business news in context, analysis with attitude

Published on: June 6, 2022

Today, I return to a conversation we were having last week here on MNB, prompted by an essay written by Meghan Smith, a Tufts University graduating senior who had the temerity - to some folks, at least - to suggest that issues of climate change require that the traditional benchmarks of capitalism need to be adjusted to some degree.  (Pun mine.  Totally intended.). Frankly, this didn't strike me as all that radical - to me, the mark of a great leader is being able to recognize when the winds are shifting, and adjust to these changes and still move forward.  The mark of a lousy leader, I'd suggest, is ignoring reality because it doesn't comport with your biases and preferences.

Published on: June 6, 2022

Dave Clark, who started with Amazon in 1999 as Ops Manager in the Pathways Operations Leadership Development Program, on Friday announced that he would be leaving the company on July 1, having most recently become the company's CEO Worldwide Consumer, in charge of the company's logistics and operations network.

In a prepared statement,  Amazon CEO Andy Jassy said, "We’re trying to be thoughtful in our plans for Dave’s succession and any changes we make.  I expect to be ready with an update for you over the next few weeks."

The Puget Sound Business Journal writes that "Clark took the retail helm in January 2021, after longtime executive Jeff Wilke left the company. Clark had come up at Amazon in warehouse management before eventually landing director and executive roles in operations and fulfillment, climbing to senior vice president of worldwide operations in 2013. For years he was on founder and former CEO Jeff Bezos' senior executive leadership team, and is now on Jassy's."

The Business Journal goes on:  "Clark's division has faced multiple challenges recently as the surge in e-commerce demand amid the Covid-19 pandemic cools off and unionization efforts gain ground in warehouses … His first days on the job as retail CEO were right in the middle of Amazon's pandemic boom. Clark guided the division through a rapid expansion in warehouse space, which the company is now trying to slowly shed, and helped build up its workforce of front-line employees. The latter has brought the most scrutiny on him recently.

"Over the pandemic, the company has faced a surge of employee activism, especially among its warehouse ranks. Last year, Clark and other operations executives battled headlines about delivery drivers and warehouse workers having to deal with strict quotas and work pace demands. There have been high-profile unionization efforts in states like Alabama and New York, the latter of which succeeded, spearheaded by a fired employee."

Business Insider provides the following insights:

"The move is a clear signal that Amazon CEO Andy Jassy was unhappy with the performance and direction of the retail business under Clark. In a companywide email on Friday, Jassy wrote that Amazon has 'more work in front of us to get to where we ultimately want to be in our Consumer business.'

"Amazon is grappling with a slowdown in e-commerce spending following torrid online sales during the pandemic. The company opened warehouses at a record pace, and hired thousands of new workers to handle surging orders from consumers stuck at home. Now, the company has admitted that it has overcapacity and is even sub-leasing and shutting some fulfillment centers. Amazon's online retail sales fell 3% last quarter, the first year-over-year decline since at least 2015.

"When Amazon revealed these problems fully in April, the company's stock plunged. That added to other problems, such as surging costs from inflation and employees demanding better pay. The company has also been rocked by unionization campaigns at three warehouses, and congressional and regulatory scrutiny of its e-commerce business."

The New York Times writes:

"The top of Amazon’s ranks has gone through the biggest changes in its history over the past two years. Mr. Clark was promoted to run the consumer business when Jeff Wilke, a longtime executive, retired. Then Jeff Bezos, Amazon’s founder, stepped down as chief executive last year and named Mr. Jassy his replacement.

"Under Mr. Bezos, Mr. Clark had significant autonomy to build Amazon’s operations. Mr. Jassy, who had built and run Amazon’s cloud computing operations before stepping into the chief executive role, has been digging into parts of the company that had not previously been under his direct control. He has vowed to systematically address employee concerns.

"Last fall, Mr. Clark moved from Seattle, where Amazon has its headquarters, to Dallas, where the company does not have a major corporate presence, which some people in the organization saw as a sign that his time with the company could be coming to an end."

From the Puget Sound Business Journal:

Clark has had a tense working relationship with Jassy, who is known as a micro-manager, according to two Amazon insiders … The company's most recent financial report positioned Amazon's warehouse overexpansion as a mistake, another insider said, 'and the implication of whose mistake that was seems clear.' All three insiders asked not to be identified discussing sensitive topics."

The story says that "a former Amazon VP highlighted another possible source of friction between the two executives. 'Clark was brilliant, but he was soul-less, like a machine, ruthless in a certain sense, and didn't have the human connection part,' this person said. 'Jassy has a different approach, kind of trying to shape a kinder, gentler Amazon that can be successful with the scrutiny they're under'."

Published on: June 6, 2022

Interesting piece in the Washington Post over the weekend looking at whether the US is likely to face a recession as a result of federal efforts to deal with the relatively high inflation of the past year.

