business news in context, analysis with attitude

Published on: June 10, 2022

I've found a new book, "The Baseball 100" by Joe Posnanski, which was given to me by a friend, to be surprising and informative as it makes the case for the 100 greatest baseball players of all time.  That's one of the best things about baseball - everything is debatable, and we take pleasure in the arguments.  For example, one of the players identified by the author - as the fifth greatest player of all time - is Oscar Charleston, someone who I'd never heard of.  And yet, the case is persuasive.  I learned something.

The business lesson, however, come from Mike Mussina, the Orioles and Yankees pitcher, who teaches us about what's important, and what is not.

Published on: June 10, 2022

The Washington Post reports that the National Labor Relations Board (NLRB) has denied Amazon's request that it close a hearing next week into whether a successful unionization vote at one of its Staten Island warehouses should be overturned.

The hearing will be held over Zoom.

Amazon had argued that the hearing should be closed because there was no way to control who could attend, which created the possibility of witness testimony being tainted.  But the NLRB said that the fact that "this case has garnered national and international attention from outside parties only further solidifies the importance of allowing public observation, as employees and members of the public can be better informed."

Published on: June 10, 2022

Business Insider reports that Walmart-owned Sam's Club is rolling back a free curbside pickup offering that it rolled out during the pandemic, saying that for all but its Club Plus members, it now will cost $4.

"Sam's Club Plus is an upgraded membership with the warehouse chain that includes perks like early shopping, free shipping, and 2% Sam's Cash earnings on in-club purchases," the story says.  "Club membership costs $45 a year. Plus Membership — also known as Business Membership — costs $100 annually."

The company said in a statement, "Since its inception, Curbside Pickup had always been a free benefit for Plus members.  For a limited time, we made Curbside Pickup a free benefit for Club members. Throughout the pandemic, we extended the limited time offer as a courtesy to our Club members. We are now expiring free Curbside Pickup for Club members and moving forward as planned with the $4 fee for Club members."

Published on: June 10, 2022

The New York Times this morning reports that Starbucks CEO Howard Schultz is saying that the company may end its open bathroom policy, which allows anyone to use its rest rooms even if they are not customers, saying that growing mental health problems in the US are creating safety issues that put employees at risk.

The Times writes that "the move would reverse a policy Starbucks instituted in 2018 in the wake of the arrest of two Black men in one of its Philadelphia stores. The two men had been reported to the police by a Starbucks employee after they were denied use of the store’s bathroom and asked to leave. They hadn’t made a purchase.

"At the time, Starbucks announced that 'any customer is welcome to use Starbucks spaces, including our restrooms, cafes and patios, regardless of whether they make a purchase'."

Published on: June 10, 2022

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Bloomberg reports that Walmart "will use natural gas, hydrogen and electricity to power its trucks as the world’s largest retailer seeks to honor a pledge to achieve zero greenhouse-gas emissions by 2040."

The goal is to cut diesel consumption, the company says, and "the strategy is to develop 'the right recipe' of alternatives for its big rigs by testing an array of technologies."

"We have a big commitment out there by 2040," Fernando Cortes, Walmart’s senior vice president of transportation, tells Bloomberg.  "We’re not just testing the waters."

The story notes that "Walmart’s pledge is based on Scope 1 and Scope 2 emissions, which in climate accounting cover direct emissions. Scope 3 is much broader, covering emissions from a company’s supply chain and the use of its goods. Walmart is working with its suppliers on Project Gigaton, which is designed to reduce or avoid one billion metric tons of carbon dioxide equivalent by 2030."

This isn't just about being a responsible citizen of the planet, though that will be one of results.  Walmart has to see that the long term economic impact of these shifts will be positive … and so it makes sense to make these moves as swiftly as possible.

Published on: June 10, 2022

•  National Public Radio (NPR) reports that "a federal judge has ruled that Starbucks did not have to reinstate or give accommodations to three employees who claim they were retaliated against for organizing a union.

"Starbucks workers are driving a nationwide wave in union organizing, with successful votes at more than 100 locations. The case is a notable ruling in support of the corporation.

"At a store in Phoenix, three employees who were advocating for a union say they were wrongfully dismissed. They claim they were forced out through intentional scheduling obstacles or denied accommodations through the Americans with Disabilities Act and put on leave.

"The National Labor Relations Board had asked a court to compel Starbucks to reinstate the workers and give ADA accommodations to one of them. The court on Wednesday ruled that Starbucks did not immediately have to rehire two of the employees. The third has returned to work at the store, but has not received accommodations, according to a shift supervisor … The case isn't over yet — it will be heard by an NLRB judge on June 14. Injunctions are meant to give temporary relief to workers who have to wait for their cases to be heard in court, a process that can take months."

Published on: June 10, 2022

•  From CNBC:

"Amazon on Thursday rolled out a new augmented reality shopping tool that lets users virtually try on shoes they may be interested in buying.

