Target Closing 2 Small Stores in the San Francisco Bay Area

[Alpha8472]

The Walmart that closed was in Oakland. The other Walmart stores have resorted to locked glass cabinets. However, San Francisco is much worse as there are armies of homeless in San Francisco. Homelessness is not tolerated in the suburbs. The suburban cities clear the streets of homeless people and have policies in place to discourage them from staying.

San Francisco does not clear the streets of homeless and encourages them to live in the city from all over the country.

[storewanderer]

I suspect that some of these numbers are inaccurate about Metreon, but that there is truth overall to this story. First, shrink is measured at cost. Even as bad as San Francisco is right now, and it is very bad, the $25K a day metric is probably at retail not cost. All it takes is 30 shoplifters a day each stealing $950... And the shoplifters do know to steal less than $950 because it's a guarantee that they will not be prosecuted below that "magic number.". The highest cost/lowest margin electronic items aren't going to be out on the sales floor in this environment, like TV sets and game consoles. But at least 30 shoplifters a day loading a reusable bag and walking out sounds realistic.

So I'm going to say they're probably losing $10K a day at cost which is still staggering. That puts shrink at $3.65M. The average Target does $40M and this one is definitely a chunk higher, so let's say it is doing $50M. That still puts shrink at 7.3% which is astronomical. Nobody will keep doors open with consistent 7.3% shrink.

Whether you believe the writers or not, there are some specific details to pay attention to. The store opened in 2012. It is not a Target owned/built building - most of the urban stores are leased. So they are operating on a lower margin than the typical owned store.

Target is large enough to do 25 year leases - first term 10 years, then 5 year renewals after that with term guarantees past the 25 (because who would want to kick out a Target? They always get guaranteed term).

The fact this place opened in 2012, the fact that they are operating in the highest labor cost market in the US when you factor in San Francisco's outrageous "predictive schedule law" where you have to write retail schedules at least 3 weeks before they start - and if the employer makes any change every employee affected automatically gets a 8 hour pay supplement for each change... With schedules having to change all the time due to the labor shortage and people quitting or calling out for weeks at a time due to COVID quarantines, the predictive schedule law is murder on stores. You in theory could work only two days a week but your schedule gets changed three times and now you're paid as a full time employee.

I think this is a lease negotiating tactic and shrink test at same time.

They're probably screaming bloody murder to the landlord - if you don't give us a massive rent reduction due to the fact that we are being robbed blind daily and can't operate safely outside 9-6 hours, which by the way are the hardest hours to staff any retailer - then they're out at the 10 year mark which is right around the corner. The store is going to close without a rent reduction to offset all these shrink costs. And Target usually does a group of store closures in January, some years more than others. I completely believe this is happening right now and the story is a leak intended to add fuel to the fire. Don't get me started on the brain dead politicians who don't understand the difference between revenue and profit, the idiot Mayor probably thinks that since Target is a multi billion dollar company they can afford these losses.

At the same time they're testing tactics I've never seen at a Target, even Compton and Inglewood in LA. Glass cases on soap? Laundry detergent? Closing at 6pm? That's hard core loss prevention that borders on what I call sales prevention. Let's face it, nobody wants to shop at the store for embarrassing personal hygiene products when you have to get someone to unlock the glass case and walk the item to the register. Nobody wants to shop before 6pm. But it is probably a test to see if they can save the store or not.

I believe that the fate is undecided, but not a good outlook. If the LP tests work out (maybe they will see more Drive Up sales to offset the difficulty of locked cases?) AND they get a massive rent reduction then they will keep it open. But first opportunity to close is coming up. For a flagship it's concerning seeing those pictures indicating that due to lower margin from shrink they haven't done any of the recent remodel updates when other stores have had as many as three full floor to ceiling remodels in the last 5 years (like Encinitas which just got redone a third time, converted to polished concrete floors and a real surprise, open warehouse ceilings painted black over the front end of the store). Personally I doubt they can afford to raise labor further to handle a store full of lockup cases. And if the landlord is heavily leveraged they may not be able to afford a significant reduction that would allow Target to stay. Sometimes it's better for the landlord to take the tax write off of a closed tenant for years instead of giving a rent reduction. Or maybe they're renegotiating to drop it to a small format store due to the shrink (like they did in Portland).

