Friday, January 15, 2016; Running The Wal-Mart Numbers; What's The Minimum Wage In DC?

Updates

January 17, 2016: Mark Perry chimes in -- Fallout from DC’s minimum wage law: Wal-Mart abandons plans to expand and the city’s restaurants shed jobs. I had not posted on the "restaurant job. What did Mark have to say about restaurants in DC?

[S]ome early evidence suggests that DC’s minimum wage law is having a pretty devastating effect on the city’s restaurant employment. Looking at the city’s monthly restaurant employment over the last decade and comparing DC food jobs to the surrounding suburbs in Virginia and Maryland, I concluded that: a) the city’s restaurants survived the Great Recession pretty well without any major job losses, especially compared to the loss of nearly 6,000 food jobs in the surrounding suburban areas, and b) the city’s restaurants are now facing a much bigger struggle following the city’s passage of a minimum wage law in January 2014 that will raise the District’s minimum wage to $11.50 an hour in less than six months.

At the same time, the DC suburban restaurants are booming with strong hiring last year of nearly 5,000 new food jobs that brought the area’s restaurant employment to an all-time high in November.

[However, there is] another perspective to the struggle DC restaurants are now facing.

In the five-year period between January 2010 and December 2014, DC restaurants were hiring an average of 187 new food workers every month. Last year though, restaurant hiring stalled out, likely due to rising labor costs, and the city’s food jobs fell by an average 21 every month in 2015 (through November). If jobs had continued to be added at the 2010-2014 rate of 187 per month, there would now be nearly 50,000 jobs instead of the current level below 48,000, which is a gap of more than 2,000 DC food jobs that weren’t created last year due most likely to the current $10.50 minimum wage along with the pending increase to $11.50 on July 1.

Add to that known damage of rising labor costs, the additional damage that could come from the successful passage of a $15 minimum wage ballot initiative scheduled for this November, and you’ve got an economic reality that just doesn’t support restaurant expansion in DC. The rising minimum wages in DC and around the country ultimately aren’t really so much about politics as they are more simply about “restaurant and retail math.” And that math of $10.50, $11.50 and $15 an hour labor costs just doesn’t work well for the profitability and survival of restaurants and retailers in a hyper-competitive industry with razor thin margins.

January 16, 2016: what's the minimum wage in DC? The Washington Post says "DC" is upset that Wal-Mart not building stores in their poor neighborhoods. After seeing what happened in Baltimore, do you blame Wal-Mart? Wal-Mart in DC poor neighborhoods? Crime magnets.

Walmart abruptly announced Friday that it was abandoning a promise to build stores in Washington’s poorest neighborhoods, an agreement that had been key to the deal allowing the retailer to begin operating in the nation’s capital.

The giant retailer cited increasing costs for the new projects and disappointing performance at the three D.C. stores it opened over the past several years. But news that Walmart would pull out of two supercenters planned for east of the Anacostia River, where its wares and jobs are wanted most, shocked D.C. leaders. In one case, the city had already committed $90 million to make a development surrounding one of the stores viable.

Evans said that, behind closed doors, Walmart officials were more frank about the reasons the company was downsizing. He said the company cited the District’s rising minimum wage, now at $11.50 an hour and possibly going to $15 an hour if a proposed ballot measure is successful in November.

He also said a proposal for legislation requiring D.C. employers to pay into a fund for family and medical leave for employees, and another effort to require a minimum amount of hours for hourly workers were compounding costs and concerns for the retailer.

Note that The Washington Post does not tell the reader that the family medical leave will be extended to 16 weeks. 16 / 50 = thirty percent of the year paid leave -- what a great deal.

January 16, 2016: obviously I'm wrong and The Wall Street Journal is correct but I still don't get it. Wal-Mart is going to close 102 Wal-Mart Express stores (a failed "test") and seven (7) stores in Puerto Rico. Big deal. Wal-Mart is going to open 170 "large" stores this year (the standard Wal-Mart store, the supercenters, and Sam's Club's).

Wal-Mart may end up with fewer US stores by the end of the year but it's footprint, measured in square footage that matters. If the Neighborhood Markets are 40,000 square feet, I assume the Express stores are about 20,000 square feet. Very few Markets are closing, and instead are going to open 95,000 more Markets, as well as 60 new supercenters which are about 180,000 square feet. Do the math. They're going to close 154 mostly-smaller stores; open 170 mostly-larger stores.

150 x 25,000 vs 170 x 100,000. Whatever.  4 million square feet being shut down; 20 million square feet being added. Poor performing / redundant stores being closed.

The real story is that the Wal-Mart Express failed. I was a strong proponent of the concept. I was wrong. My hunch is that Wal-Mart Express could never compete in upscale strip malls in major urban centers. Even the slightly larger Neighborhood Market in our neighborhood (Southlake, TX) will be closed with this announcements. Wal-Mart Express could drive out the competition in the small rural towns across Texas (Texas will see more Express closures than any other state) but the return on investment was not worth it. It's all about volume for Wal-Mart. Not much volume for these Express stores, even though the communities who had an Express Wal-Mart loved 'em.

Original Post 

Tweeting now: Ebola death confirmed in Sierra Leone, hours after World Health Organization declared West Africa outbreak over - BBC (tweeted on the evening of January 14, 2016)

 -- At least it's easy to treat  -- President Obama. 

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Whole Lotta Shakin' Goin' On

Tweeting early Thursday: Oklahoma Corporation Commission asks disposal well operators to reduce volumes following recent earthquakes.

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Wal-Mart Closures

Stated purpose of the closures: to become more nimble in the face of increased competition from all fronts, including from online rival Amazon.com.

Raw data from the AP.

In general:

• company has 11,000 stores worldwide
• more than 5,000 stores in the US
• stores being closed account for less than 1% of Walmart's global revenue

154 stores in the US to close

• of the 154 stores, 102 of them are Wal-Mart Express stores, opened in 2011, as a "test"
• Wal-Mart Express stores never caught on; they served the same purpose as Wal-Mart's larger Neighborhood Markets

Breakdown of non-Express stores that will close:

• 23 Neighborhood Markets 
• 12 supercenters 
• 7 stores in Puerto Rico 
• 6 discount stores 
• 4 Sam's Club stores  

Note:

• more than 95% of the stores to close in the US are within 10 miles of another Wal-mart
• Wal-Mart will now focus in the US on supercenters, Neighborhood Markets, e-commerce, and pickup services for shoppers (order on-line; pick up at local store)

In 2016 Wal-Mart will open:

• 60 supercenters
• 95 Neighborhood Markets
• 10 Sam's Clubs 

The Drudge Report (based on placement of link) and local media outlets, as well as major business news  networks made it sound like retail was dead in the US, and that was the reason Wal-mart was closed 154 stores in the US.

When I look at these numbers, I see something completely different. The Wal-Mart Express stores, which account for 102 of the 154 closures, was a "test" and it simply failed; the return on investmnt simply did not meet Wal-Mart's expectations. If you subtract out those 102, one is left with 52 closures. Wal-Mart, in other words, is closing 52 stores that have been part of a network for decades. In its place, Wal-Mart is going to build 170 new, bigger stores.

I hardly see that as a "negative" story. Maybe I'm missing something. Ninety-five percent of the closing stores are within 10 minutes of another larger Wal-Mart store. This tells me that the area couldn't "support" two Wal-Mart stores, and, as for the workers, they will likely find jobs at the neighboring Wal-Mart store if they want. And some of those folks will actually have a shorter commute. Some a longer commute.

For all the press this story is getting, including this post, it's a non-story -- except to say Wal-Mart is expanding its footprint significantly.