Menards says it is not building a store because of Obama
There are a number of factors that go into the decision by a retailer to open a new store such as the current health of its business, location, consumer demographics, local zoning issues and state tax incentives. Somewhere between rarely and never do you hear that a decision to build, or not, is based on the person occupying the Oval Office. That brings us to the home improvement chain, Menards.
Recent newspaper reports say that Menards has chosen to put off building a new store in New Philadephia, OH because the chain’s ownership is waiting to see who will replace President Obama in the White House.
Jessie O’Mara, a spokesperson for the chain, wrote in an e-mail to a Times-Reporter, “We are a family owned business and with the Obama Administration scaring the dickens out of all family businesses in the U.S.A. at present and with no certainty if the next administration will be any better, we have decided not to risk expansion until things are more settled.”
Based on Ms. O’Mara’s logic, the chain may not want to build a store for quite some time. Not only is it looking unlikely that a sympathetic Republican will take the White House, but the decision not to build comes at a time when Republicans control both the Senate and House of Representatives in Washington. This may not be the case a year from now with 24 GOP members of the Senate up for reelection, including seven in states where Mr. Obama won in the past two elections.
The chain recently was found to be in violation of federal labor law for a clause in its contracts that allowed the company to cut a store manager’s pay by 60 percent if a location’s employees chose to form a union.
- Menards construction on hold in New Phila – Times-Reporter
- Menards cuts store managers’ pay if unions form – RetailWire
- Menards refuses to build store in Ohio while Obama is president – The Capital Times
- NLRB: Menard Inc. violates labor law in employee treatment – The Associated Press/St. Louis Post-Dispatch
- Donald Trump’s unfavorable rating is unprecedented – New York Post
- The Senate map is looking better and better for Democrats – The Washington Post (tiered sub.)
Discussion Questions
DISCUSSION QUESTIONS:
How common is it for retailers to put off building stores or to make other major business decisions based on the person sitting in the White House? If you had the chance, what would you tell the next President needs to be done to improve conditions for retail industry stakeholders?
Poll
BrainTrust
Ian Percy
President, The Ian Percy Corporation
Adrian Weidmann
Managing Director, StoreStream Metrics, LLC
First, let’s ask how different Menards is and still became successful at what they do. Back in the early 2000s John M. used email around the shop on a very limited basis. Many of the original players at Menards did not like the email and time it could waste — on the money there. Menards cut pay if a manager was pushing for unions. That is their own battle — but unions are not the thing for retail — at least not in the U.S. And today, not building because of the political instability of our country. As with email — Menards may have a point.
We are in the midst of some political chaos and most Americans, especially lower middle-income people and people that the media pretty much forgets, are angry. With politics, America’s direction and more.
I spend some time up in farm country/the Midwest and am starting hearing this more and more. Small town, one Walmart store (that people love), two hardware stores, a feed store and four gas stations. This is the America that heads out for a 40 minute drive to Menards and they are angry, as is Menards.
Last, nice to see a family like the Menards actually speak. Plus the press and TV news can spend a day talking on this.
Good grief. An executive group that plans ANY strategy totally dependent on the political winds in the U.S. is myopic beyond comprehension. There’s only one Menards in Arizona and I’m not going there until a new family runs it.
This discussion question should elicit some interesting responses, depending upon which side of the political spectrum one falls. As a former retailer, I can only relate to retailers typically being for less regulation and less intrusive laws regarding the tenets of their business as new healthcare mandates, minimum wage hikes, the highest corporate tax rate among developed countries and even a more ardent M&A environment, are not things that promote business growth.
Given the increase of regulation and mandates under the Obama administration, I would inject that many retailers and especially smaller retailers are hoping for a more business-friendly environment out of the next president. Bernie Sanders will likely move regulation and taxes to even higher levels, while Hillary Clinton will more likely moderate her rhetoric and actions from the campaign trail if she becomes president.
Trump, Cruz and Kasich would most likely all be a welcome replacement for the current president, for business under duress from regulation and taxes. All are promising fewer regulations, lower taxes and GDP growth in excess of the merger 1 to 2 percent that has been the rule for the past seven years.
John Menard is certainly making a political statement and while I am sure he believes what he says, but me thinks this is a bit more hyperbole than fact. If the pundits are correct and despite emails and missteps, Hillary becomes the next president, Menard should just be glad that Bernie Sanders didn’t make it to 1600 Pennsylvania Avenue.