Remember that just over the bridge Walmart had a supercenter in Emeryville that did over $300M a year and had 500+ employees. It had astronomical shrink measured in the millions, multiple assaults and homicides, and they closed the doors continuing to pay rent on a closed building. Same thing in Downtown Long Beach, massive high volume store but the shrink and violence caused them to leave. They're still paying the rent there too so the community is stuck with nothing but an El Super as Walmart put everything else out of business.

I think this store is on life support and the prognosis is not good.

You raise an interesting point the store still has the same interior it opened with 10 years ago which is odd for a flagship type location. Since most of the sales floor is on the 2nd floor maybe it isn't as each to go cement on a 2nd floor? But they have not done anything here to the decor since it opened.

Every Target in San Francisco is doing the 6 PM closing, not just this one, even Stonestown, which is an area that I thought was... pretty safe; also that store was just expanded last year and has the latest interior elements. So Target sends some mixed signals. In the past year or two they were trying to get another store in San Francisco in a long closed Bell on Post Street, it has been vacant ever since Bell closed; retail space at the bottom of residential and place was always deserted as Bell. It was the largest and nicest store under that banner. Probably 40k square feet. It closed before Ralphs officially exited NorCal.

Was unaware of the predictive scheduling law. Surprised it isn't statewide. It seems many of San Francisco's ideas eventually end up statewide. The $950 thing... At some point and I am afraid the damage may be irreparably deep by the time that point comes, someone is going to have to come in and clean up these messes.

[ClownLoach]

I suspect that some of these numbers are inaccurate about Metreon, but that there is truth overall to this story. First, shrink is measured at cost. Even as bad as San Francisco is right now, and it is very bad, the $25K a day metric is probably at retail not cost. All it takes is 30 shoplifters a day each stealing $950... And the shoplifters do know to steal less than $950 because it's a guarantee that they will not be prosecuted below that "magic number.". The highest cost/lowest margin electronic items aren't going to be out on the sales floor in this environment, like TV sets and game consoles. But at least 30 shoplifters a day loading a reusable bag and walking out sounds realistic.

So I'm going to say they're probably losing $10K a day at cost which is still staggering. That puts shrink at $3.65M. The average Target does $40M and this one is definitely a chunk higher, so let's say it is doing $50M. That still puts shrink at 7.3% which is astronomical. Nobody will keep doors open with consistent 7.3% shrink.

Whether you believe the writers or not, there are some specific details to pay attention to. The store opened in 2012. It is not a Target owned/built building - most of the urban stores are leased. So they are operating on a lower margin than the typical owned store.

Target is large enough to do 25 year leases - first term 10 years, then 5 year renewals after that with term guarantees past the 25 (because who would want to kick out a Target? They always get guaranteed term).

The fact this place opened in 2012, the fact that they are operating in the highest labor cost market in the US when you factor in San Francisco's outrageous "predictive schedule law" where you have to write retail schedules at least 3 weeks before they start - and if the employer makes any change every employee affected automatically gets a 8 hour pay supplement for each change... With schedules having to change all the time due to the labor shortage and people quitting or calling out for weeks at a time due to COVID quarantines, the predictive schedule law is murder on stores. You in theory could work only two days a week but your schedule gets changed three times and now you're paid as a full time employee.

I think this is a lease negotiating tactic and shrink test at same time.

They're probably screaming bloody murder to the landlord - if you don't give us a massive rent reduction due to the fact that we are being robbed blind daily and can't operate safely outside 9-6 hours, which by the way are the hardest hours to staff any retailer - then they're out at the 10 year mark which is right around the corner. The store is going to close without a rent reduction to offset all these shrink costs. And Target usually does a group of store closures in January, some years more than others. I completely believe this is happening right now and the story is a leak intended to add fuel to the fire. Don't get me started on the brain dead politicians who don't understand the difference between revenue and profit, the idiot Mayor probably thinks that since Target is a multi billion dollar company they can afford these losses.