"Amazon said the tool would make the online shopping experience easier and more interactive for shoppers.

"The feature, called Virtual Try-On for Shoes, is available for iOS users in the U.S. and Canada on the Amazon shopping app. The feature has been added to 'thousands of styles' from brands like New Balance, Adidas, Reebok and Puma, Amazon said.

"To use the tool, shoppers tap the 'virtual try-on' button on a footwear product page, then aim their smartphone camera at their feet, and a pair of virtual shoes will appear on their screen. Shoppers can scroll through different colors while the feature is still active and it will automatically adjust on their screen.

"The feature won’t help users figure out how the shoes fit, but it will give them a sense of what they look like."

•  From Bloomberg:

"Amazon.com Inc. is planning to withdraw from a heated competition for the rights to stream Indian Premier League cricket matches, ceding one of the world’s most popular sporting contests to rivals from Walt Disney Co. to Mukesh Ambani’s Reliance Industries Ltd.

"The rights had been estimated to fetch an unprecedented $7.7 billion. The US giant, led by Jeff Bezos, is planning to throw in the towel rather than get into a bidding war at the June 12 auction, according to people familiar with the matter. While Amazon has already invested more than $6 billion in the country, more spending merely for the online streaming rights to the league didn’t make business sense, they said, asking not to be identified discussing internal deliberations."

Published on: June 10, 2022

•  From the Associated Press:

"More Americans applied for jobless aid last week, but the total number of Americans collecting unemployment remains at a five-decade low.

"Applications for unemployment benefits rose by 27,000 to 229,000 for the week ending June 4, the most since mid-January, the Labor Department reported Thursday. First-time applications generally track the number of layoffs.

"The four-week average for claims, which evens out some of the weekly volatility, rose by 8,000 from the previous week to 215,000.

"The total number of Americans collecting jobless benefits for the week ending May 28 remained unchanged from the previous week at 1,306,000, the fewest since Jan. 10, 1970."

•  Abasto reports that Hispanic supermarket chain Cardenas Markets, which operates more than 60 stores in California, Nevada, and Arizona, is acquiring six Rio Ranch Market stores in Southern California.  Terms of the deal, expected to close next month, were not disclosed.

“Cardenas Markets is stronger than ever, and this acquisition further solidifies the company’s position as one of the leading Hispanic supermarket chains in the country,” said Doug Sanders, Chairman & CEO of Cardenas Markets, in a prepared statement. “As we look ahead, we will continue to identify strategic opportunities to grow our business while providing a fresh & authentic shopping trip for our customers."

•  From Bloomberg:

"McDonald’s diners have said goodbye to salads. Stock investors should be glad they’re gone.

"A pandemic-driven menu overhaul at McDonald’s Corp. has eliminated more nutritious menu options such as grilled-chicken sandwiches and fruit and yogurt parfaits. The world’s biggest restaurant company is trimming out offerings to move diners through lines and drive-thrus faster and with less staff — a key necessity as restaurants struggle to attract and retain workers.

"These items likely won’t be returning anytime soon, and that should bolster profitability, BTIG LLC analyst Peter Saleh said. While mounting commodity and wage expenses have weighed on restaurants’ margins in recent quarters, faster service and higher sales can help to offset that. McDonald’s says it has shaved about 30 seconds off of its drive-thru wait times over the past few years, in part thanks to the menu cuts. This has a noticeable impact for investors: Restaurant margin, a key measure that takes into account operating costs, is expected to improve to 16.2% in the second quarter, up from 14% in the prior period, according to estimates compiled by Bloomberg."

Published on: June 10, 2022

Yesterday we pointed to a Wall Street Journal report that Franchise Group, which is negotiations to acquire Kohl's for around $8 billion, plans to finance most of the deal by selling of Kohl's real estate.

I commented:

In other words, Kohl's will have more debt, which will ratchet up the pressure to increase margins and prices and lower labor costs … all of which could have the result of diminishing whatever value proposition it has to shoppers.  Forgive me, but haven't we seen this movie before?

One MNB reader responded:

About your note regarding the Kohl’s buyer potentially selling off real-estate and the future impact of that on Kohl’s customers…I was part of a consulting team that was engaged by Toys R’ Us to help the executive team sort through internal projects/investments both technology and non-technology based.  The goal was to find the most value possible as Toys R’ Us was already in a death spiral and trying to stop the bleeding.  We helped them prioritize a number of projects that had expense, customer experience, productivity and asset impacts into a single list which they could use for decisioning.  When we were done, and they drew the line under that most projects they could/would support…I was stunned.  Because of private equity investors unwillingness to spend and risk cash, they were leaving a large number of projects on the table that were life-saving surgery…not cosmetic surgery.  If I had owned any Toys R’ Us stock at that point, which I didn’t, I would have sold immediately.  They were doomed to be swallowed by the black hole of private equity hubris!  Sounds like Kohl’s is signing up for the same adventure!!

