line after you factor in interest payments on 00:18:16.400 --> 00:18:20.200 that debt and taxes, it was $79 .9 million lost 00:18:20.200 --> 00:18:23.789 in just three months. compared to 27 .4 million 00:18:23.789 --> 00:18:26.390 lost the prior year. So the loss is nearly tripled 00:18:26.390 --> 00:18:28.710 in one year. Tripled. When you see a trend line 00:18:28.710 --> 00:18:30.650 like that, losses accelerating while your core 00:18:30.650 --> 00:18:33.130 customer traffic is declining, it is a flashing 00:18:33.130 --> 00:18:34.809 red light on the dashboard. They were burning 00:18:34.809 --> 00:18:36.930 cash way faster than they could possibly bring 00:18:36.930 --> 00:18:40.009 it in. And that brings us to 2008, the year of 00:18:40.009 --> 00:18:42.589 the collapse. And it really feels like it happened 00:18:42.589 --> 00:18:46.009 incredibly fast. It did. The unraveling was just 00:18:46.009 --> 00:18:49.529 rapid. Section 5 of our deep dive starts with 00:18:49.529 --> 00:18:52.049 the first public warning signs in April of 2008. 00:18:52.609 --> 00:18:56.049 The New York Post reported rumors that Linens 00:18:56.049 --> 00:18:58.089 and Things was trying to sell off its Canadian 00:18:58.089 --> 00:19:00.769 division. And from what I understand, the Canadian 00:19:00.769 --> 00:19:03.450 division was actually pretty profitable. It was. 00:19:03.650 --> 00:19:06.130 That's the irony. In a lot of these cross -border 00:19:06.130 --> 00:19:08.869 retail bankruptcies, the Canadian arms are actually 00:19:08.869 --> 00:19:11.309 healthier. The competition landscape is different 00:19:11.309 --> 00:19:13.369 up there. So they were trying to sell off the 00:19:13.369 --> 00:19:15.549 one healthy part of the business to save the 00:19:15.549 --> 00:19:18.730 rest. It seemed so. But the company, officially, 00:19:18.970 --> 00:19:21.750 refused to confirm the sale rumors. They would 00:19:21.750 --> 00:19:23.690 only admit that they had hired an advisor to 00:19:23.690 --> 00:19:26.930 look into strategic alternatives. Strategic alternatives. 00:19:27.349 --> 00:19:29.650 That is the most notorious piece of corporate 00:19:29.650 --> 00:19:32.750 jargon. It's code for help. We are drowning and 00:19:32.750 --> 00:19:34.849 looking for any lifeline we can find. Pretty 00:19:34.849 --> 00:19:36.890 much, yes. It means they're looking to sell, 00:19:37.069 --> 00:19:39.710 find a merger partner, anything to avoid the 00:19:39.710 --> 00:19:42.450 inevitable. And they didn't find a solution fast 00:19:42.450 --> 00:19:46.009 enough. The timeline here is brutal. Just a few 00:19:46.009 --> 00:19:51.049 weeks later, May 2, 2008. The Chapter 11 bankruptcy 00:19:51.049 --> 00:19:54.009 filing. And the immediate impact of that filing 00:19:54.009 --> 00:19:57.349 was closing 120 stores. Just like that. That's 00:19:57.349 --> 00:20:00.630 roughly 20 % of their entire fleet gone overnight. 00:20:00.970 --> 00:20:02.750 Now, I want to clarify something for the listener 00:20:02.750 --> 00:20:04.869 because it's an important distinction. Chapter 00:20:04.869 --> 00:20:06.990 11 doesn't always mean the end of the road, right? 00:20:07.150 --> 00:20:08.990 That's a great point. It's not liquidation. Not 00:20:08.990 --> 00:20:11.690 yet. Right. Airlines file for Chapter 11 all 00:20:11.690 --> 00:20:13.890 the time and keep flying. It's a reorganization. 