While the likes of Jamie Dimon, chief executive of JPMorganChase, Tesla chief Elon Musk and Lawrence Summers, a former treasury secretary, "have warned of a looming recession," there also is evidence that "such dire assessments may be wrong. On Friday, the Labor Department said the economy gained 390,000 jobs in May, beating analysts’ expectations, while the unemployment rate remained at 3.6 percent."

The Post goes on:

"The Federal Reserve’s recent change of course on monetary policy is the biggest source of recession fears. After repeatedly assuring investors last year that inflation would prove 'transitory,' Fed Chair Jerome H. Powell this year has steered the central bank on a path of interest rate hikes designed to slow the economy and ease pressure on consumer prices.

"The Fed’s about-face already has been bad news for financial markets. Lifting interest rates from near zero caused investors to rethink their portfolios, sending stocks plummeting and cementing the notion that something about the economy has gone seriously awry.

"But recent indicators suggest that the two-year-old expansion — while slowing from an unsustainable pace of annual growth near 7 percent late last year — shows little sign of slipping into reverse. The labor market is churning out 'help wanted' signs faster than employers can add workers. Consumers and businesses are flush with cash. And by some measures, the bond market appears less worried about inflation than do many pundits … Despite Americans’ sour mood, economists surveyed by Bloomberg in May expect the economy to expand at an annual rate of 2.7 percent this year. That’s down from the 3.3 percent forecast in April, but far from a recession."

Of course, the Post writes, "Continued economic strength is a double-edged sword. It means more people who want work will probably find it. But it raises the chances that the Fed, which already has raised rates twice and signaled plans for two additional half-point increases, might overdo it and trigger a recession."

The Wall Street Journal also has a piece about the current bifurcated state of the nation's economy:

"The American economy remains largely healthy. The U.S. added 390,000 jobs in May, and demand for workers remains historically strong, particularly in service industries such as restaurants and airlines. Job openings are close to record highs. Planes are full, hotels are booked and high-end retailers including Lululemon Athletica Inc. are raising prices in the midst of brisk sales.

"Still, business leaders say they are increasingly preparing for a new normal in which companies’ fortunes start to splinter as inflation persists and consumer budgets tighten.

"Wage growth in May slowed from last year’s average, the Labor Department said Friday. Existing-home sales were down 5.9% in April from the previous year, according to the National Association of Realtors. Consumers boosted their spending rapidly in April, but in the midst of indications that many were tapping their savings to do so.

Many large companies, including retailers and consumer-products makers, have been able to raise prices to offset rising costs for staffing and shipping. Recently, companies such as Walmart and Procter & Gamble Co. have signaled that those conditions are changing and that they are bracing for a pullback in spending. They are bringing back more bargains and cheaper store brands in the midst of signs that inflation is taking a toll on lower- and middle-income shoppers."

Published on: June 6, 2022

Meal kit company Blue Apron announced that Walmart.com will begin offering a selection of its products without a subscription, "from classic menu items to family favorite recipes." making it "the first and only meal-kit provider on the Walmart Marketplace platform, which serves millions of monthly active shoppers."

According to the announcement, Blue Apron "is expanding its ecosystem to drive customer growth, including through third-party sales platforms that bring significant new audiences to Blue Apron. This category of distribution partners will allow consumers to buy Blue Apron boxes without a subscription, removing potential barriers for trial. The boxes will be directly fulfilled by Blue Apron, maintaining the efficiency and scale of the company’s direct-to-consumer model and strong supply chain. Blue Apron expects to continue to add more of these categories of offerings throughout the coming year."

Published on: June 6, 2022

The Wall Street Journal reports that the once-and-current CEO of Starbucks, Howard Schultz, plans to stay in the job longer than originally scheduled.  His current timetable is to stay until next March, at which point he will be succeeded by someone from outside the organization.

The Journal writes that "Schultz - who said he isn’t a candidate to hold the position permanently - said Starbucks has recently talked to several promising CEO prospects, and that the company aims to identify a new chief executive by the fall."

“For the future of the company, we need a domain of experience and expertise in a number of disciplines that we don’t have now,” Schultz tells the Journal.  “It requires a different type of leader.”

The story goes on:

"Starbucks is a far different chain than it was in 2017, when Mr. Schultz previously stepped down as CEO. Some of Starbucks’s current problems are self-induced, Mr. Schultz said, but others are a result of a rapid change in consumer behavior, sped up by the pandemic. The majority of Starbucks’s sales now come from cold beverages bought to-go, not the hot coffee sipped at tables when the chain first started. That’s requiring Starbucks to rethink its operations in ways no CEO could have fully anticipated, Mr. Schultz said."

Schultz returned as Starbucks in April, replacing Kevin Johnson on an interim basis.  It is his third go-round as CEO of a company that he built from a small Seattle business into a global retail icon.  He tells the Journal that when a new CEO is named, he will remain on the company's board of directors.

Published on: June 6, 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:  86,522,561 total cases … 1,033,591 deaths … and 82,584,531 reported recoveries.

The global numbers:  535,515,742 total cases … 6,320,703 fatalities … and 506,549,689 reported recoveries.  (Source.)

