Money Rehab with Nicole Lapin - The Cautionary Tale of Outdoor Voices with Sammi Cohen

Episode Date: May 14, 2025

When can getting investment hurt your business? Why did the girlboss era crash and burn? These seem like two totally different questions, but they’re both can be answered in the case study that is the rise and fall of the athleisure brand Outdoor Voices. Today, we’re going to understand why Outdoor Voices is a cautionary story for investors and entrepreneurs alike, with the help of creator Sammi Cohen. Sammi’s podcast Social Currency — the newest addition to the MNN fam — is out now. Nicole and Sammi recorded this conversation last year, and they didn’t know it then, but the first guest on Sammi’s pod would be Ty Haney, the Outdoor Voices founder they talk about in this episode of Money Rehab. Your next listen should definitely be Sammi’s episode with Ty on audio HERE and video HERE. And while you’re at it, subscribe to Social Currency wherever you’re listening now!

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Chime checking account required. Go to chime.com slash disclosures for details. I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. When is getting investment bad? And why did the girl boss era crash and burn? These seem like two totally different questions, but they can both be answered in the case study that is the rise and fall of Outdoor Voices. You might remember Outdoor Voices. Less than ten years ago, it was a huge athleisure brand, but now it's just a shadow of its former self. Today, we're going to get to the bottom of it and really understand why Outdoor Voices

is such a cautionary tale for investors and entrepreneurs alike with the help of creator Sammy Cohen. I have been a huge, huge fan of Sammy's content for a long time now. And actually when we were looking for people to guest host the show when I was on maternity leave, Sammy came to mind right away. But very quickly it became clear that she should just have her own show. And yesterday, Sammy's podcast, Social Currency, the newest addition to the Eminem fam, premiered. I know you're going to love it because on the show, she explores the stories at the

intersection of business and culture and breaks down the brands that are breaking the internet or breaking our trust. Sammy and I had this conversation in our old M&M studio back in October, back when we had a studio and when I was super duper pregnant. At the time, we were in the really early stages of talking about her show, and so we didn't know then, but the first guest on her podcast is actually Ty Haney, the Outdoor Voices founder, who we talked about in the episode you're about to hear. Sammy's conversation with Ty is fascinating so please listen to it next but first

here's my conversation with Sammy. Sammy Cohen welcome to Money Rehab. Thank you so much for having me. I'm so excited to be here. For you to be here we're excited to do more together but today we want to do what you do so well on your social media and on your newsletter, which is dig into one corporate story as a case study for more business lessons, which I think is such a smart tactic because everybody loves a good story. And then within that you get business lessons sneak attack. Exactly. Yeah. I have so much fun doing deep dives of these companies. It's truly my passion. So I'm really excited to dive into some with you today.

OK, so let's do Outdoor Voices. You say that this is a cautionary tale of direct to consumer failure. Explain. Yes. So Outdoor Voices was one of those companies that was huge in the early 2010s. And everyone from your little sister to your friends

to even your mom knew about this company. They were everywhere. And yet today, flash forward to 2024, they're basically a shadow of what they once were. So I'm really excited to dive into what the company's done and how they've gotten to where they are today. So who started it? What was the leadership situation? Let's go back to the beginning. Okay, great. So Ty Haney is the name of the founder, and she started the company at 24 years old.

She had gone to the Parsons School of Design, and she had grown up in Boulder, Colorado. So she was very into being active, being outside. And the origin story is one day she was running on the West Side Highway in New York. And she had looked at the legacy companies in the athletic wear space. There were the Nikes of the world, Lululemons, Under Armor. And they were all creating these products for people who took exercise really

seriously. And there wasn't a company out there that was creating athletic wear for someone who wanted a more recreational spin on everything. Yeah, I sometimes wear yoga pants and feel like I should get an exercise credit for that. She had this idea and she felt like there was a white space in the market. The customer profile was basically somebody who was casually running on the rest-side highway, but not going to run a marathon. Exactly.

Really, the target customer, as I mentioned, she was 24 when she started the company. A lot of the women who were initially attracted to outdoor voices and the ethos of the company were also young women, young millennial women, who wanted to feel as if they could wear their yoga pants or whatever athletic wear and not have to be running a marathon. And they were kitschy. I remember those, was it hats, like doing things hats?

I felt like they were everywhere for a moment. Oh, yeah, they were massive. And I think the doing things hats? I felt like they were everywhere for a moment. Oh yeah, they were massive. And I think the doing things, and I actually mentioned this in the video that I did when I first covered Outdoor Voices, they created this idea almost of the hot girl walk before the hot girl walk that we know in 2014. Wait, what is the hot girl walk? The hot girl walk. Are you kidding?