00:20:14.309 --> 00:20:16.769 The goal is to hit pause on your debt payments, 00:20:17.069 --> 00:20:19.250 renegotiate with your creditors, and hopefully 00:20:19.250 --> 00:20:21.390 come out leaner and stronger on the other side. 00:20:21.589 --> 00:20:24.809 And they really, really try to do that. In August 00:20:24.809 --> 00:20:27.950 of 2008, they devised a plan to emerge from bankruptcy. 00:20:28.710 --> 00:20:31.069 It's clear that the management team at this point 00:20:31.069 --> 00:20:33.410 realized that the Apollo strategy wasn't working. 00:20:33.589 --> 00:20:36.269 The splashy sales strategy. Exactly. They wanted 00:20:36.269 --> 00:20:38.589 to reverse that entirely. The plan was to go. 00:20:38.990 --> 00:20:41.130 Back to basics. It sounds like a corporate confession. 00:20:41.269 --> 00:20:43.210 OK, we messed up. Let's go back to what actually 00:20:43.210 --> 00:20:46.150 worked in 2005. That's exactly what it was. They 00:20:46.150 --> 00:20:48.829 wanted to stop the constant clearance sales and 00:20:48.829 --> 00:20:51.569 return to the everyday low price model that had 00:20:51.569 --> 00:20:53.750 built the company. They also wanted to improve 00:20:53.750 --> 00:20:56.990 the quality of their merchandise. And this is 00:20:56.990 --> 00:21:00.410 a crucial detail. Keep the shelves properly stocked. 00:21:00.640 --> 00:21:02.599 Which implies that during the financial trouble, 00:21:02.720 --> 00:21:04.440 they were having problems paying their suppliers, 00:21:04.539 --> 00:21:06.920 so the shelves were getting empty. And that is 00:21:06.920 --> 00:21:09.460 a death spiral in retail. It's the absolute worst 00:21:09.460 --> 00:21:12.319 thing. A customer walks in, sees empty shelves, 00:21:12.440 --> 00:21:14.099 and they don't just not buy something that day. 00:21:14.160 --> 00:21:15.980 They don't come back next time. So they tried 00:21:15.980 --> 00:21:18.720 to undo the damage of the last two years, but 00:21:18.720 --> 00:21:21.519 the timing was just catastrophic. As I noted 00:21:21.519 --> 00:21:24.490 in the intro. It feels like it was too little, 00:21:24.509 --> 00:21:27.509 way too late. It was. You simply cannot pivot 00:21:27.509 --> 00:21:30.069 a ship that large that quickly when you are already 00:21:30.069 --> 00:21:31.769 in bankruptcy court. And you have to consider 00:21:31.769 --> 00:21:34.509 the broader context. This is August 2008. The 00:21:34.509 --> 00:21:36.750 global financial crisis is knocking on the door. 00:21:36.849 --> 00:21:39.250 Hard. Lehman Brothers is about to collapse in 00:21:39.250 --> 00:21:42.289 a few weeks. The entire global economy is on 00:21:42.289 --> 00:21:44.950 the verge of crashing. Credit markets were completely 00:21:44.950 --> 00:21:48.509 frozen. In a normal economy, maybe, and it's 00:21:48.509 --> 00:21:50.910 a big maybe, someone lends them the money they 00:21:50.910 --> 00:21:54.210 need to restart. But in late 2008, there was 00:21:54.210 --> 00:21:56.609 no money available to float a struggling retailer. 00:21:57.210 --> 00:22:00.150 No one was taking that risk. And so the final 00:22:00.150 --> 00:22:04.559 blow comes in October. October 7, 2008. Bloomberg 00:22:04.559 --> 00:22:06.519 News reports they've asked the bankruptcy court 00:22:06.519 --> 00:22:08.619 for permission to auction off the remaining stores. 00:22:08.940 --> 00:22:10.960 This is the moment they give up on reorganization. 