•  The Centers for Disease Control and Prevention (CDC) says that 77.9 percent of the total US population has received at least one dose of vaccine … 66.7 percent are fully vaccinated … 46.9 percent of fully vaccinated people have received a vaccine booster dose … 23.4 percent of the fully vaccinated US population has received a second vaccine booster dose … and just 29.6 percent of the US population age 65 and older has received the second booster shot.

• From the Wall Street Journal this morning:

"The latest Covid-19 wave in the U.S. has shifted westward, hitting places like the San Francisco area, while pressure eases in recent Northeast hot spots.

"The Western U.S. region, which includes mountain and coastal states, has recently eclipsed the Northeast to have the nation’s highest rate of known cases per 100,000 people, a Wall Street Journal analysis of CDC data shows. Recent increases in parts of the West come amid declines in the Northeast.

"There are now 13 California counties, mainly clustered in the central part of the state, which have high community levels based on case and hospital trends, the Centers for Disease Control and Prevention said in a weekly update Thursday. The agency says people in such places should wear masks in public, indoor settings.  An additional 20 California counties covering roughly 60% of the state population are in the CDC’s medium zone, for which the agency advises people including those recently exposed to others with Covid-19 to wear face coverings. This group includes Los Angeles, the nation’s most populous county with about 10 million people."

The story notes that "highly contagious versions of the Omicron variant have been fueling the latest surge. It began in the Northeast in March, disrupting a recovery from a record-breaking winter wave, and has since spread into other regions. A rising number of Florida counties now have high Covid-19 community levels, CDC data show."

Published on: June 6, 2022

•  Bloomberg reports that "the workers’ union at Starbucks Corp. filed a complaint accusing the company of illegally shutting down a recently-unionized cafe, escalating hostilities between the coffee chain and the labor movement spreading swiftly through its stores.

"In a Friday filing with the US National Labor Relations Board, the Workers United union accused Starbucks of violating federal labor law by announcing it will permanently close an Ithaca, New York store and alleged it was in retaliation for workers’ union activism.

"Starbucks said the closure wasn’t related to union activism, but resulted from facilities, staffing, and 'time and attendance' issues at the store."

The story notes that "employees at the Ithaca location, located near the Cornell University campus, in April voted to unionize and mounted a one-day strike, saying an overflowing grease trap had spilled wastewater and oil onto the floor, making the store unsafe. The union is urging the agency to seek a federal court injunction to more quickly prevent or reverse the closure."

Published on: June 6, 2022

•  Walmart announced, via a blog posting by Lorraine Stomski, Senior Vice President, Learning & Leadership, that the company is "launching one global Walmart Academy to serve every associate around the world through a combination of digital and in-person offerings. Over the coming months, more than 2.3 million associates will have access to the company’s job-specific retail training as well as new well-being and leadership courses designed to build and grow their careers and delight our customers. This global focus builds on the $1 billion U.S. investment announced last year to provide associates with career-driven training and development over the next five years."

Stomski wrote that the Global Academy will focus on building on-the-job skills, growing future skills, and building leadership skills for managers.

Published on: June 6, 2022

•  The New York Times writes that "Abbott Nutrition, the company that fueled a national shortage of baby formula when it shut down a leading production plant in February because of contamination concerns, said on Saturday that the site has restarted producing EleCare and other formulas.

"The restarting of the plant in Sturgis, Mich., which was the result of an agreement with the federal Food and Drug Administration, renewed hope that the formula shortage that has sent stressed parents scrambling would ease.

"Out-of-stock rates had soared to about 74 percent at stores across the country as of the week ending May 28, according to Datasembly, which tracks retail data. The crisis, which had been building for months and stems from pandemic supply issues, was worsened by the plant’s closure."

•  National Public Radio (NPR) reports that Agriculture Secretary Tom Vilsack has "unveiled $2 billion in new funding to strengthen food supply chains hard hit by the pandemic, causing food shortages and higher prices … The new funding is made available through the March 2021 COVID relief package, the American Rescue Plan and other relief legislation.

"The pandemic and ensuing inflation caused by supply chain disruptions and Putin's war against Ukraine underscores the difficulty of providing healthy and nutritious food for all when markets are disrupted," Vilsack said. "The pandemic also exposed for us how many food banks and pantries had difficulty accepting fresh fruit and vegetables and dairy products due to a lack of warehouse and refrigeration capacity."

NPR notes that "the pandemic also highlighted major bottlenecks in the food supply chain as meatpacking plants were forced to close and slow production due to workers getting sick, the transportation industry faced additional labor shortages and input costs for farmers rose."

Published on: June 6, 2022

…will return.

Published on: June 6, 2022

•  Rafael Nadal won his 22nd Grand Slam title over the weekend, with a convincing 6-3, 6-3, 6-0 defeat of Casper Ruud in the French Open men’s final;  it was the 14th time Nadal has won the French Open.

And, in the French Open women's final, Iga Swiatek defeated Coco Gauff of the United States, 6-1, 6-3.  It was a repeat performance for Swiatek, who also won the French Open last year.