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    Published on: May 19, 2022

    While in Houston, Texas, it seemed like many of the Starbucks I visited - looking for a place to have a cup of coffee, sit down and get some work done in a "third place" environment - were drive-through facilities with no place to sit down indoors (which was important, because it was really hot outside).  It made me think about Starbucks' traditional value proposition and the challenges that it faces going forward.

    Published on: May 19, 2022

    Tough quarter for Target, which reported a $1 billion Q1 profit yesterday … a big number, but one that was about half that reported during the same period a year ago.  Q1 revenue was up four percent, to $24.8 billion, same-store sales were up 3.3 percent, and digital sales were up 3.2 percent, but profit was hit by inflation, supply chain problems and a change in consumer spending patterns.

    “Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time,” CEO Brian Cornell, Target’s chief executive, said in a prepared statement.

    The New York Times writes that Cornell also cited "higher transportation costs and 'a more dramatic change in our sales mix than we anticipated' as factors that hurt profits and put an 'additional strain on our already-stressed supply chain.'

    "As consumers shifted their spending, in part because of the end of pandemic stimulus payments, Target was saddled with an oversupply of items like kitchen appliances, televisions and outdoor furniture, Mr. Cornell said. Shoppers have switched their focus to 'going-out categories,' he said, like fashionable clothes and travel-related items."

    The Times goes on:  "Target seemed to encounter many of the same problems as Walmart, which on Tuesday reported that its latest quarterly profits fell 25 percent, pointing to higher prices for fuel and labor, among other things, as a drag on profits. Walmart also missed Wall Street’s expectations for the first time in many years, and saw its share price fall by the most in a day since the 1980s. Its stock continued to fall on Wednesday, down 6.8 percent."

    In its coverage and analysis, CNBC writes:

    "The results this week could foreshadow trouble for a number of retailers, including Macy’s, Kohl’s, Nordstrom and Gap, which have yet to report results for the first quarter of 2022. These companies that rely on consumers coming inside their stores to splurge on new clothes or shoes could be particularly pressured, as Walmart hinted that shoppers were beginning to pull back on discretionary items to budget more money toward groceries.

    "At the same time, retailers are citing an uptick in demand for items such as luggage, dresses and makeup as more Americans plan vacations and attend weddings. But the concern is that consumers will be forced to make trade-offs, somewhere, in order to afford these things. Or they’ll seek out discounted goods at shops such as TJ Maxx."

    KC's View:

    In the words of Bette Davis in All About Eve, "Fasten your seat belts.  It's going to be a bumpy night."

    If the markets were a direct reflection of what's likely to happen with retailers like Walmart and Target, you'd think that there would be far less pessimism - if inflation continues and a recession occurs, it is likely to be good for big retailers like Walmart and Target that can communicate a strong price/value message.

    It is kind of ironic, by the way, that both Target and Walmart said they got stuck with merchandise they couldn't sell at a time when supply chain issues created a surfeit of customers who couldn't find the products they wanted.

    Clearly, it is going to be a tough 12-18 months going forward.  It is going to be important for retailers to be clear, consistent and constant in how they talk to their customers.  At the risk of sounding like a broken record, I continue to believe that this is the time for retailers to define ways to draw closer to their shoppers, especially their best shoppers.  They need to recognise that even/especially in a time of economic uncertainty, focusing less on individual transactions and more on creating sustained and sustainable relationships with shoppers is the best strategy.

    I do think that we're going to see some aggressive marketing of price cuts by retailers of various stripes, as they look to directly address consumer concerns.  For example, in the UK, The Sun reports that Tesco is implementing changes in its Clubcard loyalty program, offering one-third off a number of both fresh and packaged products, including private label items.  The story notes that "members can save cash with loyalty scheme, which is free to join, as Clubcard prices are only for members, and you'll pay the usual price if you don't have a card."

    I suspect we're going to see a lot of this going forward.

    Published on: May 19, 2022

    Axios reports that "the Food and Drug Administration is testing designs of a label that food manufacturers could voluntarily put on the front of packages indicating that a product is 'healthy' … The effort is controversial, in part because the meaning of 'healthy' continues to evolve. The FDA itself is in the process of updating its definition, which dates back to 1994.

    "Other concerns are that such a label could be of dubious value, used too liberally by food makers, or seen by consumers as a product endorsement by the FDA.

    "Nutritionists make the point that a balanced diet matters more to health than any individual food."

