Port strike may hit holiday sales

originally appeared in USA Today:

A strike has crippled two California shipping ports and if it continues, could leave some retailers with sparse shelves toward the end of the holiday shopping season.

About 450 clerical workers represented by the International Longshore and Warehouse Union went on strike a week ago at the ports of Los Angeles and Long Beach. But the work stoppage quickly became more serious as an additional 10,000 port workers refused to cross the striking workers' picket lines.

Despite agreeing to federal mediation Tuesday, the Local 63 Office Clerical Unit says it plans to continue its strike. It has accused the ports' managing group, the Harbor Employers Association, of outsourcing jobs.

The strike has essentially shut down 10 of 14 terminals at the two ports, backing up cargo and delaying shipments.

The majority of our members have been impacted, cargo that's already arrived is just sitting at the port. Right now there isn't a whole lot they can do, according to the vice president of supply chain and customs policy for the National Retail Federation.

The NRF, which has more than 9,000 members, is still working to assess the economic impact. The NRF notes in one of its letters to President Obama calling for an intervention that a 10-day West Coast ports lockout in 2002 cost the economy an estimated $1 billion a day.

According to the Port of Long Beach, the closed terminals have led to more than $3 billion worth of goods sitting on the docks of both affected ports, causing backups and delaying trucks and trains.

The executive director for the Port of Long Beach indicates all of the people in the supply chain, or most of them, have stopped working because of this, (they) have approximately 15 ocean vessels outside at anchor that are waiting for a resolution to this labor problem.

While most retailers already have the majority of their shipments for the holiday season, the work stoppage could affect merchandise coming in just before Christmas.

This time now is when retailers do the big last push to get products to store shelves according to the executive director, so some of that product is currently being delayed.

Retailers faced a similar situation in September, when threats of a strike by the International Longshoremen's Association along the East Coast had some acting on contingency plans and rerouting shipments to the West Coast to avoid backups during the holiday season.

Those workers returned to the docks but are still in negotiations with the United States Maritime Alliance.

A Harbor Employers Association spokesman denies accusations that the organization is outsourcing jobs. The staffing issue is over whether to fill all jobs that become vacant with full-time workers.

The spokesman indicated that they say (when) three people have retired; we want their jobs replaced, he says. We want to make sure the people who occupy those chairs have work to do, as opposed to just occupying chairs. The bottom line is the cargo volumes are not what they used to be.

Walgreen to Cut Back on Opening New Stores

Walgreen Co., long known for expanding by hundreds of drug stores each year, said it will cut store openings further amid the economic downturn and continue focusing on updating older locations.a

The retailer is also responding to weak consumer spending by stocking more staple products and pushing its private-label brands.

Walgreen, the No. 2 U.S. drugstore chain after CVS Caremark Corp. with more than 6,600 stores, said it will increase its store locations by 4% to 4.5% in its fiscal year beginning in mid-2009, and increase stores by only 2.5% to 3% in the following fiscal year.

Walgreen announced in July a pullback from its decades-old strategy of allocating most capital spending to new stores. At the time, the company said it would slow store openings to a 5% growth rate by 2011, below its original plan of 8% growth.

Walgreen executives said Monday they plan to remodel stores and scrutinize the merchandise they order, acknowledging that some stores became cluttered and outdated. In certain categories, the chain already has boosted sales by making items easier to find.

Walgreen estimated that the slower pace of store openings will cut expenses by $500 million, on top of the $500 million in savings predicted in July.

Walgreen said its private-label items, which cost less than brand-name merchandise, are selling especially well. Other drugstore chains have reported similar trends as consumer spending slows. The staple items Walgreen is bulking up on include groceries and paper goods.

The retailer said its prescription-savings card, which gives discounts on medicines and other merchandise, seems to be helping Walgreen win back market share that had been lost to Wal-Mart Stores Inc. and other discounters advertising inexpensive generic drugs.

"We're positioning our stores to take advantage of the new consumer reality for retailers, which means customers are making more purchases using cash and timing those purchases closely to the beginning or middle of the month, when they receive their employer or government checks," Walgreen President Greg Wasson told analysts during a conference call.

Walgreen also said net income declined nearly 11%, to $408 million, or 41 cents a share, for the fiscal quarter ended Nov. 30. In the year-earlier quarter, Walgreen earned $456 million, or 46 cents a share.

Sales increased 6.6%, to $14.95 billion from $14.03 billion. Sales at stores open more than a year rose 1.7%.

Expenses increased faster than sales, mainly because Walgreen opened a record 212 new stores during the quarter and continued to invest in its Take Care health clinics.

Because it takes several years for a new store to break even, the combination of Walgreen's rapid expansion and its weaker sales trends has weighed on recent earnings.

Walgreen hopes the clinics will attract some of the 46 million Americans who have no health insurance. The company said it has administered more than 1.1 million flu shots this year, more than double the number of doses in the prior year.

Walgreen said Monday that it expects to have a permanent chief executive in place early next year. In October, then-Chief Executive Jeffrey A. Rein retired, following a failed bid to acquire Longs Drug Stores Corp. Rival CVS Caremark closed its purchase of Longs that month.

Walgreen shares declined $1.10, 4.2%, to $24.98 in 4 p.m. New York Stock Exchange composite trading.

Several More Papers Make Cutbacks

Another wave of newspaper publishers is pushing ahead with plans that will shuffle or reduce their staffs.

New York Times Co. finalized its plans to shut down the Web site of sister paper International Herald Tribune and begin hosting news from the IHT on a co-branded "global edition" of NYTimes.com. The Times said the closure of the IHT site wasn't a cost-cutting move, although as part of the change the company will have to "reassign or relocate" IHT.com staffers, a spokeswoman for the IHT said.

The IHT was incurring losses when the Times purchased the 50% stake it didn't already own in the Paris-based paper from the Washington Post Co. in 2003, although a Times spokeswoman said its performance has "improved significantly" since then.

Elsewhere, the Houston Chronicle on Wednesday said it laid off 10 employees after falling short of the more than 90 buyouts it was seeking. The 90-plus positions, about 25 of which came from the newsroom, comprise about 5% of the Hearst Corp. paper's staff. Meantime the publisher of the Cleveland Plain Dealer said Tuesday that the paper plans to cut 16% of its unionized newsroom jobs, or 38 positions, by year end.

Newspaper publishers have slashed jobs this year as the worsening global economy has exacerbated revenue declines from the shift of readers and advertisers to the Web. Freedom Communications Inc., publisher of the Orange County Register in California, said earlier this week that it may have violated financial terms on its debt. The company said it is in talks with its lenders. Freedom also said it tapped its credit line in response to recent financial turmoil.

Sam Zell, chairman of another debt-squeezed publisher, Tribune Co., gave a noncommittal response in an interview about whether the company will stay in compliance with its nearly $13 billion in borrowings. Tribune, publisher of the Chicago Tribune and Los Angeles Times, expects to sell its Chicago Cubs baseball team by year end, Mr. Zell said in the CNBC interview.

The latest developments come after the Star-Ledger of Newark, N.J., finalized cost-cutting moves that will eliminate at least 200 full-time jobs through buyouts. The union representing the paper's truck drivers late Tuesday ratified a new contract.

Advance Publications Inc. owns the Star-Ledger and the Plain Dealer.