business news in context, analysis with attitude

Published on: August 13, 2018

by Kevin Coupe

The Chicago Tribune reports that a new study suggests that tattoos no longer seem to be taboo for employers.

“The research, published this month in the journal Human Relations, surveyed more than 2,000 people and found that the inked were just as likely to be employed and to earn as much as the uninked, regardless of the number, visibility or offensiveness of their tattoos,” the story says.

The results actually surprised the study’s authors, who came from the University of Miami Business School. In the past, the story says, “research has found that hiring managers widely perceive people with tattoos to be less employable than those without, even in recent years when the popularity of tattoos has surged. That negative perception is driven in part by other research that has found customers frown upon being served by or buying from people with tattoos, which years ago were associated with countercultural delinquents.”

But now, there appear to be “no adverse employment outcomes for the tattooed, regardless of whether they were men or women, blue-collar or white-collar workers, in management or not. In fact, having one or more tattoos was associated with slightly higher employment and more hours worked, the study found.”

Probably a good thing, and an Eye-Opener, now that unemployment is low and the job market is tight. The story notes that :”thirty percent of Americans had at least one tattoo in 2015, up from 20 percent four years earlier, according to the most recent Harris polls available. Seventy percent of people with tattoos had more than one. Nearly half of millennials are tattooed, compared with 13 percent of baby boomers, the poll found. A third of 40-somethings had tattoos in 2015, up from 14 percent in 2003, changing what it looks like to be middle aged.”

A lot of things are looking different these days, and past expectations may be at odds with present circumstances. The only thing we can do is adjust.

Published on: August 13, 2018

Not surprisingly, there are a number of stories in the press about what happens now that Albertsons and Rite Aid have called off their $24 billion merger, largely because a number of Rite Aid shareholders, including a couple of influential advisory firms, felt that the drug store chain was being undervalued in the proposed deal.

Here’s what the Wall Street Journal has to say about Rite Aid:

“It is a tough time to be in the drugstore business. Investors are hardly enthusiastic about brick-and-mortar retailers of any sort. Worse for pharmacy chains, potential disruption from Amazon looms large, after the retailing behemoth bought online pharmacy PillPack earlier this summer. CVS Health , one of the industry’s heavyweights, plans to diversify into health insurance with its planned acquisition of Aetna.

“Rite Aid’s biggest handicaps are lack of scale and too much debt. The heavily concentrated market for generic-drug buyers makes it hard for smaller players to get a good deal on pricing. Just on Monday, Rite Aid announced its net loss this fiscal year will be $125 million to $170 million because it is getting squeezed on drug prices. And a smaller retail presence makes it easier for health plans to exclude Rite Aid from preferred-pharmacy networks, according to analysts at RBC Capital Markets.

“Going it alone might not be desirable, but Rite Aid might not have many other options. Total debt amounts to nearly five times the current fiscal year’s projected earnings before interest, taxes, depreciation and amortization. That would make a deal by a private equity buyer less compelling. Selling to a larger pharmacy chain doesn’t seem practical in light of those regulatory issues.”

Meanwhile, CNBC writes that “the scuttled deal is just the latest in a string of disappointments for Cerberus, which has unsuccessfully tried to shed Albertsons multiple times. Those efforts include an IPO it abandoned at the last minute in 2015 as well as attempts to combine with both Sprouts Farmer Market and Whole Foods Market last year.

“Cerberus and a consortium of investors formed Albertsons in 2006 and merged it with Safeway in 2015. But the grocery industry has gotten significantly more difficult over the past decade, and Albertsons now finds itself confronted with fortified competitors and hampered with $12 billion in debt.”

Part of the problem is a pair of competitors: Amazon and Walmart. “Both giants are shifting the demographic focus, with Walmart going after higher-income shoppers than traditional, and Amazon going after lower-income. That means Albertsons is getting squeezed from both ends.” At the same time, both Walmart and Kroger have sought to up their digital games to compete with Amazon; while “Albertsons had made some headway in its own digital business, acquiring meal kit company Plated and expanding its partnership with delivery service Instacart … those efforts have been distracted by the efforts to integrate Rite Aid over the past few months and are limited by Albertson's own capital constraints.”

Published on: August 13, 2018

H-E-B announced that it plans to close one of its Houston stores next month “and turn the space into an e-commerce warehouse to support its home delivery and curbside pickup businesses,” the Houston Chronicle reports.

According to the story, the 28,000 square foot store has not been universally accepted by the neighborhood, as some have criticized it for being too small and with an inadequate selection. In fact, H-E-B has almost conceded that fact, saying that the economics of the location and store size simply did not work.

Scott McClelland, H-E-B’s president, says that he is “committed” to bringing a better store to the zip code, but that in the meantime, it is important to develop capacity to service the growing number of customers taking advantage of the retailer’s e-commerce offerings.