00:22:11.160 --> 00:22:13.859 This is the pivot to liquidation. And then just 00:22:13.859 --> 00:22:16.440 a week later, on October 14th, the official sale 00:22:16.440 --> 00:22:19.140 to asset recovery specialists. That's a nice 00:22:19.140 --> 00:22:21.539 term for liquidators. The guys who come in and 00:22:21.539 --> 00:22:23.700 sell everything off down to the shelves in the 00:22:23.700 --> 00:22:26.400 cash registers. And on October 17, 2008, the 00:22:26.400 --> 00:22:29.299 signs go up in the windows. Those big, ugly yellow 00:22:29.299 --> 00:22:32.269 and red signs. Going out of business. Everything 00:22:32.269 --> 00:22:35.009 must go. It's such a sad sight in any retail 00:22:35.009 --> 00:22:37.529 landscape. It marked the definitive end of the 00:22:37.529 --> 00:22:40.289 brick -and -mortar era for the company. The final 00:22:40.289 --> 00:22:43.130 sales concluded on December 28, 2008. Right after 00:22:43.130 --> 00:22:45.250 Christmas. So they got one last holiday season 00:22:45.250 --> 00:22:47.210 of liquidation sales, and then the doors were 00:22:47.210 --> 00:22:50.089 locked for good. Now, before we get to the really 00:22:50.089 --> 00:22:52.289 strange zombie part of the story, the company's 00:22:52.289 --> 00:22:56.170 afterlife, there is this really weird, almost 00:22:56.170 --> 00:22:58.829 poetic cinematic interlude that I found in the 00:22:58.829 --> 00:23:01.400 source material. Just too good not to mention. 00:23:01.539 --> 00:23:02.920 I know exactly what you're talking about. It's 00:23:02.920 --> 00:23:05.819 the Wes Anderson connection. Yes. Who would have 00:23:05.819 --> 00:23:08.599 thought that a bankrupt Linens and Things would 00:23:08.599 --> 00:23:11.339 become a footnote in the filmography of Wes Anderson? 00:23:11.579 --> 00:23:14.460 It's a truly fascinating detail. So this is in 00:23:14.460 --> 00:23:16.940 2011, a few years after all the stores have closed 00:23:16.940 --> 00:23:19.940 and are sitting empty. There was a vacant Linens 00:23:19.940 --> 00:23:21.940 and Things store in Middletown, Rhode Island. 00:23:22.019 --> 00:23:24.440 Just a big, empty concrete box. You can just 00:23:24.440 --> 00:23:26.660 picture it. Probably still has the faded outline 00:23:26.660 --> 00:23:28.890 of the sign on the building. And Wes Anderson, 00:23:29.210 --> 00:23:31.930 the director known for his incredibly stylized, 00:23:31.970 --> 00:23:35.250 whimsical, handcrafted aesthetic, used that empty 00:23:35.250 --> 00:23:38.029 store to construct and film a bunch of the interior 00:23:38.029 --> 00:23:41.529 sets for his movie Moonrise Kingdom. That is 00:23:41.529 --> 00:23:44.230 just wild to imagine. Inside this hollowed out 00:23:44.230 --> 00:23:47.210 shell of corporate retail, of mass produced goods, 00:23:47.430 --> 00:23:50.430 they are in there building these intricate, quirky, 00:23:50.630 --> 00:23:53.410 beautiful little sets. It really is a poetic 00:23:53.410 --> 00:23:56.359 image, isn't it? The ultimate symbol of mass 00:23:56.359 --> 00:23:59.720 market consumerism emptied out and then temporarily 00:23:59.720 --> 00:24:02.140 filled with this very artistic, very specific 00:24:02.140 --> 00:24:05.380 world of a film. It's a strange and wonderful 00:24:05.380 --> 00:24:08.259 little footnote in the company's history, like 00:24:08.259 --> 00:24:10.400 a flower growing in a crack in the parking lot. 00:24:10.539 --> 00:24:13.160 I love that. But OK, back to the business side 00:24:13.160 --> 00:24:16.099 of things. The stores are closed. The movie sets 00:24:16.099 --> 00:24:19.009 are packed up and gone. At this point, you would 00:24:19.009 --> 00:24:21.250 think Linens and Things is dead and buried. But 00:24:21.250 --> 00:24:23.950 in the digital age, brands rarely stay dead. 00:24:24.269 --> 00:24:28.630 They just become, well, undead. And that brings 00:24:28.630 --> 00:24:32.569 us to Section 7, the zombie brand. This phenomenon 00:24:32.569 --> 00:24:34.930 is so interesting. The physical business failed. 