The hot girl walk is... I'm not. Oh, okay. I'm not a hot girl. I don't do that. You are a very hot girl walk. The hot girl walk. Are you kidding? The hot girl walk is. I am not. Oh, OK. I'm not a hot girl. I don't do that. You are a very hot girl. OK, yeah. So we're going to do some quick education on the hot girl walk.

This is just a term that people use on social media. It's very in line with what Outdoor Voices was doing. It was just creating an opportunity for you to get outside, to move, and you can do anything on your hot girl walk. You can call a friend, you can get your Starbucks, you can just, I don't know, listen to a podcast, right? So it's just an excuse to get yourself outside and walk. So a hot girl walk is just a walk.

Yes, yes. But like a power walk. But it doesn't have to be, right? And I think that's the idea that Outdoor Voices was getting at. It doesn't need to be a power walk. It can be literally walking at a snail's pace. But as long as you are moving your body, that just fits in with this whole idea of doing things. OK.

I can get behind that. That's the only kind of exercise I'm doing lately on running my mouth. But going behind the scenes of the company, from the outside, it looked like they were really crushing it. But on the inside, they weren't profitable, which isn't necessarily a bad thing, especially in startup mode.

But what was going on behind the scenes? Sure. So from the origin of the company around 2014 to 2018, they grew like crazy. They had raised over $60 million in funding. They were valued at $110 million. and they had opened around 16 stores. So looking in, you'd say from the outside, at least you'd say this company is crushing it. However, when you peel back the layers a bit, a few things were happening. So first,

Mickey Drexler, who was a retail executive, J. Crew, Gap, very well respected in the industry had come over to Outdoor Voices to kind of be the person who had the legacy retail experience to lead the company. And what we now know about the company is that things were incredibly unprofitable. They were spending money on extremely frivolous things that were not impacting their bottom line. And some examples that came out in the New York Times Exposé were $45,000 on fresh flowers for their stores, $36,000 for Topo Chico's sparkling water, stuff that, you know, that the customer wasn't even really going to factor into their decision on whether or not they were going to buy the Outdoor Voices leggings, for example. They're just very spendy.

Exactly. And I think that's why Mickey was brought in by the board. They saw that there was a very highly unprofitable company and the person who had gotten the company to where it was, was not really able to focus on the business fundamentals that were needed in order to turn the company around. I mean, I remember covering Mickey at CNBC for years, a super, super well-respected guy in the retail space, in the retail business. How did they get him to do that?

At that point, they had had a really interesting connection between J. Crew and Outdoor Voices. And that initial tie was actually one of the things that had brought outdoor voices to mainstream was that there was a collaboration between J. Crew and Outdoor Voices. So that was the first major retailer that took Outdoor Voices on and that was actually what caused Outdoor Voices to blow up. So from the origin of the company, Mickey already knew about Outdoor Voices and had watched them scale for the next three or four

years before joining the company. But he's been around forever. I'm sure he wasn't like, how do I say in a nice way, like the most collaborative executive. Like I'm sure he didn't listen to the 24 year old founder and defer to her wisdom and judgment. Exactly. And so what happened? Yeah, what we know from what has been leaked by ex-employees was that they were almost like oil and water. You had Ty, who was very big on this idea of community,

which is great, and not to dis community at all. She really loved the social media marketing of the business. And Mickey came in, and he was more focused on understanding, what are the profit margins of the company? What are the unit economics? If we're spending this much money, how are we going to make sure that there's an ROI on the money

that we're spending? And so I think the fact that they looked at the business fundamentals so differently led to a lot of churn within the company. So she was still on board, but they were fighting. Exactly. There was a lot of internal conflict. Yes.

And so he came in in 2017. And so we know that Ty officially left in 2020. So between 2017 and 2020, that's when we know that there was a lot of turmoil within the company. And in early 2020 was when they actually had done a major down round in funding. So in 2018, they were worth around $110 million. Their funding round that they did in early 2020

was valuing them at $40 million. So just for some perspective here, I think not only was there turmoil within the company, but we know that their business fundamentals were terrible. And so I think that gives us a little bit of intel on what was happening. And do you think from the business community watching this that the founder getting pushed out

was sort of the beginning of the end? Yeah, it's something where this is a very hotly debated topic, I think, just beyond outdoor voices with many founder-led companies. Because oftentimes- Founder mode, manager mode. Yes. Especially in CPG, though, consumer packaged goods.

