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

The Cautionary Tale of Outdoor Voices with Sammi Cohen

By Money News Network

In this episode of Money Rehab with Nicole Lapin, Sammi Cohen examines the rise and fall of activewear brand Outdoor Voices. The discussion covers how founder Ty Haney identified a gap in the athletic wear market, targeting millennial women seeking casual activewear for daily activities, and how the company's "doing things" ethos resonated with social media trends.

The conversation then explores the company's financial troubles, including excessive spending on non-essential items and leadership conflicts. Cohen details how tensions between Haney and retail executive Mickey Drexler led to Haney's departure in 2020, followed by a sharp decline in company valuation from $110 million to $40 million, ultimately ending in the company's acquisition by Consortium Brand Partners in 2024.

The Cautionary Tale of Outdoor Voices with Sammi Cohen

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The Cautionary Tale of Outdoor Voices with Sammi Cohen

1-Page Summary

The Founding and Early Success of Outdoor Voices

In 2014, Ty Haney, a 24-year-old Parsons School of Design graduate, launched Outdoor Voices after identifying a gap in the athletic wear market. While established brands focused on performance wear, Nicole Lapin notes that Haney recognized an untapped market for casual activewear suited to everyday activities.

The brand specifically targeted millennial women seeking comfortable athletic clothing for daily wear, not just intense workouts. Sammi Cohen explains that Outdoor Voices' "doing things" ethos aligned perfectly with casual lifestyle trends on social media, such as the "hot girl walk." This successful branding strategy, combined with their inclusive approach to physical activity, led to the opening of 16 stores.

Leadership Turmoil Led To Company's Downfall

Despite its apparent success, Sammi Cohen reveals that Outdoor Voices struggled with profitability due to excessive spending that didn't drive sales, including $45,000 on fresh flowers and $36,000 on sparkling water. The situation worsened when veteran retail executive Mickey Drexler joined the company, leading to strategic clashes with Haney. Drexler's focus on business fundamentals conflicted with Haney's community-oriented approach, ultimately contributing to Haney's departure in 2020.

Financial Troubles and Acquisition

Following Haney's exit, Outdoor Voices faced significant challenges. The company's valuation dropped dramatically from $110 million in 2018 to $40 million in early 2020. Despite attempts to stabilize under various leaders, including Cliff Moskowitz and Ashley Merrill, the company continued to struggle. In March 2024, Outdoor Voices closed all its stores, and by June 2024, Consortium Brand Partners acquired the company.

1-Page Summary

Additional Materials

Counterarguments

  • The identification of a market gap by Ty Haney could be seen as a common entrepreneurial move rather than a unique insight, as the activewear market is known for its rapid evolution and the emergence of niche segments.
  • Targeting millennial women with comfortable athletic clothing for daily wear might not be as innovative as it seems, considering the broader trend towards athleisure that many brands have capitalized on.
  • The "doing things" ethos, while resonant with social media trends, may not be a strong enough differentiator in a crowded market where lifestyle branding is common.
  • The opening of 16 stores could be critiqued as an overexpansion, especially for a startup that might not have established a sustainable business model.
  • The profitability issues due to excessive spending might reflect a deeper problem in the company's understanding of fiscal responsibility and budgeting, rather than just poor decision-making on specific expenses.
  • The leadership clash between Mickey Drexler and Ty Haney could be indicative of a broader issue within the company culture or governance structure that made it difficult to integrate diverse management styles.
  • The drop in valuation might not only reflect leadership issues but also market conditions, changes in consumer behavior, or increased competition.
  • The struggles under various leaders could suggest that the problems were systemic and not solely related to the individuals in charge.
  • The closure of all stores in March 2024 might have been a strategic decision to pivot to a more sustainable business model, such as e-commerce, rather than a straightforward indicator of failure.
  • The acquisition by Consortium Brand Partners could be seen as an opportunity for the brand to restructure and potentially thrive under new ownership, rather than an end to its independent operations.

Actionables

  • You can analyze market gaps by observing your own needs and those of your peers, just as Ty Haney did when she founded Outdoor Voices. Start by noting down areas where you feel current products or services don't meet your expectations. For example, if you're a cyclist who can't find the right gear, consider what would make the ideal product for you and your cycling community.
  • Embrace a lifestyle ethos in your personal brand or business venture to connect with like-minded individuals. If you're passionate about sustainability, for instance, integrate that into your daily life and share your journey on social media. This could involve starting a blog about eco-friendly living or creating a hashtag for your community to share their sustainable practices.
  • Learn from the challenges of Outdoor Voices by keeping a close eye on your budget, focusing on essential spending. Create a simple spreadsheet to track your personal or business expenses, categorizing them into 'essential' and 'non-essential'. Regularly review and adjust your spending, ensuring that you prioritize costs that directly contribute to your goals, like investing in quality materials for a start-up rather than splurging on fancy office decor.