At the same time they're testing tactics I've never seen at a Target, even Compton and Inglewood in LA. Glass cases on soap? Laundry detergent? Closing at 6pm? That's hard core loss prevention that borders on what I call sales prevention. Let's face it, nobody wants to shop at the store for embarrassing personal hygiene products when you have to get someone to unlock the glass case and walk the item to the register. Nobody wants to shop before 6pm. But it is probably a test to see if they can save the store or not.

I believe that the fate is undecided, but not a good outlook. If the LP tests work out (maybe they will see more Drive Up sales to offset the difficulty of locked cases?) AND they get a massive rent reduction then they will keep it open. But first opportunity to close is coming up. For a flagship it's concerning seeing those pictures indicating that due to lower margin from shrink they haven't done any of the recent remodel updates when other stores have had as many as three full floor to ceiling remodels in the last 5 years (like Encinitas which just got redone a third time, converted to polished concrete floors and a real surprise, open warehouse ceilings painted black over the front end of the store). Personally I doubt they can afford to raise labor further to handle a store full of lockup cases. And if the landlord is heavily leveraged they may not be able to afford a significant reduction that would allow Target to stay. Sometimes it's better for the landlord to take the tax write off of a closed tenant for years instead of giving a rent reduction. Or maybe they're renegotiating to drop it to a small format store due to the shrink (like they did in Portland).

Remember that just over the bridge Walmart had a supercenter in Emeryville that did over $300M a year and had 500+ employees. It had astronomical shrink measured in the millions, multiple assaults and homicides, and they closed the doors continuing to pay rent on a closed building. Same thing in Downtown Long Beach, massive high volume store but the shrink and violence caused them to leave. They're still paying the rent there too so the community is stuck with nothing but an El Super as Walmart put everything else out of business.

I think this store is on life support and the prognosis is not good.

You raise an interesting point the store still has the same interior it opened with 10 years ago which is odd for a flagship type location. Since most of the sales floor is on the 2nd floor maybe it isn't as each to go cement on a 2nd floor? But they have not done anything here to the decor since it opened.

Every Target in San Francisco is doing the 6 PM closing, not just this one, even Stonestown, which is an area that I thought was... pretty safe; also that store was just expanded last year and has the latest interior elements. So Target sends some mixed signals. In the past year or two they were trying to get another store in San Francisco in a long closed Bell on Post Street, it has been vacant ever since Bell closed; retail space at the bottom of residential and place was always deserted as Bell. It was the largest and nicest store under that banner. Probably 40k square feet. It closed before Ralphs officially exited NorCal.

Was unaware of the predictive scheduling law. Surprised it isn't statewide. It seems many of San Francisco's ideas eventually end up statewide. The $950 thing... At some point and I am afraid the damage may be irreparably deep by the time that point comes, someone is going to have to come in and clean up these messes.

Thankfully the predictive scheduling law hasn't made it past San Francisco, Emeryville and Berkeley. Even the unions are against it because they know it is a backbreaker for retailers and it has resulted in more store closures.

The law did make it into Oregon however and my understanding is that it is a miserable nightmare to run stores up there with it in place. It is basically legalized extortion and conspiracy by employees against the retailer. They can work together. "Freddy, today I'm going to call out sick with COVID like symptoms so that I don't get in trouble, and since we're short staffed the boss will have to extend your 4 hour shift to an 8 hour shift. And then you'll get another 8 hours penalty pay for the shift change without 3 weeks notice. Next Tuesday when I come back and tell them I didn't have COVID you call out and I'll get the rest of your shift plus the 8 hour penalty."

The origin of the law is a small problem blown way out of proportion. A few sleazy little mall stores basically were managing payroll by sales results and making cuts in hours after schedules posted. They called it on call scheduling, where you have to call in the night before or morning of to make sure your shift wasn't cut due to bad sales. Obviously if you were say a parent who had scheduled childcare now not only is your shift canceled but you're still on the hook for the babysitter. That is a bad practice, but writing a law that states no schedule change can be made by the retail business without paying a 8 hour penalty, and the requirement that the schedule be posted 3 weeks ahead - which really means one month as it must be out 21 days before the last day on the schedule - how does that solve the issue? For retailers that have variable truck schedules you basically just doubled the pay rate because every employee who works receiving is going to get 8 hours penalty every truck day. And then everyone wonders why prices are so high up there...