    The FDA says that the broader goal is "to provide consumers who have an unsophisticated understanding of nutrition with an easy way to make choices in the supermarket — and to coax food manufacturers to improve their products," Axios writes.  The FDA is using focus groups and surveys to gauge consumer reactions to various models.

    KC's View:

    I tend to agree with the folks who believe that "healthy" is hard to quantify and qualify;  there is way too much context and nuance that has to be taken into consideration, and may not be as simplification becomes the end goal.

    That said, it is an effort worth making … not just because of consumers who have an "unsophisticated understanding of nutrition," but because of manufacturers who actively work to deceive consumers, or at least subvert any real understanding of what health and moderation mean.

    Published on: May 19, 2022

    Reuters reports that "a New York state agency has accused Inc. in a complaint of discriminating against pregnant and disabled workers at its worksites, Governor Kathy Hochul said on Wednesday.

    "Amazon was also accused of having policies requiring workers to take unpaid leaves of absence, even if they are capable of working, instead of providing reasonable accommodations.

    "The New York State Division of Human Rights faulted Amazon for giving worksite managers the power to ignore the company's in-house 'accommodation consultants' who recommended that workers receive modified schedules or job responsibilities.

    State law requires employers provide reasonable accommodations to pregnant and disabled workers who ask. It also treats pregnancy-related medical conditions as disabilities."

    According to the story, "Amazon spokeswoman Kelly Nantel said Hochul's announcement was surprising because the Seattle-based company had been cooperating and working closely with the New York regulator.  She also said Amazon considers it 'extremely important' that all employees feel safe and supported, and works diligently to provide accommodations, while acknowledging that with more than 1.6 million employees 'we don't always get it right'."

    Which means you can add another brick to the wall of charges and investigations that Amazon is facing from regulators, legislators, and union organizers.  No wonder Jeff Bezos likes going into space…

    On the other hand, the skies may not be the safest place for him to be.

    Business Insider reports that "Amazon's Prime Air autonomous drone delivery program has tried to put off federal investigations into some of its drone crashes by claiming that the company has the authority to investigate its own crashes, according to federal documents obtained through a public records request. The company has also been slow to turn over data related to crashes, the documents show. 

    "On at least two occasions, inspectors for the Federal Aviation Administration, which regulates drone flights, were surprised to learn that Amazon had moved crash evidence, which an inspector said inhibited at least one of the investigations, according to the documents. During another investigation, Amazon told the FAA that the agency's involvement was unnecessary.

    "At least eight Amazon drones crashed during testing in the past year, Insider previously reported, including one that sparked a 20-acre brush fire in eastern Oregon last June after the drone's motors failed.

    "Taken together, the documents suggest that Amazon has at times begrudged federal inspections of its experimental drone crashes. These findings come as the company seeks FAA approval to fly its drones in residential areas ahead of a potential mid-2024 customer debut.  Regulatory delays could "totally disrupt" that timeline, the company told FAA officials in a Zoom call with the agency earlier this year, according to the FAA's notes on that call.

    "An Amazon spokesperson said that Insider's characterization of the FAA documents was 'misleading and inaccurate'."

    KC's View:

    In general, I think it is fair to say that most businesses "begrudge" any oversight and interference by legislators and regulators … so I don't have doubt about that part of the story.  But it does seem as if Amazon's ambitions for drone deliveries may exceed its ability to deliver on that promise.  

    As for the discrimination charges … I suspect that we will find out that Amazon, in fact,  didn't get it right.  It almost is inevitable that in a company as large as Amazon, isolated cases like these will occur.  If so, Amazon needs to get ahead of the story, and make sure the problem is not systemic.

    Published on: May 19, 2022

    Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

    •  The current US Covid-19 coronavirus numbers:  84,692,706 total cases … 1,028,014 deaths … and 81,438,103 reported recoveries.

    The global numbers:  525,215,109 total cases … 6,295,208 fatalities … and 495,007,034 reported recoveries.  (Source.)

    •  The Centers for Disease Control and Prevention (CDC) says that 77.7 percent of the total US population has received at least one dose of vaccine … 66.5 percent are fully vaccinated … and 46.4 percent of fully vaccinated people have received a vaccine booster dose.  The CDC also says that 49.1 percent of the US population eligible for a booster shoot has not gotten one.

    • The New York Times reports that "as the coronavirus morphs into a stubborn and unpredictable facet of everyday life, scientists and federal health officials are converging on a new strategy for immunizing Americans: a vaccination campaign this fall, perhaps with doses that are finely tuned to combat the version of the virus expected to be in circulation.