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The Cautionary Tale of Outdoor Voices with Sammi Cohen

The Founding and Early Success of Outdoor Voices

The founding story of Outdoor Voices is one of recognizing a gap in a well-established market and successfully filling that niche with a unique product and message that resonates with a specific demographic.

Outdoor Voices, Founded In 2014 by Boulder Designer Ty Haney, Fills a Casual Activewear Niche

At just 24 years old, Ty Haney, a graduate of the Parsons School of Design and Boulder, Colorado native, launched Outdoor Voices. Haney identified a significant gap in the athletic wear sector, which legacy brands had saturated by focusing primarily on performance activewear. There was, however, a lack of brands addressing those who sought an activewear suited to a more laid-back, everyday experience.

Nicole Lapin emphasized Haney's keen observation of the white space in the market for casual activewear—apparel that people could wear for a leisurely day of activity or simply for comfort without the pressure of high-performance athletics.

Haney's Target: Millennial Women Seeking Comfortable Athletic Clothing For Everyday Activities

Haney's vision was to create athletic wear tailored for individuals who prefer clothing suitable for recreational activities and errands. This approach specifically targeted young millennial women who desired to sport athletic clothes in a casual context, not strictly for intense workouts.

The early success of Outdoor Voices owes much to aligning with the preferences of millennial women who emphasize comfort and ease in their daily lives. This demographic quickly embraced the brand, captivated by its unique positioning in the activewear market.

Brand's "Doing Things" Ethos and Playful Branding Fueled Popularity, Opening 16 Stores

Sammi Cohen pointed out that Outdoor Voices' "doing things" ethos matched perfectly with the casual lifestyle trends pervasive in social media, such as the "h ...

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The Founding and Early Success of Outdoor Voices

Additional Materials

Counterarguments

  • While Outdoor Voices successfully targeted millennial women, it's possible that the brand's focus on a specific demographic may have limited its appeal to a broader audience, including older generations or men who might also be interested in casual activewear.
  • The success of a niche market strategy, such as the one employed by Outdoor Voices, might not be sustainable in the long term as larger brands could easily pivot to include casual activewear in their product lines, increasing competition.
  • The "doing things" ethos, while popular, may not resonate with all consumers, particularly those who prefer activewear that emphasizes performance and technical features.
  • The opening of 16 stores is a sign of early success, but it also represents a significant financial risk and overhead, which could be challenging for a startup in a competitive market if growth slows or market trends shift.
  • The reliance on social media trends for branding, such as the "hot girl walk," may subject the brand to the volatility of social media where trends can change rapidly, potentially affecting the bra ...

Actionables

  • Identify a niche market by observing your own community's unmet needs, much like spotting the gap for casual activewear. For example, if you notice that your local area has a lot of pet owners but lacks a self-service dog wash station, consider creating a business plan for one. This taps into a specific need that can foster a loyal customer base.
  • Create a personal brand that aligns with your lifestyle and values, and share it on social media to connect with like-minded individuals. If you're passionate about sustainable living, start a blog or Instagram account showcasing your eco-friendly habits, from zero-waste cooking to thrift shopping. This can attract a community that shares your ethos and can lead to opportunities such as partnerships with sustainable brands.
  • Embrace inc ...

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The Cautionary Tale of Outdoor Voices with Sammi Cohen

Leadership Turmoil Led To Company's Downfall

Outdoor Voices, a company that appeared successful from the outside, faced an internal financial downfall due to a misalignment of expenses and sales growth, as well as leadership clashes that continued through to the exit of its founder.

Despite Rapid Growth, Outdoor Voices Was Unprofitable Due to Expenses Not Driving Sales

Sammi Cohen disclosed that despite rapid expansion and the outward growth of Outdoor Voices, the company was unprofitable. The company incurred frivolous expenses, such as spending $45,000 on fresh flowers and $36,000 on Topo Chico sparkling water, which failed to contribute to an increase in sales. This spending did not produce a return on investment, indicating a disconnect between the company's outlays and its sales performance. This became characteristic of the company, resulting in financial instability as it committed to long-term leases for newly expanded stores while spending excessively. The interviewee suggests a need for a focus on slower, more profitable growth and maintaining a strong customer connection, something that Outdoor Voices initially did well.

Veteran Retail Executive Drexler Clashed With Founder Haney Over Strategy

Mickey Drexler, a veteran retail executive known for his tenure at J. Crew and Gap, was brought into the company to leverage his extensive legacy retail experience. His focus on business fundamentals, such as profit margins and unit economics, was crucial for achieving profitability and contrasted sharply with founder Ty Haney’s community and social me ...