MNB reader Joe Ciccarelli wrote:

This is the typical playbook of Private Equity. They strip out all assets, load the firm up with debt like you said and take high dividends and management fees.  They leave no money for Capital Expenditures (CapEx) – such as store remodels, IT investments, logistics etc. The are many retailers over the years that have had this issue – besides the ones you mention Southeastern Grocers, Topps, Marsh are others that come to mind. Too bad for the employees and customers.

On another subject, from an MNB reader:

Thank you for highlighting the growing gap between compensation for CEOs and frontline workers. I noted the reference to "costs" in a reader view you posted today, which I think captures the issue perfectly. There are two kinds of companies: those that see their employees as costs to be controlled, and those that see employees as resources to be invested in. I believe the latter are more likely to win in the marketplace in the long run.

You're playing my song.

Regarding Saks and its Saks Works initiative, which takes it out of retailing and into the co-working space, MNB reader Rich Heiland wrote:

I have always said that in addition to cash flow there is one other economic factor a business should look at - utilization of overhead. In other words, you are paying a mortgage, utilities, etc for space, but how much of it and how many hours a day do you get return on it? At my last newspaper I found a big, beautiful press worth more than $1.5 million running two hours a day. Poor utilization of overhead. We created a commercial printing venture that in its first year saw the press running many more hours a week and generated $700,000 (in 1991) in gross revenues.

My take is that if Saks has the real estate investment, utility investment and does not need all its space for its traditional line of business, then  using it to generate revenue makes sense. I say that with the caveat that it should be apart from, and not detract from, its core business. I'd actually be saying "is there any way we can find uses for our space at night?" 

I agree with all your observations … though in the case of the Greenwich, Connecticut, space, the Saks Works was put into a closed Ralph Lauren Polo store, not into space that Saks already was using.

Published on: June 10, 2022

Top Gun: Maverick is just plane … er, plain … fun.  Even better than the original, this sequel  - coming more than three decades after the original - manages to be a thrilling and engaging piece of filmmaking.

Let's be clear - much of this is because of the star and producer, Tom Cruise, who manages to be both ageless and at least somewhat evolved in this new story, in which he is brought back to the Top Gun Navy aviator training school to teach a group of young pilots how to prepare for an impossible mission (not a phrase used in the movie, but we can't ignore the connection to another film franchise that Cruise energizes).

One of the extraordinary things about Top Gun: Maverick is the degree to which it appeals across generations, hitting home for both teens and aging Baby Boomer.  Pretty much everyone I've talked to has loved it, which explains why it is such a huge box office success.  I think the fact that we're watching real jets, not special effects, helps a lot, giving the film enormous verisimilitude.

I really recommend it … though I have to be honest about one thing - Mrs. Content Guy and I had what amounted to a private screening.  Last Friday, we lost power and internet … and so we went to the next town over and bought tickets to a noon show that we had almost to ourselves.  (Even as the pandemic recedes, it was sort of reassuring….)

I really like the Disney+ series, "Obi Wan Kenobi," a lot more than I expected to.  I pretty much hated "The Book of Boba Fett," and have liked, with reservations, "The Mandalorian" - all efforts to expand and deepen the "Star Wars" universe.  To me, they were sort of flat and uninspiring, but "Obi Wan Kenobi" manages to be both surprising and entertaining.  Ewan McGregor's strong performance in the title role, following up on his turns in The Phantom Menace, Attack of the Clones, and Revenge of the Sith, is critical to making it all work, and he's amply supported by a variety of British and American character actors.  Maybe it is because the series is more connected to the Star Wars films, or maybe it is less predictable than its brethren, but either way, I like it.

The other day, I re-watched one of my favorite movies - Robin & Marian, Richard Lester's 1976 romantic adventure film about Robin Hood and Maid Marian in middle age.  Sean Connery and Audrey Hepburn play the titular characters with movie star aplomb, and there are great supporting turns by Robert Shaw as the Sheriff of Nottingham, Nicol Williamson as Little John, Richard Harris as Richard Lionheart, and Ian Holm as King John.  If you've never seen it, Robin & Marian is a lovely film about trying to achieve the heroics of youth at a time when those events are just a distant memory, and it combines drama, romance and comedy in a near-peerless way.  Check it out.

My wine of the week - the 2020 Pigoudet Rosé Premiere from Provence, which is a bright and lovely rosé that is perfect for those warming summer nights.

One other thing.  Twenty-eight years ago today, my daughter Allison was born.  Today, she is an elementary school special education teacher, and she is extraordinary.  I'm very proud.  Happy Birthday, Kiddo.

That's it for this week … have a great weekend, and I'll see you Monday.

Sláinte!!