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    Published on: May 21, 2020

    Today, KC wants to tell you about the life lesson he learned yesterday morning when, while out for a bike ride, he was involved in a collision with a truck.  (The truck won.  But - spoiler alert - he lived to tell the tale.)

    Published on: May 21, 2020

    The New York Times this morning reports that people returning to office buildings in coming weeks may have more to worry about than contracting the coronavirus from fellow employees.

    According to the story, "Office buildings once filled with employees emptied out in many cities and states as shelter-in-place orders were issued. These structures, normally in constant use, have been closed off and shut down, and health risks might be accumulating in unseen ways."

    Like Legionnaires’ disease.

    Here's how the Times sketches out the potential problem…

    "'The buildings aren’t designed to be left alone for months,' said Andrew Whelton, an associate professor of civil, environmental and ecological engineering at Purdue University.

    "Dr. Whelton, other researchers and public health authorities have issued warnings about the plumbing in these buildings, where water may have gone stagnant in the pipes or even in individual taps and toilets. As lockdowns are lifted, bacteria that build up internally may cause health problems for returning workers if the problem is not properly addressed by facilities managers. Employees and guests at hotels, gyms and other kinds of buildings may also be at risk.

    "The biggest worry is Legionella pneumophila. The bacteria can cause Legionnaires’ disease, a respiratory condition. It leads to death in about one in 10 cases, according to the Centers for Disease Control and Prevention. The National Academies of Science, Engineering, and Medicine estimates that over 52,000 Americans suffer from the disease each year."

    In other words, just another Eye-Opener, and something else to keep us all awake at night…

    Published on: May 21, 2020

    From the Wall Street Journal this morning:

    "Workers filed 2.4 million unemployment claims last week, a slight drop-off from previous weeks since the economic fallout from the coronavirus began."

    This means that more than 38 million people have filed for unemployment benefits in just the last nine weeks.

    "Hundreds of thousands of self-employed and gig-economy workers are receiving unemployment benefits for the first time through a temporary coronavirus-related program, but those claims aren’t reflected in overall totals since the pandemic started more than two months ago," the Journal writes.

    "The omission of self-employed workers means the actual number of people seeking claims has been higher since the federal program called pandemic unemployment assistance, included in a stimulus package approved in late March, got under way.

    Published on: May 21, 2020

    Albertsons announced yesterday that private equity group Apollo Global Management is spending $1.75 billion to acquire 17.5 percent of the retailer's stock.

    Reuters writes that the stock purchase is "a sign of confidence in the debt-laden U.S. supermarket operator whose fortunes have picked up in the coronavirus outbreak.

    "The parent of grocery chains such as Safeway, Vons and Acme for years struggled to generate enough earnings growth to pursue an initial public offering (IPO) that would allow its owners, including private equity firm Cerberus Capital Management LP, to cash out.

    "But the pandemic has fueled a boom in its business as consumers who stay at home buy more groceries. Albertsons said last month that its sales in March and most of April were up 34% from last year."

    “Albertsons Companies is pleased to work with Apollo and its co-investors. Apollo knows our industry and business model well, given its significant prior history of successful investments in the grocery sector. We believe the investment led by the Apollo Funds represents a vote of confidence in both our business and our long-term strategy,” said Vivek Sankaran, President and Chief Executive Officer of Albertsons Companies. “We are also proud to have the continued support of our owners, led by Cerberus Capital Management. We appreciate their tremendous support over the years in operations, technology and financing as we have grown our business and our platform, and especially during the COVID-19 pandemic as we focus on the safety and well-being of our associates, customers and communities."

    KC's View:

    What I find interesting - and illustrative, for better or worse, of the world in which we find ourselves, is that this deal makes clear that Albertsons is valued at about $10 billion.

    I'm told that as it goes out to raise more money, Instacart is valuing itself at between $12 billion and $14 billion.

    I'm not saying that Instacart is worth that.  (My feelings about Instacart are fairly well known.)  But I do find the comparison to be striking.

    Published on: May 21, 2020

    The McChrystal Group, founded by former Gen. Stanley McChrystal, is featuring a series of online dialogues with business executives in which they talk about leadership issues.

    The current one is with Starbucks COO Roz Brewer, and it is totally worth listening to here.

    "The times when I actually have focused on the temporary results instead of the whole picture, the results have been very temporary."  Sustainable results, she says, can only be achieved "if you get the opportunity to think about how you are impacting the people who work for you, the people that you serve as customers, and the community that has to follow you."