Published on: August 13, 2018

The Wall Street Journal has a story about how Barnes & Noble is about to begin looking for a new CEO - who will be its sixth since 2013. The last, Demos Parneros, “was terminated without severance in July for violating company policies,” though the company said it was unrelated to issues of financial reporting.

As it happens, the company’s lack of strong leadership - or even a coherent and well-communicated strategic direction - isn’t just a problem for Barnes & Noble. It also is of significant concern to book publishers, who “have a strong interest in Barnes & Noble running a healthy and stable business, to counteract the clout of Amazon.com Inc. in book retailing.”

Company chairman Leonard Riggio - who also happens to be Barnes & Noble’s biggest shareholder - has told publishers that there is a plan to turn things around, though he has not explained it to them, the story says. One possibility seems to be smaller stores, but beyond that plans are, to say the least, vague.

The Journal writes that “the need for a solid turnaround plan is acute. For the full fiscal year ended April 28, total sales fell 6% to $3.7 billion, while same-store sales, a key economic indicator, decreased 5.4%. The market value of Barnes & Noble has fallen dramatically to $440 million on Thursday from $1.33 billion on Aug. 10, 2015.”

The need for a solid turnaround plan is acute. For the full fiscal year ended April 28, total sales fell 6% to $3.7 billion, while same-store sales, a key economic indicator, decreased 5.4%. The market value of Barnes & Noble has fallen dramatically to $440 million on Thursday from $1.33 billion on Aug. 10, 2015.

Published on: August 13, 2018

The Washington Post has a story about how, since “children and preteens are more connected to the Internet than ever … retailers are looking for new ways to market — and sell — directly to young shoppers on their phones, tablets and laptops. Gone are the days of blanket television ads, marketing experts say. Instead, companies are flocking to Snapchat, YouTube Kids and other mobile apps to reach children with personalized messages.”

Since the back-to-school selling season is in full swing, this is prime time for such marketers: “Brands such as Five Star, which makes binders and folders, and Red Bull, the energy drink maker, have released new back-to-school filters on Snapchat, while clothing chain Justice is advertising in-store fashion shows on its app. Families are expected to spend an average of $685 per household on clothing, shoes and other items for school-age children in the coming weeks, according to the National Retail Federation.”

But, the Post writes, “advocacy groups say marketing to children directly on their smartphones — where companies can collect data on users and tailor ads to specific consumers — raises a number of concerns, not just about privacy but also about the kind of influence those ads may have on children.”

Published on: August 13, 2018

The New York Times reports that a California jury ruled on Friday that Monsanto was culpable in a case where a school groundskeeper’s cancer by the company’s weedkillers, including Roundup. Monsanto has been ordered to pay $289 million in damages, though it says it will appeal the verdict, maintaining that its weedkillers are safe and did not cause his cancer.

The story notes that this was just “the first lawsuit to go to trial alleging that Roundup and other glyphosate-based weedkillers cause cancer. Monsanto, a unit of the German conglomerate Bayer following a $62.5 billion acquisition, faces more than 5,000 similar lawsuits across the United States.”

The groundskeeper claimed to have “developed non-Hodgkin’s lymphoma after using Roundup and Ranger Pro, another Monsanto glyphosate herbicide, as part of his job as a pest control manager for a California county school system.”

While the US Environmental Protection Agency (EPA) has gone on record as saying that glyphosate - the main ingredient in its weedkillers - does not cause cancer, the Times notes that the World Health Organization (WHO) has classified it as “probably carcinogenic to humans.” The plaintiff’s attorneys maintained that Monsanto has known that the weedkiller is a carcinogen for decades, and that the verdict came because the jurors had seen documents proving this case.

The groundskeeper’s cancer is so severe that he is not expected to live past 2020.

Published on: August 13, 2018

The Washington Post has a story about biotech firm Calyxt, which has developed a new “healthier” soybean oil, described as “the industry’s first true gene-edited food.”

This new oil “could make its way into products such as chips, salad dressings and baked goods as soon as the end of this year,” the Post writes. “Unlike older genetic modification methods, the new techniques are precise, fast and inexpensive, and companies hope they will avoid the negative reputation and regulatory hurdles that hobbled the first generation of genetically modified foods.

“But the speed of change has startled consumer and environmental groups, who say the new technology has not been adequately vetted, and they have petitioned regulators to add further safety reviews.”

Calyxt is not alone. Scientists at universities and in business “are already designing plants that are more nutritious, convenient and sustainable, they say. Gene editing’s low cost has empowered smaller players to compete in a field that has long been dominated by huge agribusiness companies … universities around the country are working on plants that will withstand droughts, diseases and the ravages of climate change. Such improvements, underway in crops as diverse as oranges, wine grapes and cacao, could protect these plants in the future while cutting down water and chemical use, experts say.”