I think it's such a fascinating industry, first off, because people love tangible products that they can feel and that they can buy in a store. And it's not a SaaS, B2B tech product, right? And so these founder-led CPG companies oftentimes are inextricably bound to the founder. And because Ty was the same age as her target demographic, and she was essentially just as big on Instagram

as the Outdoor Voices Instagram page was, they were so connected that when people saw this founder who had built the company that was suddenly ousted, I think it changed mentality around why people were connected to the brand. And then on top of that, there were several other very public debates around the quality of the product going down. And it created a lot of questions when she left for sure. Who replaced her? So right after she left, they brought in Cliff Moskowitz, who was an interim CEO.

He was a president of an investment firm. And then around June of 2020, they actually brought in Ashley Merrill, who had previously co-founded Lunya, which is a sleepwear brand. And the company really has never been the same since Ty left. And then there was an acquisition offer, right? Yes. What happened next?

And this was under Ashley's leadership. There has been a revolving door of different leaders there. So this is actually under a different leader. But earlier this year, yes, there was. Isn't Ashley also like one of the like Merrill, as in Merrill Lynch? Yes. Yeah, there is a whole legacy story there was. Isn't Ashley also like one of the like Merrill Lynch, as in Merrill Lynch? Yes. Yeah, there is a whole legacy story there too.

Yeah. So her connection actually to why she stepped in was she was one of the investors in a previous funding round. So she was close to the company and she was the person who they tagged to come in and lead. And obviously her company, Lanya too, had its own fair share of issues as well. I think with everything that has happened with the company, they're obviously not in a great place. Right? So in March of 2024, they very abruptly shut all of their store locations, barely gave any of the employees any notice. So it created a lot of questions about what the company's

future was going to be like. And in June of this year, Consortium Brand Partners came in and acquired the company. And Consortium Brand Partners had previously bought the majority stake in Draper James, which is Reese Witherspoon's company. So they are now, I guess, building this celebrity slash buzzy CPG company empire, perhaps.

So we'll see what happens with their leadership now. But they're like P firm. Yes. And so they bought it cheaply. Do we know how much the purchase price was? We don't know how much. Of course, it's undisclosed. I think they bought it for-

It's always undisclosed when it's bad. Exactly. I think the number would for... It's always undisclosed when it's bad. Exactly. I think the number would shock us all, honestly. And I would... If they did a down round at 40, I would bet it would be sub-five. Maybe even sub-three. Exactly.

Sub-five? Yeah. And so what is really interesting is when they did all of their layoffs right around the time of the store closings, someone had come out and said that the company only had around 10 employees. At their peak, they had 350, right? What's the latest with Outdoor Voices right now? So now they're still under consortium brand partners. In 2025, they are teasing the fact that they would open new stores potentially. They are saying that they may end up doing brand extensions of new product

lines. In one of their recent articles they did with Retail Dive, they talk about everything in terms of expanding. So they talk about swimwear as a potential option, children's clothing. They mentioned exercise equipment and honestly the range of items that they had mentioned. I'm just thinking these people have to really figure out what they're doing because I think they're in a really precarious place in my opinion. I think they have a brand under their ownership that is quite a familiar brand. Many people know about the brand, but I think the reason why people would shop the brand today is extremely different than it was 10 years ago when the brand started.

So I'm really curious to see if they're able to turn it around. I very much doubt that they'll ever be able to get back to where the company was at its peak, but it's P.E. They're going to try and infuse some life into the company and then potentially sell it once they're able to do that. It's always disconcerting when you hear companies that are trying to do so many things but haven't done one thing well. Like when people want to do all these expansions but they don't have a hero product or they like haven't actually solidified themselves or when you know you'll see entrepreneurs will go pitch for investment or even on Shark Tank

where they're like, oh, like we're doing a water bottle, but now we want to make a water slide and a water house and like whatever. And you're like, wait, just make the fucking water bottle amazing. Start there. So I think that what Outdoor Voices needs to do, especially since they're under new ownership is they need to double down on what essentially worked with the company. They were well known for their-

Before expanding, yeah. Exactly. So I think before they try and save the day, because they're not going to save the day if they go into children's clothing or exercise equipment, I think that they need to start with fundamentals. And actually, a company that has done this outstandingly well and has been documented all over the place is Abercrombie,

right? They were known as a retail company that had very questionable designs, and the quality wasn't there. And now they've turned it around under their CEO, Fran Horowitz, and they're able to come out with products that are known to be now very high quality, and customers love them.