    "The plan would borrow heavily from the playbook for distributing annual flu shots, and may become the template for arming Americans against the coronavirus in the years to come.

    "But some experts question how well a renewed vaccination push would be received by a pandemic-weary public, whether the doses can be rolled out quickly enough to reach the people who need them most — and whether most Americans need additional shots at all.

    "On June 28, scientific advisers to the Food and Drug Administration will meet to identify the coronavirus variant most likely to be percolating in the United States as temperatures cool. That should leave manufacturers time to decide whether the vaccines’ composition needs to be revised and to ramp up production, hopefully enough to churn out hundreds of millions of doses by October."

    Speaking as someone who is double-vaxxed and double-boosted, I would say that I've been working on the assumption that when I get my flu shot in the fall - and I always get a flu shot, because it seems like the intelligent thing to do, just I've been happy to get vaccines for shingles, pneumonia, and pretty much anything my physician advises me makes sense.  I'm weary of the pandemic just like pretty much everyone else, but what I'm really weary of is getting emails from people who suggest that I (and most of the media) have not been sufficiently skeptical about masking and vaccination strategies and have not questioned the motives of those who push them.  It would be true that I made a decision to trust the vast number of public health officials who I think have been heroic in how they've dealt with the pandemic over the past two years, preventing far more deaths that would've occurred otherwise … though not as effectively as public health officials did in places like Australia.  Cast aspersions all you like.  I'm comfortable with both my personal and professional position on this, and we'll just have to agree to disagree.

    Published on: May 19, 2022

    •  Amazon has begun hiring for its first Amazon Fresh stores to open in New York (in Oceanside) and New Jersey (in Paramus), saying that it is looking to fill hundreds of jobs - though it is not specific about when it plans to open the stores or precisely how many people will be hired for what roles.

    The stores will feature the Just-Walk-Out checkout-free technology that Amazon pioneered with its Amazon Go stores;  there currently are 14 Amazon Fresh stores featuring that technology.

    Published on: May 19, 2022

    •  The Washington Post reports that "President Biden on Wednesday invoked the Defense Production Act to address a nationwide shortage in baby formula, marking a major attempt to ramp up domestic manufacturing rapidly as parents are scrambling and store shelves are running bare.

    "The White House said the directive requires the suppliers of key formula ingredients to prioritize the delivery of those resources to formula producers, adding that the administration would simultaneously launch a new operation to ensure faster flights of imports using Defense Department air cargo contacts.

    "The moves reflected the magnitude of the current shortage, which has seen some parents driving for miles on end to locate formula, including specialty products that are critical to infants’ health. The U.S. government previously tapped the same 1950 law in the early days of the coronavirus pandemic, aiming to ensure the speedy production of key equipment as the crisis worsened."

    •  The Wall Street Journal reports that McDonald's and Wendy's are facing a possible class action suit, " filed in the U.S. District Court for the Eastern District of New York Tuesday," alleging that "both companies have wrongly advertised the size of their various cheeseburgers. The suit alleges that the ads make the burgers appear much larger than the ones customers are actually served … The lawsuit, which includes at least 20 photos of cheeseburgers, says that both companies use undercooked patties in their advertisements, allowing them to showcase burgers that are about 15% to 20% bigger than the ones served. Meat in general tends to shrink by 25% when cooked, the lawsuit says."

    The Journal notes that "the same three law firms involved in this case also filed a similar lawsuit against Burger King Corp. in March. That lawsuit, filed in the U.S. District Court for the Southern District of Florida, alleges that Burger King also mis-advertises the size of its burgers."

    •  Axios reports that "top lawmakers on the Senate health committee are proposing to beef up FDA oversight of dietary supplements, cosmetics and lab-developed tests as part of a sweeping plan to reauthorize regulatory programs … A draft plan released Tuesday by Senate HELP Committee Chair Patty Murray (D-Wash.) and Ranking Member Richard Burr (R-N.C.) would, among other things, require premarket approval of supplements and make manufacturers disclose what's in their products."

    Currently, Axios writes, "The FDA lacks authority to approve supplements, and firms generally don't have to provide evidence for the FDA to conclude the products are safe."

    Not surprisingly, "some supplement manufacturers are aggressively fighting the plan: The Natural Products Association says it would drive up consumer costs and weaken privacy protections for the industry's supply chain."