00:24:35.069 --> 00:24:37.390 The stores failed. The logistics failed. The 00:24:37.390 --> 00:24:40.009 debt structure failed. But the brand name, the 00:24:40.009 --> 00:24:42.670 two words linens and things, that still had value 00:24:42.670 --> 00:24:44.650 in people's minds. People knew it. They trusted 00:24:44.650 --> 00:24:47.029 it. Exactly. So even though the stores were gone, 00:24:47.150 --> 00:24:48.750 the intellectual property was worth something 00:24:48.750 --> 00:24:50.630 and someone was going to buy it. And it happened 00:24:50.630 --> 00:24:53.509 practically immediately. In February 2009, while 00:24:53.509 --> 00:24:55.109 the physical stores were still empty and dark, 00:24:55.309 --> 00:24:59.099 the website LNT .com was relaunched. Right. A 00:24:59.099 --> 00:25:01.319 new ownership group took over just the e -commerce 00:25:01.319 --> 00:25:03.819 assets. They continue to focus on housewares. 00:25:04.000 --> 00:25:06.940 The idea is simple. Capture all the residual 00:25:06.940 --> 00:25:09.839 traffic of people who are still typing linens 00:25:09.839 --> 00:25:12.980 and things into Google, looking for the store 00:25:12.980 --> 00:25:15.059 they used to shop at. So if I went to that website 00:25:15.059 --> 00:25:18.180 in 2009, I wasn't buying from the same company 00:25:18.180 --> 00:25:20.460 that went bankrupt. Not at all. You were buying 00:25:20.460 --> 00:25:22.940 from a completely different entity that had simply 00:25:22.940 --> 00:25:25.410 purchased the intellectual property. They bought 00:25:25.410 --> 00:25:28.109 the logo, the customer email list, and the domain 00:25:28.109 --> 00:25:30.309 name. It's like they're wearing the old company's 00:25:30.309 --> 00:25:33.029 skin. That is a gruesome but incredibly accurate 00:25:33.029 --> 00:25:36.430 analogy. Skin suit? And then from there, the 00:25:36.430 --> 00:25:38.230 brand just gets passed around like a hot potato. 00:25:38.410 --> 00:25:40.730 It really does. It enters what the source calls 00:25:40.730 --> 00:25:43.950 the ownership carousel. In December 2013, the 00:25:43.950 --> 00:25:46.250 brand was sold by Gordon Brothers and Helco Global, 00:25:46.509 --> 00:25:48.809 those are the original liquidation firms, to 00:25:48.809 --> 00:25:51.369 another company called Galaxy Brand Holdings. 00:25:51.430 --> 00:25:53.630 Galaxy Brand Holdings sounds very futuristic. 00:25:54.240 --> 00:25:56.160 They're brand managers. They buy up names like 00:25:56.160 --> 00:25:58.160 this and try to license them out or run a very 00:25:58.160 --> 00:26:01.079 lean online operation. But the most interesting 00:26:01.079 --> 00:26:04.059 chapter in this afterlife story starts in 2020, 00:26:04.359 --> 00:26:08.700 July 2020. The Raviera. Ravy Retail E -Commerce 00:26:08.700 --> 00:26:10.980 Ventures. This is a holding company founded by 00:26:10.980 --> 00:26:15.299 Alex Mayer and Tai Lopez. Wait, the here in my 00:26:15.299 --> 00:26:16.920 garage with my Lamborghini guy from all those 00:26:16.920 --> 00:26:19.440 YouTube ads. The very same. He and his partner 00:26:19.440 --> 00:26:22.200 built a business model almost entirely around 00:26:22.200 --> 00:26:25.000 buying up these distressed brands. So their whole 00:26:25.000 --> 00:26:27.890 business model is. What? Corporate necromancy. 