Stater Bros. Lays Off Courtesy Clerks. First Time in 89 Year History.

[BillyGr]

It looks to me like Stater is in a strange place. They want to run a perimeter that is more of an upper middle class type of perimeter with a lot of staffing, assortment, etc. But their center store is completely "middle of the road" in offer. So there may be a disconnect going on in the eyes of the customer.

Another challenge is the Stater customer may not buy enough high cost items from that perimeter. For instance is the meat department selling a lot of Ribeyes or is it selling a lot of Top Sirlions? Because that little 2% final profit gives you twice as many dollars on the higher priced Ribeye. So this may be another problem.

Seems (in a way) similar to Wegmans. So many try to say the store is high priced, but that is mostly in the perimeter, as they will have many varieties of items that most stores will only have a couple of, and then items that few other stores carry.

So, those items tend to cost more, as they are more limited (may be made in smaller quantities if only going to one chain and then a few gourmet type stores) plus that if you have 10 varieties of something, you are likely either buying less (thus paying more for it) and/or having more that gets wasted.

The center store tends to have the main brand (or two) of things, plus store brands, and those are often equal to, if not lower than, many other stores in the given area (and vary between Wegmans, such as a PA store and one in NJ, with NJ actually being cheaper).

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Now, as to the steaks, I guess the sales of the second one may vary, depending on how loudly they roar to get attention (being sirLIONS and all)

[retailfanmitchell019]

It looks to me like Stater is in a strange place. They want to run a perimeter that is more of an upper middle class type of perimeter with a lot of staffing, assortment, etc. But their center store is completely "middle of the road" in offer. So there may be a disconnect going on in the eyes of the customer.

Stater Bros. ought to take lessons from Market Basket in New England. Market Basket doesn’t spend money on loyalty programs, a modern store interior, self-checkout, or digital advertising. That’s how they keep costs down. They aren’t unionized, but employees are still paid strong wages.
Market Basket is as plain and old-school as you can get for a conventional supermarket in this day and age.

[ClownLoach]

Dark cloud over Stater Bros. Markets as company lays off clerks across Southern California

https://www.vvdailypress.com/story/news ... 895284007/

"CEO Pete Van Helden stated that retail prices have increased by about 30% in the last four years, and customers are choosing lower-priced competitors."

"The company is considering slashing labor and electricity costs to offset losses."

"Van Helden also alluded at potentially more layoffs based on the economy."

"As inflation impacts customers, they are purchasing less at Stater Bros. and some have chosen to shop at “lower priced” competitors like Walmart, Aldi, Target and dollar stores, Van Helden added."

"Nearly 150 workers and union leaders picketed Wednesday, March 5, at an affected Costa Mesa Stater Bros. store to protest the layoffs, arguing that the move wasn’t about saving money to protect the chain from going under but to chill ongoing labor contract talks, the Times reported."

"“Stater Bros. has the best customer service. Stater Bros. is profitable. Stater Bros. is able to remodel and open new stores,” the union stated."

IMO, this is a smokescreen from Staters providing cover for internal malaise and dysfunction as a result of bad decisions.

Maybe.

However I will maintain capital investment has nothing to do with labor. In most cases the company has to spend on construction, remodels etc. to write it off otherwise they're going to pay the same out in taxes.

Labor is a product of short term sales income.

I think this is a Union negotiating tactic. Unfortunately the days of Stater being cooperative and supportive in this process are over.

[ClownLoach]

It looks to me like Stater is in a strange place. They want to run a perimeter that is more of an upper middle class type of perimeter with a lot of staffing, assortment, etc. But their center store is completely "middle of the road" in offer. So there may be a disconnect going on in the eyes of the customer.

Stater Bros. ought to take lessons from Market Basket in New England. Market Basket doesn’t spend money on loyalty programs, a modern store interior, self-checkout, or digital advertising. That’s how they keep costs down. They aren’t unionized, but employees are still paid strong wages.
Market Basket is as plain and old-school as you can get for a conventional supermarket in this day and age.

SB obviously has.
They don't have loyalty.
Their store interiors are far from modern.
Few have self checkout and they have stopped installing it.
They don't have digital advertising.

And SB clearly does not try to run an upscale perimeter. There are few upscale items anywhere in the store except for a handful of locations in upper class areas where they'll squeeze in a few Choice (not even Prime) steaks.

[storewanderer]

It looks to me like Stater is in a strange place. They want to run a perimeter that is more of an upper middle class type of perimeter with a lot of staffing, assortment, etc. But their center store is completely "middle of the road" in offer. So there may be a disconnect going on in the eyes of the customer.

Stater Bros. ought to take lessons from Market Basket in New England. Market Basket doesn’t spend money on loyalty programs, a modern store interior, self-checkout, or digital advertising. That’s how they keep costs down. They aren’t unionized, but employees are still paid strong wages.
Market Basket is as plain and old-school as you can get for a conventional supermarket in this day and age.

