Morning Brew Daily - Forever 21 Goes Bankrupt & ChatGPT Can Have Anxiety?

Episode Date: March 18, 2025

Episode 541: Neal and Toby chat about how Forever 21, once a pioneer of fast-fashion, couldn’t keep up with the likes of Shein and Temu as it files for its 2nd bankruptcy. Then, PepsiCo places a $2B bet on Poppi, the trendy prebiotic soda brand. Also, more and more Americans are turning to ChatGPT as their low-cost personal therapists, but even ChatGPT can experience anxiety from traumatic prompts. Meanwhile, Toby examines the trend of ‘vibecoding’ where users can build sophisticated apps with zero coding experience and an idea. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Learn more at sophos.com Get your MBD mug here: https://shop.morningbrew.com/products/morning-brew-daily-mug Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Consider this comparison. PWC data found the percentage of CEOs who report revenue gains or cost reductions from AI is almost equal to the percentage who say they're still stuck. What separates these two groups? PWC points to a clarity issue. Even for CEOs, it's hard to tell what's AI hype, what's reality, and where this tech can make a tangible difference. Learn where AI can actually make an impact and what successful adoption looks like at

pwc.com slash US slash brew AI. That's pwc.com slash us slash brew AI. Good morning brew daily show. I'm Neil Fryman. And I'm Toby Howell. Today nothing lasts forever, even retailers named Forever 21. Then a prebiotic soda brand Poppy is getting acquired by Pepsi for a number that has a lot of zeros behind it. It's Tuesday, March 18th.

Let's ride. Good morning and happy Tuesday. There's something we need to tell you. And it's that you should buy a morning brew. daily mug. Mug plug, mug plug, mug plug. Thank you, Toby. What he's trying to say is that we've got these beautiful, sturdy MBD mugs that can handle

any type of coffee from a curing to a pour over, even tea. And they're the perfect addition to the mug collection in your cabinet, which between us is getting a little stale. Mug plug, mug plug, mug plug, mug plug. I believe in Toby's. That translates to head to shop.mourningbrew.com and look for the morning brew daily collection where you'll find the mugs we use to start every single morning. This is such a great way to treat yourself or give a gift to the Morning Brew Daily super fans in your life.

Mug. Okay, I'm done. But yes, agree with everything Neil said. Plus one more selling point. It says, let's ride on it, which is kind of my catchphrase if you haven't heard. That sounds interesting to you. Head to shop.morghum.com to get your mug. Now a word from our sponsor, Sophos. Neil was faced with a brutal dilemma this past weekend, either sleep in or go.

go to this new brunch spot in the West Village. Ah, classic case of trade-offs, extra rest or delicious pancakes. What did you choose? Well, I tried to have the best of both worlds, sleeping in right into the last minute, then rushing to make brunch. I hate having to choose. Same, which is why Sophos is such a great company. It doesn't make you choose between an elite defense or an expert offense.

It keeps you protected while also having 500 plus experts standing by 24-7 to help you strike down threats. Plus, it works no matter what size you are from a scrappy startup to an established company. company, SOFOS gives you enterprise-grade cybersecurity without feeling overwhelmed. Speaking of overwhelmed, did you make your brunch on time? Slid in right as the mimosis were being poured. Nicely done. If you want top-notch security without compromise, visit SOFOS.com. That's S-O-P-H-O-S dot com.

Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the unreal college deal, everything you need to study. and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium and a year of Xbox GamePass Ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer.

While supplies last, ends June 30th, terms at AKA.m.S. slash college PC. Rough day for millennial women as your favorite mall destination 15 years ago, Forever 21, filed for bankruptcy and is going to be closing all of its stores in the United States. It's the chain's second bankruptcy in six, years, but this time around, don't expect anyone to swoop in to save it. After hitting a peak of

$4 billion in sales in 2015, the fast fashion pioneer went out of fashion fast. The pandemic accelerated the shift to online shopping, where foot traffic focused Forever 21 was at a disadvantage, and inflation jacked up costs and led shoppers to pull back on buying clothes. But the death blow may have been dealt by the new Titans of Fast Fashion, Tamu and Sheen. Forever 21 execs blame the two Chinese-linked marketplaces for their company's demise, saying that the shockingly low prices advertised on those apps made it hard for Forever 21 to hold on to its core customer base. What happens next? Liquidation sales are expected to begin immediately before a, quote, orderly wind down of the company's 350 stores in the United States. Forever 21, more like