The Emeryville/Oakland area Walmart that I have on good authority was a $300M/year store and in the top 10 stores in the company was supposedly closed due to the shrink and crime, but that predictive schedule law took effect within a few days of the sudden closure. It was a factor too.

[ClownLoach]

The Walmart that closed was in Oakland. The other Walmart stores have resorted to locked glass cabinets. However, San Francisco is much worse as there are armies of homeless in San Francisco. Homelessness is not tolerated in the suburbs. The suburban cities clear the streets of homeless people and have policies in place to discourage them from staying.

San Francisco does not clear the streets of homeless and encourages them to live in the city from all over the country.

Yeah not sure why but the Walmart folks I know called it Emeryville not Oakland for some reason. Was top ten in their company in volume but still closed.

[Alpha8472]

The Oakland Walmart was very busy and popular. Oakland is a very impoverished and poor city. The people shopped at Walmart because they had very little money. The store was packed day and night. The parking lot was filled to capacity.

Then it suddenly closed. The customers crowded the 2 other nearby Walmart stores in San Leandro. The San Leandro Walmart on Davis street, which is much closer to Oakland, was packed to the walls with people for years. Every day looked like Black Friday with wall to wall people and lines that stretched down the aisles. Then in 2020 they started locking every single aisle with glass cabinets to prevent shoplifting. Now even a $1 toothbrush or bottle of detergent is locked up! Every day there were mobs of angry customers complaining that everything was locked up and that there were no employees with keys. There were angry customers yelling and screaming. It looked like some of them were about to pull out guns and shoot employees. People had reached a breaking point. They looted and set the store on fire in 2020. The glass cabinets were smashed and hundreds of people robbed the store until there was nothing left. The store had to be closed for many months just to rebuild. There was a huge hole in the ceiling from the fire.

When it reopened, it was once again completely filled with locked glass cabinets down every aisle. Now when you see the store, the store is empty of customers. It looks so bad, that it seems like the store could close any day now. That is how you drive away customers and turn a once successful business into a failure. No one wants to shop there. Everything is locked up and there are no employees to unlock the cabinets. How does a store make money if everything is locked up? I kid you not, the employees just run away from customers at this store. "I don't have the key," is all you hear.

The Costco across the street is a different story. The parking lot is packed all day long. The lines are outrageous and customers and buying like crazy.

Walmart corporate seems to love this Walmart store in San Leandro. They look at the low shoplifting rate and promote every store manager that has worked at this store to district manager. These words are straight from the mouths of employees who work at this store. This is insane.

The Target store in San Leandro is very successful and busy. Virtually nothing is locked up and it seems like it has taken many customers away from Walmart. So Target is doing well in the San Francisco Bay Area outside of San Francisco, because San Leandro is tough on homeless people. They will clear the streets of the homeless.

[veteran+]

San Francisco has probably over reacted with this scheduling thing.

But...............................this over reaction is 100% the retailers' fault and I have no pity for them.

For decades and decades they have diminished the work life balance of their employees and in tandem helped to destroy labor unions (unions were not perfect of course).

I have worked at many levels of management and clearly remember the "directives" from above. They were intentional and anti employee. I tried hard to resist these directions, which did not help me with corporate politics, though the "results" of my resistance produced higher rates of productivity, morale and by defacto very happy customers.

Btw, my store, district or region always seemed to be the training location for career minded employees.

All of this is connected.

[TW-Upstate NY]

I have worked at many levels of management and clearly remember the "directives" from above. They were intentional and anti employee. I tried hard to resist these directions, which did not help me with corporate politics, though the "results" of my resistance produced higher rates of productivity, morale and by defacto very happy customers.
All of this is connected.

I worked for the Post Office for over 32 years and it was the same thing. It's a highly Unionized environment and management likes to play rough. Unlike your example, local management happily joined in. When they did that with me, I told them this: "you get what you give." If you treat people at the very least like human beings, they will respond positively and produce the results you outlined. There would also be no need for these kind of laws and ordinances. It's not rocket science.