    Published on: May 21, 2020

    The Wall Street Journal has an extensive interview with John Furner, CEO of Walmart US.  Excerpts:

    •  Re: the shift to online shopping … "It would be hard to say exactly how long any of these changes last, although I believe many of them will be permanent. We had some periods in the quarter when we saw as much as 300% growth rates with the [online grocery] pickup business. We slowed our pickup business while we focused on replenishing and restocking stores, then we quickly added back pickup slots. We’re at the highest slot level we’ve ever been, and we are still looking for more ways to innovate to either add more stores or more slots per store."

    •  Re: competing with Amazon Prime … "One of the advantages Walmart has is the store footprint, and layered on the footprint is the ability for shoppers to come in, buy off the shelf, pick up or have things delivered. Customers will continue to come back and return to shop either online or in-store as long as we deliver. It’s really the nature of being an omnichannel retailer that has helped Walmart in the last few months."

    •  Re: Walmart+, which is designed to offer Amazon Prime-style advantages … "It’s on the road map, for sure. We’re not quite there yet. In the last couple of months, the acceleration of change from our customers is the fastest I’ve seen it in the U.S. It’s important we continue to build for the future. Walmart+ would be a part of that."

    Published on: May 21, 2020

    Random and illustrative stories about the global pandemic and recovery efforts, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  In the US, there now are 1,593,039 confirmed cases of the Covid-19 coronavirus, with 94,941 deaths and 370,812 reported recoveries.

    Globally, there now are 5,106,100 confirmed coronavirus cases, 330,004 fatalities, and 2,035,670 reported recoveries.


    •  Fox News reports that the Centers for Disease Control and Prevention (CDC) is now saying that the Covid-19 coronavirus  “does not spread easily” from "touching surfaces or objects," which is a shift from recent guidance.

    However, the story says, "experts warn that doesn’t mean it’s no longer necessary to take 'practical and realistic' precautions in stopping the spread of COVID-19."

    The story says that "the CDC now includes 'surfaces or objects' under a section that details ways in which the coronavirus does not readily transmit.  Other ways in which the virus does not easily spread is from animals to people, or from people to animals, the federal agency said on its updated page."

    Fox News notes that the shift "comes after The Food and Drug Administration (FDA) in mid-April issued a statement saying that there’s no need to wipe down food packaging after you’ve returned home from the grocery store."


    •  From the  Financial Times:

    "The rapid spread of coronavirus in the southern hemisphere suggests it is likely to flare up again in the US this autumn and winter, raising the possibility of a second round of lockdowns this year, the head of the nation's public health body has told the Financial Times. Robert Redfield, director of the Centers for Disease Control and Prevention (CDC), warned the US would have to increase its disease-tracking capabilities rapidly in the next few months to avoid another public health crisis as seasonal flu coincides with a second wave of Covid-19."

    According to the story, "Dr. Redfield blamed the high US death rate on two factors: a lack of funding for public health organisations such as the one he runs; and high levels of underlying health conditions such as obesity and diabetes.  'What this outbreak has shown is that the underlying occurrence of some key co-morbidities in the American public is greater than it should be,' he said.  'We need to work to try to develop programmes that help improve the public health of America.'  He added that avoiding a similar public health disaster in the future would involve doubling or tripling investment in the US public health system."

    I'd mostly be concerned about the possibility/probability of a resurgence in the fall, which could have devastating economic implications.


    •  Axios reports that "several Southern states are seeing a rise in new coronavirus cases, moving them further away from an important target for safely reopening parts of their economies."

    The story goes on:  "The total number of cases is an important piece of the puzzle — but it's only one piece.

    "The number of new cases will rise as a state performs more testing, so looking at this metric in isolation can give the false impression of a worsening outbreak.

    "Some of the states where new cases are increasing — including Arkansas, North Carolina and North Dakota — also fare poorly in a more holistic analysis that accounts for other metrics."

    Clearly, there will be more cases on the books because we're going more testing.  But the pictures that were all over the internet yesterday showing people clustered together and not wearing masks can only result in more cases that will be reported after testing.


    •  National Public Radio (NPR)says that a new NPR/PBS NewsHour/Marist poll finds that "two-thirds of Americans do not expect their daily lives to return to normal for at least six months, and as states reopen, three-quarters are concerned that a second wave of coronavirus cases will emerge."

    "There's a great sense that normalcy is not around the corner," said Lee Miringoff, director of the Marist Institute for Public Opinion, which conducted the poll.


    •  From USA Today:

    "Pier 1 Imports, which previously said it would close half of its fleet of stores, now plans to close all of its locations.

    The retailer, based in Fort Worth, Texas, announced … that it was seeking bankruptcy court approval to begin an 'orderly wind-down' when stores are able to reopen 'following the government-mandated closures during the COVID-19 pandemic.'