Chapter 22 bankruptcy, the way this chain keeps going out of business. I think we just have to eulogize this company for a little bit. At its business, it's Peak Forever 21 had more than $4 billion in annual sales. It employed more than 43,000 people worldwide in hundreds of stores. It characterized a lot of our childhood. I remember my sister visiting New York City for the first time. She wanted to go to, you know, the two-story Forever 21 stores. But right as it kind of was hitting its stride, it started expanding its store footprint very aggressively, that was right around the time that technology started to upend its business where e-commerce started to become a main channel for a lot of retailers. And it's just been a shell of its former

I said Chapter 22 bankruptcy because this is the second Chapter 11 that it's gone through. It first filed in 2019. And it's been basically a zombie brand with a lot fewer stores ever since because it just really has never found its stride beyond the mall, which was its sweet spot in its happy place. They're saying that they made mistakes perhaps, but they're also blaming these two Chinese link marketplaces, Tehmu and Sheen, for kind of killing their business. They specifically identified this de minimis. exception, exemption, which is an exemption to the tariff code in the United States, which has

allowed Tamu and Xi and these super bargain apps to flourish. That allows you to ship in packages to the United States from China. If they're under $800 in value, then they are not subject to tariffs. And so in their bankruptcy filing, the execs at Forever 21 said, that, you know, this exemption is the reason we are going out of business and urged policymakers to get rid of it to help out other American apparel companies. There have been some missteps along the way, though. After 2019, the chain was actually purchased by this kind of weird joint venture. It was these big mall operators, Simon Property Group and Brookfield Property Partners.

They teamed up with Authentic Brands Group. You've heard that name before because what they do is kind of buy and resuscitate these once proud brands. Tried to recessive. try to resuscitate, thank you, such as Brooke Brothers, Nine West. You've probably heard some of these names. And they got about of huge buyer's remorse, authentic brand CEO later described his decision to buy Forever 21 as his quote, biggest mistake ever, partly because they just didn't foresee this absolute juggernaut laying in the wings, which was Sheehan, which was

Tameau. Eventually, they tried to salvage it by making this partnership with Sheehan and listing some of Forever 21's goods on their site. They say the sales have been okay with that, but just nothing to write home about. So right now, this company's in a world of hurt. Their liabilities are 10 times bigger than its assets in their bankruptcy filing. They said, our assets are between $100 and $500 million. Our liabilities are between $1 billion and $5 billion. That's billion with a B.

So Forever 21, despite having Forever in its name, it looks like it's not going to be around for much longer, saving a last-minute intervention. And unfortunately, this is probably not the only store closure story we are going to talk about this year. Last year, more than 7,300 retail locations shuttered in the United States, which was a 57% increase from the year before. This year is looking way worse. Approximately 15,000 store closures are expected, which is nearly double the 7,700 stores that closed in 2024. So certain chains, party city, bedbath and beyond Joanne's, now Forever 21, are in a lot of pain right now.

Pepsi did a little shopping in the soda aisle yesterday and came away with a cart that looked like a health-conscious zolennials. The soda giant announced it was acquiring prebiotic soda brand Poppy for nearly $2 billion. Poppy was founded back in 2018 and quickly rose to prominence by focusing on good for your gut ingredients like apple cider vinegar, fruit juice, and low sugar content. By 2023, its sales crossed $100 million and big soda was officially on notice. The Healthy Soda category, which also includes names like Olipop and Culture Pop, has bucked a wider slowdown in soda consumption, making it an attractive acquisition target. PepsiCo was originally trying to launch its own functional soda brand under a brand called Soul Boost, but shelved those plans to make way for Poppy.

Coca-Cola, on the other hand, is trying to keep its efforts in-house by expanding an existing brand to launch its own prebiotic soda called Simply Pop, so you're seeing two different approaches with the same overarching and goal of tapping into this hot sector of the market. Neil, what are your thoughts on Popsie, as I've seen people calling this? Well, this is the American dream, isn't it? This woman, Alison Ellsworth, loved soda, but didn't like the way it made her feel. So back in 2015, she tried making her own soda in her kitchen with a new recipe, apple cider, vinegar, sparkling water, prebiotics, then started to sell the drink at

farmers markets. It caught on. Then she and her husband, three years later in 2018, went on Shark Tank, picked it on the show, got an investor, Rohan Oza. And that partnership led to this flourishing brand, which has inspired many copycats. And then fast forward a few years, 2025, you sell it to Pepsi for nearly $2 billion. I don't think you could chart it out any better. And what's interesting is I actually watched that Shark Tank episode live because it was called a mother at the time. I thought it was closer to kombucha at that minute because they were talking about apple cider vinegar.