00:26:27.990 --> 00:26:30.009 Yeah. They go around buying the corpses of these 00:26:30.009 --> 00:26:32.230 fallen retail giants. That's a great way to put 00:26:32.230 --> 00:26:34.950 it. They buy brands that everyone over a certain 00:26:34.950 --> 00:26:37.630 age knows, but that went bust in the physical 00:26:37.630 --> 00:26:40.269 world. And they try to revive them purely as 00:26:40.269 --> 00:26:42.450 e -commerce businesses. The source lists some 00:26:42.450 --> 00:26:43.890 of the other brands they bought, and it's like 00:26:43.890 --> 00:26:46.509 a graveyard of the 90s shopping mall. It really 00:26:46.509 --> 00:26:48.650 is. Who else is in their collection? Let's see. 00:26:48.710 --> 00:26:53.130 Dress Barn. Model Sporting Goods. The Franklin 00:26:53.130 --> 00:26:57.240 Mint. Pier 1 Imports. Pier 1, that's another 00:26:57.240 --> 00:26:59.559 one that hits that same nostalgic nerve. RadioShack. 00:26:59.740 --> 00:27:01.759 They bought RadioShack. They bought RadioShack. 00:27:02.220 --> 00:27:04.720 It's the same strategy. You buy the name for 00:27:04.720 --> 00:27:06.859 a tiny fraction of what it was worth at its peak. 00:27:07.140 --> 00:27:09.880 You don't have the overhead of 500 stores. You 00:27:09.880 --> 00:27:12.279 don't have 7 ,000 employees. You just have the 00:27:12.279 --> 00:27:14.740 URL and the logo. And you're banking on the fact 00:27:14.740 --> 00:27:17.420 that when people need some obscure cable or battery, 00:27:17.599 --> 00:27:19.859 they'll trust the name RadioShack more than a 00:27:19.859 --> 00:27:23.059 random no -name seller on Amazon. But does it 00:27:23.059 --> 00:27:26.569 actually work? Is Linens and Things now thriving 00:27:26.569 --> 00:27:29.809 as an online zombie? Well, that is the big question. 00:27:29.910 --> 00:27:32.250 Because the source gives us a pretty crucial 00:27:32.250 --> 00:27:35.630 update from just last year, from 2023, that suggests 00:27:35.630 --> 00:27:38.450 it might not be a foolproof plan. Right. So November 00:27:38.450 --> 00:27:41.630 2020, REV relaunches the Linens and Things website 00:27:41.630 --> 00:27:45.539 again. But then on March 2, 2023, the source 00:27:45.539 --> 00:27:47.859 notes that REV, the parent company, the corporate 00:27:47.859 --> 00:27:49.940 necromancer, announced it was considering its 00:27:49.940 --> 00:27:52.160 own bankruptcy filing. Wait, hold on. So the 00:27:52.160 --> 00:27:54.200 company that built its business on buying bankrupt 00:27:54.200 --> 00:27:56.460 companies is now on the verge of going bankrupt 00:27:56.460 --> 00:27:59.420 itself. The irony is just off the charts. It 00:27:59.420 --> 00:28:02.000 highlights just how volatile and difficult the 00:28:02.000 --> 00:28:04.500 retail sector is. Even when you strip away all 00:28:04.500 --> 00:28:06.480 the costs of brick and mortar stores, even just 00:28:06.480 --> 00:28:09.539 running it as a lean website, it is incredibly 00:28:09.539 --> 00:28:12.099 hard to make money. It turns out that simply 00:28:12.099 --> 00:28:14.920 owning a nostalgic name isn't enough. You still 00:28:14.920 --> 00:28:16.619 have to run a good business. You still have to 00:28:16.619 --> 00:28:18.660 compete with Amazon and Wayfair and everyone 00:28:18.660 --> 00:28:21.079 else. So the zombie might die again? Or it might 00:28:21.079 --> 00:28:23.440 get sold out of RV's potential bankruptcy to 00:28:23.440 --> 00:28:25.440 another holding company who will try to