[ClownLoach]

The Oakland Walmart was very busy and popular. Oakland is a very impoverished and poor city. The people shopped at Walmart because they had very little money. The store was packed day and night. The parking lot was filled to capacity.

Then it suddenly closed. The customers crowded the 2 other nearby Walmart stores in San Leandro. The San Leandro Walmart on Davis street, which is much closer to Oakland, was packed to the walls with people for years. Every day looked like Black Friday with wall to wall people and lines that stretched down the aisles. Then in 2020 they started locking every single aisle with glass cabinets to prevent shoplifting. Now even a $1 toothbrush or bottle of detergent is locked up! Every day there were mobs of angry customers complaining that everything was locked up and that there were no employees with keys. There were angry customers yelling and screaming. It looked like some of them were about to pull out guns and shoot employees. People had reached a breaking point. They looted and set the store on fire in 2020. The glass cabinets were smashed and hundreds of people robbed the store until there was nothing left. The store had to be closed for many months just to rebuild. There was a huge hole in the ceiling from the fire.

When it reopened, it was once again completely filled with locked glass cabinets down every aisle. Now when you see the store, the store is empty of customers. It looks so bad, that it seems like the store could close any day now. That is how you drive away customers and turn a once successful business into a failure. No one wants to shop there. Everything is locked up and there are no employees to unlock the cabinets. How does a store make money if everything is locked up? I kid you not, the employees just run away from customers at this store. "I don't have the key," is all you hear.

The Costco across the street is a different story. The parking lot is packed all day long. The lines are outrageous and customers and buying like crazy.

Walmart corporate seems to love this Walmart store in San Leandro. They look at the low shoplifting rate and promote every store manager that has worked at this store to district manager. These words are straight from the mouths of employees who work at this store. This is insane.

The Target store in San Leandro is very successful and busy. Virtually nothing is locked up and it seems like it has taken many customers away from Walmart. So Target is doing well in the San Francisco Bay Area outside of San Francisco, because San Leandro is tough on homeless people. They will clear the streets of the homeless.

They may be getting some kind of multi unit position but they're not the DM. Could be the District Ops, District LP etc. As they have a lot of those types of District "coordinators" and "supervisors". But nobody at Walmart is promoted direct to District Manager, a role that at any other company would be a Regional VP as districts are now approaching 100 stores.

Walmart is so crazy now that there are hardly any District Managers because of the elevation of the position, and those positions are almost always given to Corporate people who have a position that is being cut in a downsizing.

They do not care about the stores, only the Corporate offices. When they do store layoffs of course a security officer is there to witness the discussion and walk the laid off employee out the door. At the Corporate office however the employee is given notice, AND given up to three months just to apply for another position in the company.

So a cubicle dweller, let's say the VP of forklift procurement and rental, gets their position eliminated in a downsizing. The Washington-Oregon-NorCal district happens to be open and the employee is interested. They get a fully company funded relocation and are now the DM.

The DM at Walmart is lucky if they see half their stores one time in a year.

Considering that in my company the expectation is the DM sees every one of their stores weekly with rare exceptions (like the Washington state DM that has a couple Alaska stores) - I do not know how the DM can be effective if they see a store every other YEAR. Then you get that District glass case coordinator or whatever else who visits and only looks at that one area they specialize in.

When the DM is actually going to visit a store - all these other District coordinators and such are invited - hence the actual DM visit always leaks out to the Store Manager weeks in advance and all hell breaks loose. No matter how bad the store is it magically gets cleaned up by the visit. The DM never sees the real store condition for the customer.

Even better - in the neighborhoods considered unsafe - the DM is not allowed to drive there by themselves. They have to use an executive transportation company with a guard. So the stores are not safe enough for the District Manager to visit... But safe enough for the employees to work there without any security!

This is why Walmart is now so inconsistent and poorly executed.

[veteran+]

WOW

[ClownLoach]

WOW

The Walmart DM cannot visit Bakersfield stores without a executive driver and guard. Bakersfield is considered to be too dangerous to expose the DM to possible harm. Based on that I would imagine that they can't walk into more than half their California locations without the same driver and guard.