So I think- And size inclusive and not racist. Yes. All of the above. Just other details. But sure. Yes. So what Net-Net do you think went wrong with Outdoor Voices?

And what is the lesson that we can take away from the story? I believe that Outdoor Voices was a classic case of a founder-led company that was not focused on the right fundamentals for growth. I think Ty was an amazing leader during the first few years of the company. And the idea that they had to bring Mickey Drexler in actually was the right one. I think it may have happened. It's really impressive. Yeah.

I think it may have happened too late in the game when it was already past the point of saving, however, because ultimately when you have a company that is incredibly unprofitable, that has already got themselves into these long-term leases for the stores that they expanded into and they're spending money hand over fist, it's really difficult to pull in the reins and to turn the company around. So I think if I were to lead outdoor voices or go back in time, it's all about slower, more profitable growth.

And being able to connect with your customers, of course, is something that outdoor voices did extremely well. So I think you have to kind of focus on connecting with your customers and being able to grow at a scalable rate that's not going to completely burn through all of the cash that you've just raised. Do you think this high valuation can be a curse? We saw it with Away, we saw it with Nasty Gal, these ridiculous valuations ultimately led to the downfall. Definitely. I think when you are a consumer company that raises money as if you were a tech company At multiples like tech companies. Exactly. I think that is a recipe for failure. And now we're in the post-Zerp era, the zero interest rate policy era.

I think we're now at a point where we understand that. I think there was this really unique period from 2012 to 2019 where we weren't fully aware of that or maybe we were just too optimistic thinking that if you throw enough money at something, you can get to a point of massive growth where the economics will eventually work in your favor and we've found out through experience that that's not the case. But you know this from the investing world. Different categories are valued differently. We're a media business. We're not trading at a 10x multiple, which

is more of like a tech company. And a consumer products company or a CPG company is not going to either or shouldn't. Exactly. And I think now that we're in this era where we've seen these companies all go boom and bust the ones that raised at the tech company valuations, you're now seeing even CPG companies that

are trying to scale and grow and raise money today are just not able to raise the amounts of money that they were five, 10 years ago. So let's step back, Sami. Why are you investigating these types of stories? Like, why are you diving deep and then plucking out these gems of lessons? I think it just fascinates me. I have always, for as long as I can remember, been obsessed with understanding the whys behind businesses. And when I say whys, I mean understanding

the fundamentals, understanding who's behind the companies, why they are making the decisions that they're making. And in my mind, I kind of view a lot of what I do as true crime, but for business. And when I say that, I mean, I want to talk about, of course, the failures are sexy and fun to talk about, but I also want to talk about the wins. And I want to talk about the reasons why businesses

are acting the way that they are that people may not know about. And for me, every time I put out a new story, it is genuinely a really fun activity for me. And that's how I know that I'm doing what I love and that I want doing what I love and that I want to continue to do. Were you nervous about putting out these videos

for the first time? Terrified. You didn't come from this world. No, no, not at all. When I started this, I was working in big tech. I was a product manager. It was 2022, which is still in the pandemic era. And I was in my room.

I desperately wanted a hobby and I wanted to do something creative and I put out my first video on, I believe it was Sophia Amoruso, the founder of Nasty Gal. And it was also actually quite similar to what we're talking about now. It was a bit of a rise and fall story. And I think for me, I realized that when I was starting, it was just a creative outlet. And now it's turned into something that's so much more than that. And I'm so grateful. I am so grateful that you put the stories out there because I am your target audience.

I'm obsessed too. We end our episodes, as you know, with a tip that listeners can take straight to the bank. So do you have anything that would be entrepreneurs can maybe take away from some of these corporate cautionary tales that you do? Absolutely. I think when it comes to raising money for a business, and it ties in very well to what we talked about with Outdoor Voices and these CPG companies that are so focused

on scaling and growth, take what you need. As an entrepreneur, as a founder, if you're building a business, also anytime you raise money, right, you're giving up equity. Equity is the most valuable thing to any person who's trying to grow a business that's going to be around for a very long time.

Just be very intentional about where your money is coming from, who your partners are that you're bringing on, and there are nowadays more options than ever to raise money. So just be extra, extra careful, cautious about who you're taking money from. And if you take it, just like chill on the topo chico. Money Rehab is a production of Money News Network. I'm your host, Nicole Lapin. Money Rehab's executive producer is Morgan Lavoie.

Our researcher is Emily Holmes. Do you need some Money Rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News

and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make. you