Business
Terranea resort fined for failing to rehire workers it laid off during pandemic shutdown
![Terranea resort fined for failing to rehire workers it laid off during pandemic shutdown Terranea resort fined for failing to rehire workers it laid off during pandemic shutdown](https://newspub.live/wp-content/uploads/2022/03/149537.TR_.0618.hotel2_.WJS_.jpg)
The state labor commissioner has ordered the ritzy Terranea Resort in Rancho Palos Verdes to pay practically $3.3 million in fines for failing to first supply jobs to employees who had been laid off through the pandemic shutdown as soon as the positions had been out there once more.
The fines signify the primary quotation imposed for violations of laws adopted final yr that requires lodges, occasion facilities and airport hospitality and janitorial employers to first supply positions to employees laid off due to a COVID-19 shutdown when the roles change into out there once more. Labor unions stated the legislation prevents companies from utilizing the pandemic shutdown to switch older employees — together with many ladies and other people of colour — with youthful, lower-paid employees.
The labor commissioner ordered the fines Wednesday in opposition to Terranea for failing to supply jobs altogether or failing to take action in a well timed method for dozens of housekeepers, banquet servers, sous cooks, therapeutic massage therapists and bartenders who had been laid off when the resort closed in March 2020. The resort reopened that June.
“These employees invested years of service at Terranea and thru no fault of their very own misplaced their jobs because of the pandemic,” Labor Commissioner Lilia García-Brower stated in a press release Thursday. “The legislation makes it clear that employees within the hospitality and providers industries should be prioritized to return to the identical or comparable positions when their former employer reopens for enterprise.”
David Gomez Martinez, who labored as a banquet server on the resort since 2009, has but to be supplied his outdated job, based on the labor commissioner’s quotation. In an interview, Martinez stated he and his spouse collected stimulus funding but in addition dipped into their financial savings and their kids’s school funds to make ends meet after he was laid off in March 2020.
“It has been a battle,” he stated, noting that his father and brother each handed away because of COVID-19 whereas he was out of labor.
He’s hopeful that Terranea will supply him his outdated job and pay him for failing to recall him. “I’m excited and a bit relieved,” Martinez stated.
The fines are to be distributed among the many employees, primarily based on the variety of days Terranea failed to supply positions to every employee. For every day a place was open however was not supplied to a former worker, the resort was fined $500, plus curiosity and penalties. For instance, 14 housekeepers will break up $1.3 million — or about $95,570 every, based on the labor commissioner’s quotation.
The quotation listed 5 employees, together with Martinez, who’ve but to be contacted about returning to their outdated jobs.
In a press release, the resort stated “we strongly disagree with the Labor Commissioner’s quotation, which isn’t a discovering of truth. We’re exploring all of our authorized choices.” The resort has 15 days to attraction the fines to an administrative legislation choose.
The resort’s assertion additionally blamed the legislation’s “ambiguous and poorly-defined language” and stated greater than 85% of the employees employed earlier than the shutdown have returned to the resort.
“We display our care and concern for our associates by way of our deeds, not simply phrases,” the resort stated.
The 102-acre resort on the bluffs of Rancho Palos Verdes options 582 luxurious rooms, a number of eating places and a spa.
The fines signify solely the newest chapter in a drawn-out battle between the resort’s administration and its employees, lots of whom have been attempting to unionize with the assistance of Unite Right here Native 11, which represents 32,000 hospitality, airport, sports activities area and conference heart employees in Southern California.
In 2019, an administrative legislation choose ordered that the resort rehire a prepare dinner who the choose decided was illegally fired for talking out in favor of unionizing his fellow employees. In December, the Nationwide Labor Relations Board ordered Terranea to pay the prepare dinner $35,000 in again wages for the time he was out of labor.
Terranea agreed in 2019 to pay $2.1 million to settle a lawsuit filed by employees who demanded pay for time they spent ready to get uniforms earlier than every shift and being pushed from a distant car parking zone.
The resort has fired again, accusing Unite Right here of utilizing questionable techniques to power Terranea to permit union members on the property to arrange employees. The union has referred to as for a boycott of the resort, a message it has unfold to brides, grooms and friends of weddings deliberate on the resort, in addition to firms that recurrently maintain conferences on the resort or have enterprise partnerships with Terranea.
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Business
Opinion: Silicon Valley is maximizing profit at everyone's expense. It doesn't have to be this way
![Opinion: Silicon Valley is maximizing profit at everyone's expense. It doesn't have to be this way Opinion: Silicon Valley is maximizing profit at everyone's expense. It doesn't have to be this way](https://ca-times.brightspotcdn.com/dims4/default/3f8cff1/2147483647/strip/true/crop/4612x2421+0+327/resize/1200x630!/quality/75/?url=https%3A%2F%2Fcalifornia-times-brightspot.s3.amazonaws.com%2F7c%2F79%2Fe091ba5e42cc8270d287103130a3%2Felection-2024-trump-65546.jpg)
A public battle has broken out among the titans of Silicon Valley. One side, led by Elon Musk, PayPal co-founder Peter Thiel and venture capitalists Marc Andreessen and Ben Horowitz, is backing Donald Trump for president. The other, led by LinkedIn co-founder Reid Hoffman, is behind Kamala Harris.