    "In January, Pier 1 said it planned to close up to 450 stores, or nearly half of its locations. It then filed for Chapter 11 bankruptcy protection in February."


    •  Victoria's Secret announced yesterday that it plans to permanently close about 250 of its US stores, which represents about 25 percent of its US fleet.

    At the same time, its parent company L Brands said it would permanently close 50 Bath & Body Works stores in the U.S. and one in Canada.

    USA Today writes that this is just continuing bad news for the company:  "In February, L Brands announced a deal to sell 55% of Victoria’s Secret to Sycamore Partners, a New York private equity firm. After the pandemic struck, Sycamore went to court to back out of the deal and in early May, both parties called it off."

    Which has to be a considerable blow to all the malls where Victoria's Secret has a fairly sizable presence.

    This is yet another sign - albeit a scantily dressed one - of how the American consumer experience is changing right before our eyes.


    •  Media Daily News reports that market researcher Global Web Index is out with a new study saying that "consumers are shifting from an 'acute' phase of concern about the pandemic to a 'transitory' phase that will ultimately lead to 'normalcy'."

    The story says that the findings "show that both 'global' and 'local' concerns about the disease appear to have stabilized among consumers worldwide and in the U.S., and that the new normal will nonetheless suggest some fundamental changes for both brand marketers and consumers."

    Some of the findings:  "Fifty-six percent of consumers across the national markets surveyed said they approve of brands advertising as normal -- a number that dips slightly to 49% in the U.S." … "Eighty percent of consumers worldwide, and 73% of Americans, said they believe brand marketers should offer flexible payment terms for purchasing their products" … "71% of consumers worldwide and 68% of Americans said they should offer lower-cost versions of their products and services" … "Three-quarters of consumers want brands to help produce 'essential' products and services that are necessary for society, while Americans are much more in favor than the rest of the world of wanting brands to continue producing non-essentials."


    •  From the Los Angeles Times:

    "Coronavirus may have spread at a church service. Now the pastor is speaking out

    Pastor of church where 180 were exposed to coronavirus at Mother’s Day service explains what happened

    "A Butte County pastor who defied public health officials and held an in-person Mother's Day service that potentially exposed 180 congregants to the coronavirus has spoken out about his decision on social media.

    "In a Facebook post on Friday, pastor Mike Jacobsen of Palermo Bible Family Church said that an asymptomatic congregant who attended the May 11 service woke up the next morning 'needing medical attention' and was tested for the coronavirus that day.  The congregant received positive test results for COVID-19 two days later.

    "Jacobsen, who with his wife has led the pentecostal church since 2008, said in the post that he would 'never with knowledge put anyone in harms [sic] way'."

    I guess my problem with this is that it wasn't hard to have the knowledge that bringing people together in close quarters would put them in harm's way - all you had to do was read a newspaper or sign onto the internet.  I recognize the need for religious fellowship, but fellowship isn't worth a lot if it is being expressed at people's funerals. 


    •  The New York Times reports on the flour shortage hitting the UK, as people sheltering at home use baking as a way to soothe their savage beasts.  (Though one doesn't often think about modern Brits as being savage.)

    The Times writes that "commercial mills produce nearly four million tons of flour each year in Britain, according to the National Association of British and Irish Flour Millers. With much of the country stuck at home, baking has surged, and retail-size flour bags have become scarce on grocery shelves … The desire for flour has led some baking Britons to buy commercial-size sacks (weighing up to 70 pounds), some to try new recipes and others to monetize the shortage, with bags of flour going on eBay for more than $85."

    The story goes on:  "The problem in Britain isn’t merely a flour shortage but the industry’s inability to package small bags quickly enough. Large, commercial milling sites produce 99 percent of the flour in Britain. They typically provide 16-kilogram, or about 35-pound, bags of flour to bakeries, so shifting to retail bags, which make up only a sliver of the market, has proved difficult … Small flour bags have been so scarce that the supermarket chains Morrisons and Sainsbury’s have taken matters into their own hands: selling 35-pound bags of flour or portioning it into small paper bags."


    •  Hooray for Hollywood.

    The Los Angeles Times reports that California Gov. Gavin Newsom is saying that the state "next week will roll out protocols for productions to resume filming … The move will be a ray of hope for Hollywood. It’s been about two months since the state shut down productions and other entertainment, resulting in billions of dollars in losses for entertainment companies and throwing more than 100,000 people in the industry out of work."

    Filming, Newsom says, can "resume in counties that meet testing, hospitalization capacity and other criteria established by the state."

    However, Los Angeles - which is where much of film and television production takes place - is likely to be one of the last places where it can resume, since it has "recorded 1,973 deaths," and has had "the highest number of coronavirus cases among the state’s 58 counties and the most deaths."