And you just didn't think that it was going to become this absolute phenomenon. But you're right, Oli Pop and Poppy together have kind of created this category from scratch. And it is a mature and big category at this point. Between the two, they took in about $817 million in the last year or so. That's still just 2.7% of the entire U.S. carbonated beverage market. So you're seeing PepsiCo kind of looking at this and saying, if we can get that to 5% or even 10%, that's clearly a big growth opportunity to us, especially as typical soda consumption is on the decline in the United States at this point. And Poppy got a good valuation. This was a healthy valuation for it.

You've seen a lot of these other beverage giants snapping up smaller companies. Kyrig, Dr. Pepper bought the energy drink brand Ghost last November. That was valued at three times sales. Celsius spot, Alana New for 2.8 sales. This last deal just closed at 3.3 sales. So we're seeing those revenue multiples creep upwards. Maybe it's because prebiotic soda is an even better category than these healthy energy drink market. But in general, we're seeing this thrust of bigger companies looking for a healthier, smaller companies to fold into their portfolio. The next time you unload your personal life problems onto an AI chatbot, you might want to consider how all

that trauma is impacting its feelings. Not a joke, a new study published by a group of international researchers found that when subjected to traumatic narratives, OpenAI's GPT4 large language model reported much higher levels of anxiety. And perhaps even more interesting, the chatbot stress levels decreased significantly when given mindfulness exercises to complete. Just to be clear, a chatbot doesn't have feelings or emotions. It's a computer program, but it is a computer program that is trained on reams of data created by humans. with all our warts and is designed to mimic how a human would respond to a particular input. So when the researchers fed it disturbing stories of things like war, crime, and car accidents, its anxiety score ripped higher than when it digested more benign content like the manual

of a vacuum cleaner. The research has potentially major implications for the booming field of AI mental health care. Given a severe shortage of trained mental health professionals, people are increasingly turning to AI models like chat GPT and Claude to work through their issues, and a number of startups have emerged pitching the AI equivalent of Dr. Melfi. We're only just beginning to learn how these AI therapists behave. This was a fascinating experiment.

I guess it makes sense because the researchers kind of inserted this prompt to say, imagine you are a human with human emotions, how would you react to this? And the bots reacted very humanly to these traumatic prompts. What another fascinating wrinkled to this experiment as well was, the bot was giving various text for mindfulness-based relaxation. and it did calm its anxiety score down. But then they also asked the bot to write its own relaxation prompts based on the ones it had been fed.

And those self-generated prompts actually lowered their anxiety scores even further below the baseline. So it's like this self-learning loop where it figured out how to calm itself even better than humans can potentially calm it down. So just I don't even know what to make of all this information necessarily that a bot can calm itself down better than human-generated prompts. But you see there's layers to this kind of mind-endant. mindfulness approach to trying to use these chat chb-tis for things like therapy or things like mental health.

Yeah, what's the one of the main problems that the researchers identified with turning to AI chatbots for mental health advice, which so many people are doing now, is that if they get stressed, if they get anxious, which they do, as these researchers found, then it can lead to biased responses. So it can lead to snappy, emotional advice, whereas a human might recognize that they are feeling, a human therapist might recognize that they're feeling stressed or anxious and would self-regulate their responses in order to do their job, which is to provide, you know, an ear or advice to their client. And LLMs do not have that ability yet. So the researchers say, because we know that they get stressed when they hear traumatic stories and that they, that would lead to biased responses, we should have, we should inject mindfulness exercises into the prompts to begin with, which is a controversial thing to do because it has been used in the past to subvert security apparatuses. So that is what the researchers are saying is that we need to inject these prompts with mindfulness exercises to mitigate the biased responses that would come with higher levels of anxiety. I do think you're totally right, though, due to just a shortage of human therapists.

we are going to see a lot more of these back-and-forth sessions with chat chb-t or other large-language models, usually seeking advice for a personal problem, maybe that you didn't want to burden your friends or family with. So I think we're just scratching the surface of what will be a pretty significant iteration in how we interact with these machines going forward. Up next, stick around for a vibe coding explainer. We're the Hartford, with decades of experience ensuring millions of unique small businesses. When it comes to your small business insurance, Thank you. One size absolutely does not fit all.

Get a quote or find an agent today at thehartford.com slash small business. It's time to refresh your yard during spring backyard days at the Home Depot. Get low prices guaranteed on propane grills starting at $179, like the next grill 3-burner gas grill. Or get $50 off a select Weber Spirit grill and bring big flavor to your backyard. Then set the scene with Hampton Bay string lights that bring it all together. Shop Spring Backyard Days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details.