SB obviously has.
They don't have loyalty.
Their store interiors are far from modern.
Few have self checkout and they have stopped installing it.
They don't have digital advertising.

And SB clearly does not try to run an upscale perimeter. There are few upscale items anywhere in the store except for a handful of locations in upper class areas where they'll squeeze in a few Choice (not even Prime) steaks.

Let me rephrase my thought about the Stater perimeter: they put the amount of labor into the perimeter that if they worked with higher end products, it would be an upscale perimeter. Back to my sirloin vs. ribeye example they are handling the products more of their customer base buys which are lower cost products.

[HCal]

However I will maintain capital investment has nothing to do with labor. In most cases the company has to spend on construction, remodels etc. to write it off otherwise they're going to pay the same out in taxes.

Labor is a product of short term sales income.

Can you explain what you mean by this? Corporate tax for Stater (federal + California) would be less than 30%. I can't think of any way that they would pay the same out in taxes unless the tax rate somehow approaches 100%.

[storewanderer]

However I will maintain capital investment has nothing to do with labor. In most cases the company has to spend on construction, remodels etc. to write it off otherwise they're going to pay the same out in taxes.

Labor is a product of short term sales income.

Can you explain what you mean by this? Corporate tax for Stater (federal + California) would be less than 30%. I can't think of any way that they would pay the same out in taxes unless the tax rate somehow approaches 100%.

21% Federal+8.84% CA is pretty close to 30%...

Plus there are so many tax incentives for capex. Between bonus depreciation, various incentives for "environmentally friendly" capex, etc.... lot of opportunities for businesses on this. I expect this is the reason for some of their very major remodels to outdated older stores.

I am thinking if they have 171 stores, assuming average sales volume is $25 million per year per store (probably a low estimate), they should still be highly profitable. But I may be wrong. However, look at some of their last publicly issued financial statements. Page 11
https://www.sec.gov/Archives/edgar/data ... 77d10k.htm

[ClownLoach]

Generally companies I've worked at manage to find capital dollars to spend so they can write off enough expenses to lower their taxes. Sure it is not really a 1 to 1, but you do get the idea. You borrow or otherwise use shareholders money to invest in remodels, equipment etc. that will become new assets on the books and also be written off to reduce tax liability. I'm not a corporate accountant or I would probably be retired by now. I don't know how they play these games, but I do know this is why you've seen over and over again chains on the verge of bankruptcy managing to churn out brand new stores as if business is booming. Sometimes the grand opening sale is turned into a liquidation (see Circuit City, BB&B where multiple Grand Reopening post remodel celebrations were converted to liquidation the same week, Party City that just relocated and opened a bunch of new concept stores, and so on). There's always money to be spent on capital. Not so much on labor where it's a straight expense.

[storewanderer]

Generally companies I've worked at manage to find capital dollars to spend so they can write off enough expenses to lower their taxes. Sure it is not really a 1 to 1, but you do get the idea. You borrow or otherwise use shareholders money to invest in remodels, equipment etc. that will become new assets on the books and also be written off to reduce tax liability. I'm not a corporate accountant or I would probably be retired by now. I don't know how they play these games, but I do know this is why you've seen over and over again chains on the verge of bankruptcy managing to churn out brand new stores as if business is booming. Sometimes the grand opening sale is turned into a liquidation (see Circuit City, BB&B where multiple Grand Reopening post remodel celebrations were converted to liquidation the same week, Party City that just relocated and opened a bunch of new concept stores, and so on). There's always money to be spent on capital. Not so much on labor where it's a straight expense.

It is very complicated. The other thing is the various tax incentives in place to replace energy inefficient refrigeration/lighting and so many other initiatives. Some smaller/regional grocers take advantage of this heavily and have used these sorts of things to their advantage to basically stay in business after decades of struggle/not modernizing their stores (see: Holiday/Sav-Mor in NorCal).

On the chains on the verge of bankruptcy still pushing out new stores, sometimes this is to meet sales growth targets in debt covenants (grow now, worry about profitability later) in hopes lenders will give them more time. Because if you hit the sales target at least you hit that (even if it came from money pit new stores). But if you didn't do the new stores, then you'd miss the sales target, obviously you're already missing the profit target...

Some of these legacy chains as I call them seem pretty poor on spending capital though. Especially in the department store segment. And obviously Kmart.

I was going through the Wal Mart in Reno on Kietzke and thinking about this. This is currently the oldest building Wal Mart has in this market, it was built in 1995. It got expanded into a Supercenter around 2003 or 2004 so the original area of the store has a drop ceiling and the expansion area has a warehouse ceiling. It has been remodeled a few times; the last remodel it got a cement floor throughout. The front of the building has been renovated multiple times and exterior signage replaced about 4 times. Bathrooms have been bulldozed and remodeled multiple times. The store does not look or feel 30 years old. The capital program there seems to be working. Thinking back to the early 00's as Kmart was imploding, many of those stores were also 30 years old- and they sure looked, smelled, and felt it in every way. So this capital thing, it is very important, if it really is used to keep the store base up and maintained.