    •  ABC News  reports that "the philanthropic arm of Tito's Handmade Vodka has made a $1 million grant to the Baylor College of Medicine," which will be applied to efforts at the school to find a Covid-19 vaccine.  "The grant will speed up the process in development and manufacturing and allow researchers to move into human trials faster," the story says.

    I was using Tito's as a self-administered oral vaccine, but I do appreciate the donation.   Go, Bears!

    Published on: May 21, 2020

    The Seattle Times reports that now that landlords have started receiving formal requests from Starbucks asking for rent concessions for as long as a year because of the impact of the pandemic on its ongoing operations, they are reacting.  Not well.

    "The company won’t say how such negotiations are proceeding," the Times writes.  "Nor will it say just how many of landlords got the letter asking for a break — but commercial property owners from the tip of Florida to northwestern Washington received the letter.

    "Some landlords have said they won’t play along," arguing that Starbucks - with annual revenue of more than $25 billion - is in a better position to weather the storm than the landlords.

    One California landlord responded to Starbucks' letter with one of his own:  "I am highly disappointed, disgusted and angry … Shame on you.”

    KC's View:

    Starbucks isn't the only retailer that will be looking for rent concessions - there will be similar calls from businesses big and small.

    You'd think that in the end, renters and landlords would be able to negotiate a reasonable solution that would be good for everyone - maybe based on sales, so that as business gets better, the landlords get rewarded for their patience.  But retailers have to be aware that landlords have mortgage payments to make, and banks may not generous of spirit when dealing with them.

    Published on: May 21, 2020

    •  E-commerce platform Shopify announced yesterday the launch of a new bank account product for businesses as well as a new consumer mobile application.

    TechCrunch writes that the bank account is called Shopify Balance, "which Chief Product Officer Craig Miller described as an attempt to rethink the bank account in a way that’s better suited to a business’ needs … Shopify Balance is a merchant account with no fees and no minimum balances.

    "Miller said that 'initially,' the only funds in the account will come from Shopify payments — merchants won’t be able to deposit additional money, but they will be able to log in, track cash flow and pay bills. The account comes with a debit card (virtual or physical), and Shopify said it will also offer cashback rewards and discounts on expenses like shipping and marketing."

    Shopify's new consumer shopping app is "simply called Shop. The app is actually an update and rebrand of Arrive, an app for tracking packages from Shopify merchants and other retailers."

    In addition, Shopify "is also announcing a Buy Now, Pay Later feature, allowing merchants to give their customers the option to split their payments into four equal installments, with no interest or additional fees.

    "Buy Now, Pay Later could be particularly useful for merchants selling bigger ticket items — at a time of record unemployment and economic uncertainty, concerns about 'going into a serious amount of debt' could prevent some customers from making these purchases on their credit cards. At the same time, the merchants will still get paid 'instantly'."

    Published on: May 21, 2020

    •  Target's Q1 results are out, showing that total revenue was up 11.3% to $19.62 billion, from $17.63 billion a year earlier.  Same-store sales were up 0.9 percent, while e-commerce sales were up 141%.

    However, CNBC notes that Q1 net income "fell to $284 million … from $795 million" a year ago, a reflection of expenses that include "increased wages, store cleaning and other expenses related to the pandemic."


    •  Wegmans yesterday announced that its Employee Scholarship program "will award college tuition assistance to 1,842 new recipients for the upcoming academic year. The company expects to pay out approximately $5 million in tuition assistance to both new and returning scholarship recipients during the 2020-2021 school year."

    Since 1984, the company says, it has handed out about $125 million in scholarship money to more than 40,000 employees.

    Published on: May 21, 2020

    From MNB reader Terry Marshall:

    100% agree with your assessment on the Costco store manager and the customer that refused a mask.  None of us want to wear a mask, but if it will help us get through this extraordinary time and to some semblance of normalcy, we all should be willing to do our part.  That little loss of “freedom” is well worth the potential restrictions that could come down on all of us again as this country re-opens. 


    Regarding Mariano's stores in Chicago, in the news at the moment because founder Bob Mariano plans to launch a new chain, one MNB reader wrote:

    Mariano's used to be fantastic a great shopping experience on any day of the week.  Now has become an upscale jewel and lacking in any excitement or charisma.

    That seems to be the consensus.


    Responding to yesterday's Innovation Conversation about the new e-grocery service being planned by the founder of e-commerce debacle Webvan, one MNB reader wrote:

    I lost about $2,000 when I invested in Webvan the first time around.  The value of their stock at the end- 0.0, which is the same as Blutarsky’s grade point average.  Fool me once….

    That may well end up being the consensus …