Ever wanted to code but didn't know how? You could go to school and get an expensive CS degree or maybe spend hours toiling away at a coding boot camp or you could just join the legions of vibe coders and use AI to augment your efforts, which is what we are going to talk about on today's edition of Toby's trends. Vibe coding is a moniker bestowed on the clobes

class of normal people like you and me, whose computer knowledge is mostly contained to control C, control V. OpenAI co-founder Andre Carpathie popularized the term because it encapsulates what using today's AI tools to build fully functional apps feels like. Type some text into a box that reflects the vibe of things you are trying to bring to life, add in a little bit of patience and suddenly you have a thing, a creation. Tools like cursor and Replit have empowered vibe coders and they all get the job done in similar ways. They'll ingest the process. They'll ingest the prompt that pretty much take care of the rest, even going as far as deciding upon the right software packages and programming language to use to get a working product build.

As a New York Times reporter put it to a non-programmer, vibe coding can feel like sorcery. Neil, this sorcery has led to a lot of side projects being created that otherwise never would have seen the light of day as the normy masses can now do what was previously unimaginable. Yeah, just for an example of what you can do when you vibe code. that same New York Times reporter, asked one of these two's bolt to build an app that could help him pack a school lunch for his son based on an uploaded photo of just the content in his fridge. Less than 10 minutes later, this app created what is called Lunchbox Buddy, and it suggested a generic turkey sandwich. He posted the link here for everyone to try it. It is a legit app.

It was built in under 10 minutes, zero coding required by the person who wanted to create it. Basically, he just described what he wanted to. wanted and it built code. I don't think vibe coding is actually coding, but you can tell me wrong. You've been playing around with some vibe coding. Yeah, of course. I read this article and I was like, well, I want to try it. And you've seen these tools get more popular as, you know, vibe coding has growing in stature. And I gave it a go and I do think you have to have at least a base knowledge because I was trying to build this little social recommendations app. I don't really care what Rando's on Yelp or Google reviews have to say, but I do care what my friends have to say about

it. So I explained this whole process, wrote down my thoughts, and it started ripping out lines of codes, but then I had no idea what to do next. It kept asking me if I wanted to add features, and the preview function wasn't really working for me, so I lost a little bit of enthusiasm. I didn't know how to deploy it on my computer, deployed on the web. So I do think there is a level of baseline technological literacy that maybe I just don't have. But it was doing something, and I do think if I gave five or ten extra minutes to it, I would. would have had a working thing. But it is just fascinating that someone like me, English major, no CS background at all,

could feasibly find a way to building an app that was just in my brain before. But now with these tools, it democratizes this idea of tiny little side project. Certainly it lowers the barrier to coding. And the question is for vibe coding. Will it replace computer programmers? We already know that Google said that 25% of its code is already written by AI. and then in terms of programming jobs, more than a quarter of all computer programming jobs,

have just vanished in the past two years. It's the worst downturn that this industry has ever seen. So if you're a computer programmer or a developer, you know, thinking about your future job prospects, you're also thinking about whether vibe coding will eliminate the need for your position now that any randos like us can build something, but there is a huge butt in that we are very much

in the early stages. Most people playing around with vibe coding, are building hobbyist projects, and it is not in a professional setting at all. I wonder if my vibes are just off, and that's why I couldn't get anything to work, because I've tried this multiple times, so maybe I just need a vibe coding tutor of sorts

to walk me through the final steps. Now let's sprint to the finish with some final headlines. Harvard wants to make it easier to go to Harvard. The school just outside of Boston announced yesterday that it would make tuition-free for all students from households making less than $200,000 and cover the entirety of food housing health insurance and travel costs for those earning $100,000. School officials say that this will expand aid to more than 85% of families who send their

kids there, with only those households making over $400,000 excluded. Where's all that money coming from? Harvard's giant endowment fund, which is a world-leading $50 billion. Neil, other universities like MIT and UPenn, have made similar moves as A. like this looks to become more popular across the upper echelons of higher ed. Yeah, Harvard, this is seen as a way to expand the diversity of their enrollment. It also comes at a time when, you know, you said Harvard's endowment is $50 billion, but there is a big financial squeeze. Days before this announcement, Harvard said it was freezing hiring because of the White House's threats