You can check out the entire story here.

Published on: August 13, 2018

The New Yorker, one of the best magazines in America, has written about many things, and over the years MNB has highlighted a number of them.

But this week, the story that drew my attention was unexpected - it was about the pleasures of iceberg lettuce.

An excerpt:

“There are many categories of salad snob - the ingredient minimalists, the chop evangelists, the dressing-goes-in-the-bowl-first brigade - but perhaps the most vocal, and the most misguided, are those dedicated to the denigration of iceberg lettuce. To its detractors, iceberg is the avatar of commodity gastronomy - ‘the polyester of lettuces’ is a popular gibe. The influential Times food editor Craig Claiborne famously loathed it. ‘It is omnipresent,’ Alice Waters, goddess of the farmer’s market, sniffed in a 2001 interview. ‘It doesn’t have a season,’ she said. ‘It doesn’t have a sense of place.’ The only thing iceberg really has going for it is durability, this line of thinking goes—it’s a lettuce for growers, shippers, warehousers, and sellers, not a lettuce for eaters. But, like its glacial namesake, iceberg lettuce has a lot more going on beneath the surface.”

It is a good piece … and it comes with recipes. Including one, go figure, for Chilled Iceberg Soup. You can read it here.

Published on: August 13, 2018

• The BBC reports that Marks & Spencer closed down seven more stores over the weekend, part of its overall closure by 2022 of 100 stores that it says “is ‘vital’ for its future.”

According to the story, “M&S is attempting to re-shape itself at a time when the High Street is under unprecedented pressure … Under its plan, M&S wants to move a third of its sales online and plans to have fewer, larger clothing and homeware stores in better locations.
It says it is facing competition from online retailers, as well as discounters such as Aldi, Lidl and Primark.”


• The Wall Street Journal reports that “activist investor Third Point LLC is pushing for a sale of Campbell Soup Co. with the help of an heir to the soup company’s founder.”

The story says that the investment group, which owns more than five percent of Campbell Soup, has concluded that “‘given the significant obstacles’ facing Campbell, a sale to another food maker is ‘the only justifiable outcome’.” Third Point says that it “has the backing of George Strawbridge Jr. , the grandson of the inventor of Campbell condensed soup,” who owns 2.8 percent of the company” and has expressed discontent about the company’s direction.

The story notes that “Campbell’s soup sales have declined over the past year while its attempts to make more fresh food have backfired. Campbell Chief Executive Denise Morrison stepped down in May, and the company said it would conduct a strategic review.”


• In Minnesota, the Star Tribune writes about how Buffalo Wild Wings is hoping that sports betting - now legal after the US Supreme Court struck down prohibitions on the practice earlier this year - will give the chain an infusion of energy and customers.

While the story says that Buffalo Wild Wings is early in the process, the company said that “as the largest sports bar in America, we believe Buffalo Wild Wings is uniquely positioned to leverage sports gaming to enhance the restaurant experience for our guests. We are actively exploring opportunities, including potential partners, as we evaluate the next steps for our brand.”

Published on: August 13, 2018

On the subject of meal kits, now becoming more visible in supermarkets as the independent subscription model seems to lose traction, MNB reader George Denman wrote:

Why aren’t the savvy retailers creating a demonstration station near the meal kit offerings to show consumers just how easy these kits are to prepare, and creating the same “popcorn” experience and smell you get walking into a movie theatre.

The savvy ones will. But more won’t, and then will wonder why they’re losing sales and market share.



Regarding the fast fading MoviePass, one MNB reader wrote:

Sounds a lot like the Blockbuster online moves shortly before disappearing altogether.



Chiming in on our discussion of the cost of credit cards, one MNB reader wrote:

Last night, I was paying my son’s college tuition for the upcoming semester.  I was going to pay by credit card, until I saw that the additional fee was $110.  So, I chose to pay by debit for no fee.  It was a good reminder that credit card usage is not free.



One MNB reader last week suggested that Aldi will be a significant disruptor, but another MNB reader begs to differ:

Aldi a disruptor? Not yet, maybe not ever. I have two near me, both with a Market Basket and Shaw's to compete with. They have been there for years now, doing around 100k a week.(5 mil a year, so not bad) Same store sales have not been affected at either competitor.
I'm sure they are glad to take a small chunk of business, but a major disruptor? No.



Not everyone agreed with the study we mentioned last week into companies identified as most ethical. Most MNB reader wrote:

I literally snorted when I read the list of top ethical companies. I’d love to know what criteria people used besides, “Oh, these are my favorite places, so since I think I’m ethical, these places are too!”.

I guess my definition of ethical includes different things.