Politics and the economy have always been intertwined with one another. While their importance may not be in that order, financial stability and growth will almost always trump (no pun intended) politics. These issues always get magnified during an election year and the politics always seem to be used as an excuse rather than a viable reason. If, as Ms. O’Mara states, the board of directors at Menards has decided not to build a new store because of the POTUS, then their business or their acumen are lacking. Perhaps they should curtail their NASCAR sponsorship, a far more questionable investment. Any guesses what the Menard family’s position is on raising the minimum wage?!
Menards is building its brand on Ms. O’Mara’s comments — it is up to their shoppers and customers to determine who and what that brand represents.
Quit your whining. President Trump will be awesome, fantastic, incredible and YUGE for business!
I would say it is all but unheard of, unless it is a global retailer waiting for treaty reform to open a market. This strikes me as … and I’ll try not to violate the Golden Rule here … just plain weird.
Maybe it’s because it is Presidential primary season and we’re have a small army of men and women vigorously excoriating the President and promising the great unwashed that they will completely redo the entire government on “Day One,” but the truth is, it doesn’t work like that. No President has that kind of power. It’s that little “checks and balances” thing you were supposed to learn in fifth grade civics.
As to advising the next President, seems pretty easy to say and hard to deliver. Retail does best when employment is high, disposable income is high, consumer confidence is strong and the economy is rock solid.
Of course, that’s no secret now, is it?
Menards is looking for excuses when the only enemy it has to fear is itself. Blaming President Obama for its decision not to open a new store is disingenuous. If the family can’t figure a way to make a profit, perhaps it shouldn’t be in business.
Aside from the political rhetoric, business stinks and it has for over a decade with no end in sight. There are no positives from the selection process in assigning blame. The fact is that all of the politicians must take responsibility for doing a miserable job. And the taxpayers must own the fact that they allow it to continue. Big businesses are not expanding or building simply because of the horrendous over-supply of retail outlets and inventory surplus. When you couple this with rising production costs due largely to increased taxes and tariffs and lower wages to reduce production costs further the economic depression is forced to grow deeper and stronger roots. In a single sentence, no money at the consumer level means no growth for businesses.
Hopefully, Sanders or Trump don’t get to start a trade war. If that is what the question is, then I would not build a store or anything else. A trade war isolating the U.S. would destroy the U.S. economy.
Beyond that, here is what is going to happen. The U.S. economy is mature. Based on demographics alone, the middle class will shrink as Baby Boomers retire and die. They will not be replaced at the same rate by young people. The estimated drop in the next 15 years is between 25 and 30 million people. The economy will grow between 2 percent and 2.5 percent each year.
If that is not good enough for Menards, they should not build a store.
For Mr. President, I would suggest he not think about the retail industry and think about the economy as a whole. If the economy is good, so will be the good retailers.
In 1992 when I worked at Roundy’s we did not get a bonus because we feared Clinton would win and our taxes increased, therefore cutting profit. Taxes did not go up but I still didn’t get my bonus. On the other hand, I own part of a small bank and we doubled our dividend twice for one year fearing the tax on dividends would be increased the following year. The tax never went up but I did enjoy the extra dividends.
I work with a lot of small retailers. The two big scary things are healthcare and minimum wage. One is about to have to start paying $15 a hour which means he can only keep those who are worth it. Constant rule changes in healthcare like saying 30 hours is full time with threats of it going down to 20 hours. These are expenses that are YUGE! and will certainly affect how a business moves forward.
I would tell the President either ditch Obamacare or go to a single-payer system. Next ditch the Federal minimum wage and forbid states from setting their own. Finally ease up on immigration so we can find enough labor to pick our crops, slaughter our meat, clean our stores and not have customers scared of being pulled over driving to the grocery store and being deported.
It seems to me that the home improvement/DIY sector has done nicely since the Great Recession. I guess Mr. Menard’s memory is short regarding the housing bubble, the unemployment rate above 10 percent and so forth.
As I’ve mentioned before, I worked for Kohl’s from 1982 (18 stores) to 2006 (750 stores and much higher now). Kohl’s has opened stores during Republican and Democratic administrations, in times of economic boom and bust, and when the regulatory environment varied greatly. (Remember that the Americans with Disabilities Act was passed by Bush 41 and brought some sweeping design changes to the retail landscape.)