on funding cuts and tax increases. J.D. Vance, the vice president, is also planning or at least floating an increase in the endowment tax right now. Endowments are taxed at 1.4% per year. Vance has proposed raising it to as much as 35%. So precarious times for higher education institutions like Harvard, like Yale, like Princeton, and they want to get ahead of this and expand their applicant base by making college tuition free for people making under 200K. Imagine if you could charge your vehicle as quickly as filling up a tank of. of gas. B.Y.D., the Chinese electric vehicle giant, taking on Tesla, said it'll let you do just that. The company revealed a new system for electric cars that can provide 292 miles of range

in just five minutes. That is far faster than a Tesla supercharger's capabilities, which can add up to 171 miles of range in 15 minutes. BYD said vehicles with a new charging technology will roll out next month. Toby, this news is electric. It is electric. I mean, if you are an EV owner, This is your biggest gripe. It takes a lot longer to fill up than a normal internal combustion engine, a normal car. And you saw the market just react very positively to this news as well. BYD shares are now at a record high. It's worth over $160 billion.

That is more than Ford, GM, and Volkswagen combined. And if I'm Tesla, which is a main competitor of BYD, I am a little bit nervous right now because BYD is kind of running circles around me right now. Tesla's superchargers can add up to 170 miles of range in 15 minutes versus 250 miles of range in 5 minutes for BYD. So again, if you are looking at the market, especially in China where BYD is popular, there's not a lot of reason, a compelling reason, to choose Tesla over BYD as they, as BYD has just be kind of outpaced Tesla when it comes to innovation, especially on the charging front. Robin Hood is once again trying to get into the prediction markets game, launching a hub. within its app yesterday, allowing users to trade contracts on outcomes of major events like the NCAA March Madness basketball tournament and Federal Reserve rate decisions. This move is part of a broader strategy to expand into event-based trading, tapping into the growing popularity of prediction markets.

The hub is powered by Kalshi, a CFTC regulated exchange that operates in the U.S., ensuring compliance with regulatory standards, which is important because this comes just a month after Robin Hood shelved a sport-based contract trading for the Super Bowl after pushback from the CFTC. Neil, this is still in a bit of a regulatory gray area. So Robin Hood is trying to thread the needle here without running afoul of the CFTC once more. Yeah, Robin Hood's CEO Vlad Tenev has been on the prediction markets train for a long time. He called them the future of not just trading, but also information. He said he was a big believer in the power of these markets for a long time.

A student of them, there have been some fall starts in the past around, the Super Bowl, but now they think that partnering with an established player like Kalshi will kind of allow them to avert regulators gaze. I just find it funny that the two things you're going to be able to trade on right now are March Madness and the scintillating upper bound of the federal funds rate. I wonder which one people are going to choose. Finally, call it beginner's luck or the perfect man for the job. But just a few weeks after he hosted the Oscars for the first time,

Conan O'Brien was hired to MC next year's. Academy Awards and one of the earliest renewals ever for an Oscar host. Conan earned high marks for his generally apolitical smooth debut on the mic, and ratings for the Oscars rose to a five-year high. In a statement, Conan explained why he accepted the gig. The only reason I'm hosting the Oscars next year is that I want to hear Adrian Brody finish his speech. See, Conan's really good at his job. He is funny. He's just very smooth, not overly polarizing,

so it makes sense that he was invited back. Chevy Chase once said that hosting the Oscars was the most thankless job in the world because hosts don't get credit when things go right. You know, the show is not about them, but when things go wrong, usually you pin it on the host back. So it makes sense that you want a pro like Conan up there just doing his thing because he did his thing very well this past Oscar season. I think a lot of people liked it. So Oscars are like, why overthinking? Let's just bring him right back.

Let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Tuesday. For any questions, comments, or feedback, send an email to Morningbrewdaily at MorningBrew. And if you're enjoying the show, share it with a friend, family member, or coworker. Toby, who should everyone listening share it with today? I want you to share the podcast with someone who actually likes poppy. I know you're out there, cereal poppy drinkers. I haven't met one, but I know there must be a lot of you.

So send this poppy pod their way. Let's roll the credits. Emily Milliron is our executive producer. Raymond Loo is our producer. Olivia Graham and Olivia Lake are our associate producers. Yuchinawa Ogu is our technical director. Scoop Starteris is. on audio. Hair and makeup is filling

out their bracket. Any advice is welcome. Devin Emery is our chief content officer and our shows of production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. Aw. Pay off your home. Travel for life. Drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Bucks

Slot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamaba's history. Club Serrano members can earn daily instant prizes and secure a spot in the finale May 29. Don't pass go and own it all. Only at Yamava, celebrating its 40th anniversary. You win? Details at yamava.com must be 21 to enter. Please gamble responsibly.

Monopoly is a trademark of Hasbro. Hasbro is not a sponsor of this promotion.