revive 00:28:25.440 --> 00:28:27.960 it all over again. The cycle could just continue 00:28:27.960 --> 00:28:31.140 forever. The name might outlive all of us. That's 00:28:31.140 --> 00:28:34.740 a mind -boggling thought. It is. So let's just 00:28:34.740 --> 00:28:36.809 trace that arc one more time. We've gone from 00:28:36.809 --> 00:28:38.750 a leased linen department in a discount store 00:28:38.750 --> 00:28:43.529 in 1958, to a multi -billion dollar 571 store 00:28:43.529 --> 00:28:46.670 empire, to a debt burdened casualty of the 2008 00:28:46.670 --> 00:28:50.490 crash, to a movie set for Wes Anderson, to a 00:28:50.490 --> 00:28:53.210 digital ghost passed between online investors. 00:28:53.490 --> 00:28:56.230 It is a wild ride, an absolute textbook example 00:28:56.230 --> 00:28:59.230 of the modern retail life cycle. So let's wrap 00:28:59.230 --> 00:29:01.049 this up. What is the big takeaway here when we 00:29:01.049 --> 00:29:03.829 look at this entire what? 60 -plus year arc? 00:29:04.029 --> 00:29:06.450 For me, I think the biggest lesson is about fragility. 00:29:06.809 --> 00:29:09.450 We tend to look at these big category killers, 00:29:09.589 --> 00:29:12.569 these massive chains with huge concrete and steel 00:29:12.569 --> 00:29:15.170 buildings, and we think they are invincible, 00:29:15.549 --> 00:29:18.589 permanent fixtures of the landscape. Right. But 00:29:18.589 --> 00:29:20.710 this story shows that when you load them up with 00:29:20.710 --> 00:29:23.410 too much debt, make a few strategic missteps, 00:29:23.490 --> 00:29:26.029 and then hit a rough economic patch, they can 00:29:26.029 --> 00:29:29.220 crumble incredibly shockingly fast. And for me, 00:29:29.259 --> 00:29:31.680 the takeaway is about the nature of a brand versus 00:29:31.680 --> 00:29:34.759 a business. I can still go to LNT .com today. 00:29:35.099 --> 00:29:38.500 Yeah. But am I really buying from linens and 00:29:38.500 --> 00:29:41.039 things? Not really. I'm buying from a company 00:29:41.039 --> 00:29:43.539 that just owns the logo. The actual experience 00:29:43.539 --> 00:29:46.160 walking into that store, smelling the potpourri, 00:29:46.180 --> 00:29:48.519 touching the towels, that has gone forever. That's 00:29:48.519 --> 00:29:50.480 a great point. It completely separates the brand 00:29:50.480 --> 00:29:52.420 from the business. The business died in 2008. 00:29:52.759 --> 00:29:55.279 The brand is just a ghost that's left haunting 00:29:55.279 --> 00:29:57.759 the Internet. Which brings us to our final provocative 00:29:57.759 --> 00:30:00.430 thought for you, the listener. We live in a world 00:30:00.430 --> 00:30:02.410 that is now full of these zombie brands. We do, 00:30:02.589 --> 00:30:05.490 more and more every year. So the next time you 00:30:05.490 --> 00:30:08.369 are shopping online and you see a familiar, nostalgic 00:30:08.369 --> 00:30:11.130 name from your childhood, whether it's Linens 00:30:11.130 --> 00:30:14.650 and Things or Radio Shack or Pier One or any 00:30:14.650 --> 00:30:17.509 of the others, ask yourself this. Are you buying 00:30:17.509 --> 00:30:19.809 into the quality and the trust that built that 00:30:19.809 --> 00:30:22.630 name 50 years ago? Or are you just buying the 00:30:22.630 --> 00:30:25.250 nostalgia of the logo? That is the multi -billion 00:30:25.250 --> 00:30:27.869 dollar question. buyer beware. Thanks for diving 00:30:27.869 --> 00:30:29.349 deep with us today. We'll see you on the next 00:30:29.349 --> 00:30:29.630 one. Goodbye.