My point: If your company has a valid strategy, go for it. In the meantime, run for office if you want to use your megaphone more effectively.
I have heard of putting off business for a local councilperson, or a mayor or even governor, but saying the Presidential level is a little too far. Local zoning, tax breaks and state budget and even law enforcement (smash-and-grabs unchecked here in Atlanta on a daily basis) engagement with retailers are factors I would see a business being concerned about.
Reading between the lines of family-owned (Hobby Lobby, Chik-Fil-A, etc.) and the issues (providing benefits to same sex marriage and covering women’s health issue contrary to religious belief) I would say Menards (and Hobby Lobby) is being small and petty in a world where almost everything they sell is made in China.
It may be common behind closed doors, but pretty uncommon (to my knowledge) to the public. And personally, I don’t get it. Republicans have been in charge of congress for six years, so who is “scaring the dickens” out of who?
My dad taught me that you can support whomever you want for President, but when the election is over, we ALL need to support the democratically elected leader of our country. That notion is gone, unfortunately. This is not sports, where you’re a Buckeye fan forever and never a Michigan blue will cross your path. This is not a competition of good and evil. We are all in this together. This person was elected by a majority of Americans and we’re all Americans. Even Menards.
Frankly, I’m pretty sick of Obama-trashing. Your business either warrants expansion or it doesn’t. Stop blaming outside forces for something you’re responsible for. Man up.
These decisions are made more times than you think, but usually aren’t discussed publicly. Economic uncertainties are never good for companies looking to expand and obviously Menards is waiting for a settling.
The country is at a crossroads. Unless a business has some strong ties inside the political realm, I believe those in positions like Menards are actually more typical, so don’t be surprised if industry takes a huge turn next year — for better or worse.
Honestly I think it is a very short-sighted stance. Either a store location makes sense for your business or it does not. Any store that is built for a major retailer is presumably going to be there for more than another four or eight years and will need to be viable through many political cycles.
I’m not certain what the national trends for retail currently are, but based on the growth in the Milwaukee area I don’t know that anything needs to be done. This area is seeing an incredible growth in retail with one new outdoor mall going in, another new outdoor mall adding multiple phases and other indoor malls going through or finishing up expansions.
When you’re too much of a coward to take the blame, blame the President. Why is this on RetailWire?
The economy is soft at this time. NRF forecasts a >2% lift in ’16. The home improvement business is very regional, and mirrors home values across the country. Menards (based in WI) footprint is solidly upper Midwest which continues to struggle with relatively high unemployment and depressed home prices. Menards’s huge stores struggle with profitability.
So it makes sense for it to wait and see. Therefore the minimum wage debate has Menards attention, for all the right reasons. Menards is privately held company.
John Menard, #116 on Forbes list, is a major contributor to Republican candidates and PACs. In particular, WI Governor Scott Walker who is pushing to make WI a “right to work” state. So, as a privately held retailer, Menards is akin to Hobby Lobby and Chik-fil-A.
The impact of the Great Recession is lasting longer than consumers expected. It’s been almost 8 years since Lehman Bros collapsed. The core issues remain jobs and wages. Governments, state and fed, are pushing to raise the minimum wage in lieu of job creation. We all know the impact upon retail and B,C,D malls in particular. And while the US economy is the strongest in the world, the middle class wages are stagnant.
There are many reasons for the global and US economies to remain flat. I think the current tenor of the POTUS election is not inspiring investment. Doom and gloom resounds from either side of the aisle as independents argue for profound change and the establishment is scorned.
My recommendation is to drive for unity via more transparency and authenticity. Establish a series of town halls which capture citizen feedback, assign ownership of the fixes and begin a web site that weekly tracks performance upon metrics agreed upon with the citizenry. We need positive stories of change that will unify the country.
Or as we like to say, “politics, like retail, ain’t for sissies!”
I’m sure it’s a tactic employed by many, many firms … that we no longer hear of because they quickly went out of business. Not sure what it is, but I’m sure there’s some Yiddish word for this kind of foolishness.
This may be news to folks in that a large, well-run retailer, like Menards, would be cautious in their expansion plans. However, if it is news to you that small business, privately-held/family businesses of all types are being cautiously patient before they commit to the next investment, you likely have to expand your listening skills.