From another reader:

Wal-Mart??? To a lesser extent: McDonalds? I wasn’t trained by Jesuits, but apparently I take ethical behavior more seriously than the people who answered the survey.



Last week we took note of a Reuters story about how Kroger “is experimenting with a variety of technologies as it battles Amazon.com and Walmart Inc to find a profitable formula to serve customers who want milk and eggs whisked to their doorsteps.” One interesting tidbit from the story:

“Chief Financial Officer Mike Schlotman revealed for the first time that the company never made money on Home Shop, a roughly 30-year-old delivery service it shuttered in April. Kroger offered it in just 20 stores in the company’s King Soopers division in the Rocky Mountain area, for prices ranging from $10.95 for an internet order to $20.90 for telephone orders. That was not enough to cover the cost of labor and the expense of operating a fleet of refrigerated trucks … Kroger replaced Home Shop with Instacart, one of a handful of third-party delivery firms that now serve more than 1,200 Kroger stores.”

One MNB reader wrote:

Was surprised today by the fact that you missed an opportunity to take a shot at Instacart. As a former retailer who launched Instacart in NYC, I resemble Schlotman’s remark for independents however was frankly shocked that you didn’t lay into Kroger for saying that in light of past commentary.

Still think that there is a place for Instacart especially in a world where grocery retailers are still eons behind in technology and have zero attention span. Their first focus needs to be the IN STORE experience because that is where they are going to win. They are not going to be better at home delivery than Amazon (it’s their freaking core competency) and based on the fact that the grocery industry is allergic to tech investment, they should leave the mechanics of delivery to others until they figure out how to revolutionize the in store experience. Most retailers still don’t even mine their front end data, so they don’t truly know who shops their store. If they are going to invest, they need to invest those tech dollars into understanding who their customers are and how to sell more to them. Spending them instead on outdate in-house platforms for e-commerce has buried many execs (I know a few!!) and yielded next to nothing.



On another subject, from MNB reader Mike Bach:

Great of you to share the Globe story on civility. It’s always good to read things on MNB which challenge and inform us on the retail landscape.  We need personal growth stories woven in to remind us that how we do things matters as much as what we do.

As one who’s worked in the most kind place on Earth (Kansas) before and early in my working career, the change is most noticeable.  Parents definitely have to instill the “civility” quality early on for any “stickiness” to exist.  I often think that people show civility today only when they want something.

What I attribute the change to is social media.  Humans are (becoming even) more disconnected. I wish I would have known social media would become so pervasive, when my Son was younger.  (Even though I really wonder what I’d have done differently…)
 
It’s not all about social media, though.   I’m guilty as charged and I don’t use social media.  I want to be #1 in the zone assigned on my airline boarding card.  I hustle on the plane to put my bag/s overhead before others get to same row so I can easily retrieve my bags after stretching my legs for the duration of the flight.  I see it as a badge of honor to use the HOV lane (when I’m late somewhere).   I can’t blame my Parents for that – its on me.   I’m thankful to you for the “Friday reminder” to live better.



From Portland, Oregon, last week, I mentioned the fact that Bon Appétit named Portland, Maine, the 2018 Restaurant City of The Year.

MNB reader Thomas Gordon wrote:

As someone who grew up in Portland, Maine, its been fun to watch the last decade as my hometown has started to get recognized nationally.  It has won most liveable city (Forbes), Best town in the East (Outside Magazine), voted one of the coolest small cities in the US (GQ), and there have been a bunch of other awards as well.
 
Plus, you should love the original Portland (as the two founders of Portland, Oregon were from New England, and named the city after the original Portland.
 
I would have thought you would have been up on Portland, Maine given your time in the Northwest.  You might have seen the Seattle Sounders marketing campaign about how they love Portland (Maine).
 
I think you need to make that road trip happen so you can check it out!  Let me know if you want some insider restaurant recommendations!

I will.



One MNB reader had a thought about a study by Nielsen about how - and how much - American adults interact with media … and the numbers were a little Eye-Opening:

When I read any survey, I like to see who wrote/paid for that survey.

So when a media company surveys a media outlet, itself, I wonder how valid their results are? Are their results self serving?

I would normally share your skepticism, but this is what Nielsen does. I see no reason to doubt their numbers.



And finally, last week we noted a Chicago Sun Times report that “a Chicago Walmart store was temporarily closed Wednesday after a health inspector found over 400 rodent droppings throughout the store … According to the health inspection report, there were 405 mouse droppings throughout the store, including 35 droppings under the cereal and snack shelves, 100 droppings along the wall of the dog food and toilet paper shelves and 25 droppings in the bakery section.”

Leading MNB reader Kerley LeBoeuf to write:

"100 droppings along the wall of the ...... toilet paper shelves” suggests the rodents of Chicago are more sophisticated than those in Virginia.