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Leadership Turmoil Led To Company's Downfall

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Clarifications

  • Outdoor Voices is a popular activewear brand known for its focus on inclusivity and community engagement. Founded by Ty Haney in 2014, the company gained a strong following for its stylish and comfortable athletic wear. Outdoor Voices differentiated itself by promoting a balanced approach to fitness and wellness, emphasizing the importance of recreational activities and everyday movement. The brand's success was attributed to its early emphasis on building a loyal customer base through social media and community events.
  • The financial downfall of Outdoor Voices was primarily due to excessive and unproductive spending on items like fresh flowers and sparkling water, which did not translate into increased sales. This misalignment between expenses and revenue generation led to financial instability within the company. Additionally, committing to long-term leases for new stores while overspending exacerbated the financial challenges faced by Outdoor Voices. The lack of a clear return on investment from these expenses highlighted a disconnect between the company's financial decisions and its sales performance.
  • The leadership clashes at Outdoor Voices primarily stemmed from differing business strategies between founder Ty Haney and veteran retail executive Mickey Drexler. Drexler's focus on traditional business metrics clashed with Haney's emphasis on community and social media marketing. This clash led to internal conflict, ultimately resulting in Haney's departure from t ...

Counterarguments

  • Misalignment of expenses and sales growth is a common issue in startups, and it can sometimes be a strategic choice to invest in brand building before focusing on profitability.
  • Frivolous expenses could be part of a broader brand-building strategy that may not yield immediate sales but could contribute to long-term brand recognition and customer loyalty.
  • The high spending on items like fresh flowers and sparkling water might have been intended to create a unique brand experience that differentiates Outdoor Voices from competitors.
  • Long-term leases for stores could be seen as a strategic investment in prime retail locations, anticipating future growth despite current financial instability.
  • A focus on slower growth might not always be the best strategy in a competitive market where rapid expansion can be crucial to capturing market share.
  • Mickey Drexler's traditional retail experience might not have been fully adaptable to the modern, digital-first retail landscape that Outdoor Voices was part of.
  • Ty Haney's community and social media marketin ...

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The Cautionary Tale of Outdoor Voices with Sammi Cohen

Financial Troubles and Acquisition of Outdoor Voices

Post-Haney Exit, Outdoor Voices Struggled With Interim and New CEOs to Regain Footing

After founder Tyler Haney stepped down, athletic apparel company Outdoor Voices faced significant challenges trying to stabilize its operations with new leadership.

2020 Down Round: Valuation Dropped From $110M To $40M

Following Haney's departure, Outdoor Voices experienced a substantial reduction in its company valuation. In 2018, the company was valued at $110 million; however, by early 2020, during a funding round, the valuation plummeted to $40 million. This financial setback was discussed in relation to the company's struggles to maintain its market position amidst leadership changes.

Outdoor Voices Acquired by Consortium Brand Partners After 2024 Store Closures

In March 2024, Outdoor Voices made the drastic move to close all of its store locations, which stirred up uncertainty regarding the company’s future trajectory. Not long after, in June 2024, Consortium Brand Partners stepped in to acquire Outdoor Voices. This acquisition occurred amidst a background of rapid leadership changes within the company, with a "revolving door" of different leaders trying to steer Outdoor Voices in a new direction after Haney's exit.

...

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Financial Troubles and Acquisition of Outdoor Voices

Additional Materials

Clarifications

  • A down round in financial terms occurs when a company raises funds at a valuation lower than its previous funding round. This can indicate a loss of investor confidence or a decline in the company's perceived value. Down rounds can impact existing shareholders negatively by diluting their ownership stakes. It is often seen as a sign of financial distress or challenges within the company.
  • Consortium Brand Partners is a company that acquired Outdoor Voices after its struggles with leadership changes. They are known for holding a significant stake in Draper James, a brand associated with Reese Witherspoon. The acquisition by Consortium Brand Partners signaled a new chapter for Outdoor Voices as they aimed to refocus on their core strengths. This move was seen as a strategic decision to help Outdoor Voices regain stability and potentially grow under new ownership.
  • Outdoor Voices made the decision to close all its store locations in March 2024 due to financial difficulties and challenges in maintaining its market position. The closures were part of a strategic move to address the company's operational and financial issues amidst leadership changes and declining valuation. This decision aimed to streamline operations and refocus the company's efforts towards a more sustainable business model. The store closures were followed by the acquisition of Outdoor Voices by Consortium Brand Partners in June 2024.
  • The interim CEOs, Cliff Moskowitz and Ashley Merrill, faced challenges in stabilizing Outdoor Voices due to the company's financial troubles and leadership instability following founder Tyler Haney's departure. Despite their efforts, the company struggled to regain its market position and faced difficulties in maintaining operational continuity. The revolving door of leadership changes added to the complexity of the situation, making it challenging for the interim CEOs to implement long-term ...

Counterarguments

  • The valuation drop from $110 million to $40 million could reflect market conditions or investor sentiment rather than just internal company issues.
  • Closing all store locations might have been a strategic move to pivot towards a more sustainable, online-focused business model in response to changing consumer behaviors.
  • The acquisition by Consortium Brand Partners could bring in new resources and expertise that might eventually lead to a successful turnaround, even if immediate restoration of the company's former status was not achieved.
  • Leadership changes are common in the industry, and interim leaders like Cliff Moskowitz and Ashley ...

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