News

Questionable Practices

BY Richard Berman

Here’s a question retailers should ponder: Is the Service Employees International Union (SEIU) doing anyone any good?

In Houston, at least, the answer does not look promising.

The city’s unionized janitors aren’t happy with the union’s sluggish progress in fulfilling its own promises since the blitzkrieg organizing of building cleaners last year.

The labor contract’s fine print calls for very little compared to what the union promised up front. The new SEIU agreement gives employees a 25¢ raise on top of the new minimum wage, should it supersede the union wage. Since a national wage hike is a foregone conclusion, the gain from striking (at a cost of several weeks’ worth of lost wages) is $260 a year for the typical janitor.

And despite all the publicity and hoopla the union mustered by breaking into the South, there are a few things the union hasn’t publicized. In 2005, SEIU Local 1 leaders spent $12,000 from their members’ dues to hold a banquet at an Illinois resort. Money from dues that year—to the tune of $40,000—also went to the activist group Association of Community Organizations for Reform Now (ACORN) for its union-friendly advocacy in the Houston organizing effort (despite ACORN’s own record of busting unionization among its own employees).

Nor is SEIU publicizing the dues funneled to those organized labor bosses in Washington who promote a political agenda having nothing to do with the cultural and religious mores of most janitors. Labor’s history of corruption and embezzlement did not get much publicity from the union, either.

Organizing five of the six major cleaning companies in Houston has given SEIU major leverage to go after the lone holdout, Professional Janitorial Services, even as the union eyes San Antonio, Dallas and any other city it considers ripe. Should SEIU organize the entire industry, clients will have no choice but to hire from the union’s labor monopoly. As one Texas labor expert put it, SEIU can’t afford to let non-union companies exist, or the union won’t be able to demand unprecedented wages.

Above all, however, SEIU can’t afford to let workplace democracy exist. Employees of the five newly unionized cleaning companies in Houston were all organized through a process called “card check.” Instead of a secret-ballot election in which employees can vote their consciences (choosing to unionize or not in the privacy of the voting booth), under “card check” employees sign union cards as union organizers look over their shoulders. Predictably, the process is rife with intimidation and misrepresentation.

Right now the card-check process is optional, meaning unions can’t require it unless an employer agrees (usually after the union has threatened to ruin a firm’s business—hence the Houston cave-in). But SEIU has already started pushing the Democratic Congress to pass the misnamed Employee Free Choice Act, which would require employers to recognize unions under card check, even though employees might decide against unionizing if given the chance to vote in private.

A strike that generates more publicity than wages for janitors. Dues money from thousands of new union members to spend on causes members don’t support. A labor cartel that drives up prices for everybody. A scheme to end secret-ballot elections. Who is SEIU really good for?

SEIU’s drive to hijack elections nationwide underscores a sad fact about today’s labor movement: “Prounion” is not the same thing as “proworker.” Not any more.

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: SAM’S REALIGNS STORE-LEVEL MANAGEMENT

BENTONVILLE, ARK. Sam’s Club is changing the management structure in its stores. In the realignment, approximately 250 positions will be eliminated, Wal-Mart Stores announced last week. The company said it’s replacing five lower level management positions at each Sam’s Club location with three new higher level and higher paying assistant manager positions.

“This is not a cost cutting effort. We expect a slight increase in payroll upon completion of this change,” said Sharon Orlopp, senior vp of Sam’s people division.

THE FIX: Differentiation would better help Sam’s

Since Sam’s decided that its refocus on the business customer was too narrow, it has sought to find ways to make its clubs more attractive to primary shoppers, i.e., women. And that’s a pretty tough row to hoe, as Costco has done a pretty good job at satisfying the club customer in general and BJ’s has been going after female shoppers for several years now, with some success.

Having fewer managers with more direct responsibility could create a tighter knit club-level management and shorten lines of responsibility and accountability. Yet, without differentiating the offering, execution isn’t going to overcome all of Sam’s challenges.

That being said, a store-level management realignment might be overlooked at other retailers, but, this being Wal-Mart, everyone has to make a big deal about it. But that’s the price you pay as the big guy on the block.

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Weekly Retail Fix

BY CSA STAFF

THE NEWS: TOYS ‘R’ US EARNINGS GAIN 40.1%

WAYNE, N.J. Toys “R” Us today posted net earnings of $199 million for its critical fourth quarter, which meant it turned a profit for the fiscal year ended Feb. 3. But special charges and gains had an impact on its numbers.

Sales for the previous fiscal annum were $142 million, the difference translating into a net earnings increase of 40.1% year over year. For the last fiscal year, Toys “R” Us posted net earnings of $85 million versus a net loss of $384 million for the previous period.

Operating earnings in the fiscal 2006 fourth quarter gained 53.1% to $571 million versus $373 million for the fourth quarter of fiscal 2005. For the last fiscal year, operating earnings were $649 million versus an operating loss of $142 million for the previous period.

THE FIX: Improved shopper experience ups comps

Of course, any observer has to take into consideration special financial circumstances. Fiscal 2006 operating earnings were positively impacted by $96 million from gains on property sales, slightly offset by restructuring and other charges. In fiscal 2005, operating earnings were negatively impacted by $410 million in costs relating to the merger of the company, as well as $58 million of costs and charges relating to contract settlement fees, restructuring and other charges.

Still, sales were trending up at last year’s end. Net sales gained 15.8% to $5.7 billion. In the full fiscal year, net sales advanced to $13 billion, up 15.2%.

Comparable-store sales for the Toys “R” Us’ U.S. division gained 0.6% in fiscal 2006, and that represents the division’s first comps increase in six years. Comps at Babies “R” Us were up 4.8% and those at Toys “R” Us international were up 2.6% for the fiscal year.

Jerry Storch, chairman and ceo of Toys “R” Us, said the company is “pleased with the strides we made in fiscal 2006 to improve at all levels of the organization and reposition the company for profitable growth over the long term.”

He said the company’s new management team has been focusing on executing a strategy that would turn the retailer into a global toy and baby products authority.

“This translated into higher overall sales, positive comparable-store sales, improved gross margins and strong operating earnings growth for the 2006 fiscal year,” Storch asserted. “The key to our strategy has been improving the customer shopping experience in our stores. We are accomplishing this by delivering a more compelling merchandise selection, better service and a cleaner and more comfortable shopping environment.”

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