These types of businesses, largely entrepreneurial, have been frightened by excess government regulation, extortion-like actions by the Justice Department, unclear tax policies, challenges with Sarbanes Oxley if they are of a certain size, unclear labor costs, and more. These are driven by the statements made by leading candidates that can come from both sides of the aisle.
Retail has unique margin issues in each merchandising category, phase of growth, and within each state. If your labor costs for a QSR operation is 25% – 28% of expense (18%-20% for crew and 5%-7% for store management), or were in auto supply operation that calls out changes to pay overtime, how would any rational business owner consider expansion when they hear that they may have to increase wages 20% – 50% over the next 3-4 years?
Too much of the political structure sees businesses as evil. If retailers feel that type of pressure overtly or otherwise, they are going to remain hunkered down.
The first thing that retailers have to tell the next President, as well as their state and local politicians, is to get excess regulation off our backs. We’re spending too much time adjusting our strategic thinking and operational time to meet the bizarre policies and regulations that you keep throwing at us. Please come and spend a week working in our store or factories. You and your colleagues are making it increasingly difficult to make added investments in our businesses — investments in capital, people, and operations.
The premise here is not correct. Menards is making a decision based upon policies that have been approved (Obama does not do this alone) and they are waiting to see what future policy decisions look like with a new administration (a combination of President and Congress). Business is a game of golf — you play the ball where it lies. Wait until you know who the new administration is and what decisions are being made and make plans accordingly.
White House, Statehouse, Congress, legislatures … even mayors and city councils enter into retailers’ decisions on when, where and whether to open new stores. You don’t think Walmart watched Chicago’s municipal elections prior to opening there (and still has an eye on New York’s City Council)?
What about all the retailers who went wobbly on expansion plans in Arizona until the state observed a Martin Luther King Day. And what about those who are now eschewing plans in North Carolina (as some did in Indiana in the recent past) over gay-lesbian-transgender issues?
In addition to demographics, psychographics and economics, politics both local and national play a part in retailers’ decisions on expansion.
In a country like ours that is currently divided roughly pretty evenly between good people who lean left and good people who lean right — and with the economy still struggling mightily — I always thinks it’s a mistake for retailers of all stripes to make political statements that may please OR tick off half of their potential customer base. Menards probably should not be singled out in its own post for demonstrating this emerging and bad trend of retailers being overtly and publicly political. And I hope nobody on this thread is naive enough to believe that behind closed doors, corporate decisions are not made privately every day on the basis of political, tax, and economic realities.
I always figure there’s a difference between why a company makes a choice and the public reasons they put out for it. Menards has a very interesting business and our clients have sold a lot through their stores. But who knows what’s really behind this choice. I suppose the question we should ask is why they’d choose to make an announcement like this.
O! The despair!
Seriously. Does John Menard really need to invent a thin excuse rooted in partisan politics and loathing of labor unions to justify his company’s economic decision to put off a few store openings?
Nothing like broadcasting a calculated insult to the presidency if you want to alienate a whole segment of your customer base. Whether you lean to the left or the right politically, shooting your mouth off like that is bad for business.
Lots of comments on this, and some shots at Menards for this type of thinking. Here is how I as a small business owner see it, and feel free to write in and chime in on this subject. Excessive regulations and Federal mandates, e.g. minimum wage increases, and healthcare increases are a huge negative impact on our bottom lines, and for some it will force businesses to close or scale back on service.
I’m not a doom and gloom person, but when I look at the increased healthcare, and labor costs, plus the ridiculous amounts of legislation being forced upon us, and in particular to the food industry, it is going to impact the small retailers big time. Why shouldn’t they be concerned about who may be in office next year, as liberal policies have caused major corporations to find other countries to set up headquarters, and save on taxes to help their shareholders, where as a small business does not have that luxury to do the same.
We have a grinding law, passed by the USDA, that is beyond insane, and will impact my store, and anyone else who runs a custom butcher shop. I have tried to contact my congressman twice on it, and as usual, no returning phone calls, since they are too busy to talk to anyone who is not a paid lobbyist.
There are many reasons to stop and think about how and why things are done in DC, and I would challenge anyone with an ounce of common sense who thinks that things are running smoothly in our country right now. If I am out of line, it’s fine, but it is how I see things from the small business owner’s perspective, and I could only hope that whoever gets elected actually understands that things need to change in order for the spirit of free enterprise to rise up strong again, and allow us the freedoms to make our own decisions wisely, without Uncle Sam telling us how to think.