We should not make the mistake of thinking this is a battle over ideology or policy. It’s a battle to maximize Silicon Valley’s profits regardless of the consequences for society.
On this objective, both sides agree. Andreessen Horowitz is one of the largest investors in cryptocurrency and artificial intelligence, and Trump has signaled that he would keep the government out of its business. Meanwhile, soon after donating $7 million to a Harris super PAC, Hoffman called for her to oust Federal Trade Commission Chairwoman Lina Khan, who has brought antitrust cases against Big Tech and introduced rules to protect workers.
Silicon Valley, a longtime engine of human achievement, has become a significant source of human harm. Aware of the gathering backlash, its leaders have dived into the political fray to protect their wealth.
Two Silicon Valley obsessions threaten the most damage: creating human addiction to increase profits and eliminating humans altogether to decrease costs.
Social media platforms, which started out by bringing old friends together and giving voice to the otherwise powerless, have become “social slot machines” compelling excessive use. Gaming companies have a similar objective. Teenagers today spend more than eight hours a day on screens, fueling digital advertising revenues that reached $225 billion last year.
Meanwhile, the artificial intelligence revolution promises to cut labor costs. A recent study by MIT economist Daron Acemoglu found that 50% to 70% of the growth in inequality between more and less educated workers can be attributed to automation. Poverty rates in Silicon Valley’s home state are rising even as AI makes Big Tech richer.
The broader prospects are equally concerning. AI is enabling killer robots, autonomous weapons and massively destructive misinformation.
The root of the problem is that the United States and Silicon Valley in particular are dominated by what we call an “investor monoculture.” Modern corporations are designed to serve investors and no one else. About 80% of public company stock in the United States is owned by institutional investors, most of which have one objective: to maximize profits, largely in the short term and without regard to the costs for society. In 1980, their share of stocks was just 29%.
Venture capital firms, the biggest funders of Silicon Valley startups, have grown from under $400 billion in assets in 2010 to nearly $4 trillion today. Their performance is measured by “multiples on invested capital,” or “MOIC,” as insiders call it.
Suicide rates among young people are up more than 60% since 2007, and U.S. democracy is in danger. But these are not investors’ concerns.
Regulation and advocacy can certainly make a difference. But Big Tech is cash-rich, lawyered up and capable of running circles around regulators.
It’s time for a different approach. When businesses are owned and governed by employees, customers, suppliers or communities, they become less predatory and more benign. And as it turns out, corporations have been designed in such ways across time and cultures. Capitalism comes in many forms.
Farmers, employees or customers own and govern some of the world’s most respected companies, including Ocean Spray, Publix Super Markets, Organic Valley, New York Life Insurance Co. and Vanguard. Corporations such as Patagonia, Rolex, Novo Nordisk and Ikea are owned or controlled by nonprofits, trusts or foundations, which have no investors and thus face less pressure to boost profits.
Silicon Valley has examples too. Mozilla, which operates the web browser Firefox, is owned by a nonprofit. It has no incentive to maximize profits, which explains why it does not sell user data to advertisers. Wikipedia, among the world’s most visited websites, is also run by a nonprofit, which shows that scale and impact don’t always depend on investor capital.
A nonprofit owns a majority of ChatGPT maker OpenAI, a design it chose to “ensure that artificial intelligence benefits all of humanity.” But its minority investors, such as Microsoft, are profit-driven, which has led to concerns that it’s releasing products at an irresponsible pace.
Many technology companies would be more benign if they were owned and governed by their users. Users have the most to lose from tech-driven addiction and automation, and their data generate most of the companies’ value. User-owners would share in this value and have an incentive to keep companies from causing harm.
How might users come together to start and run more technology companies? Bringing together a disparate and dispersed group of people is difficult; economists call this the collective action problem.
Influential nonprofits such as the Center for Humane Technology and Project Liberty can play an organizing role, incubating a new generation of user-owned social media businesses. While it’s a competitive field with entrenched players, social media technology is not complex, and there is a real hunger for more benign versions.
Existing firms can also be redesigned. Instead of raising capital from profit-seeking corporations, OpenAI could seek funding from users and give them representation on its board. And with users on the board, the company might take more care to launch products safely and dedicate resources to maintaining employment. Most important, more of the financial gains of the AI revolution would flow to the people creating the value.
If Keith Gill, also known as Roaring Kitty, could organize retail investors to drive up the market value of GameStop by $10 billion, could a similar approach have been employed to acquire Twitter for users in 2022? Given the millions of defections from the platform since Musk purchased it, it may not be too late.
The government can also help if it’s not headed off by Big Tech political contributions. The Small Business Administration, the Department of Energy and the National Science Foundation should encourage user ownership of the companies they fund.
The venture capitalists of Sand Hill Road will of course scream that this is socialism, but they will be wrong. It’s just business.
Hans Taparia is a clinical professor and Bruce Buchanan is a professor of business ethics and marketing at New York University’s Stern School of Business.
Business
In College Sports’ Big Money Era, Here’s Where the Dollars Go
![In College Sports’ Big Money Era, Here’s Where the Dollars Go In College Sports’ Big Money Era, Here’s Where the Dollars Go](https://static01.nyt.com/images/2024/08/22/multimedia/2024-05-15-nil-compensation-index/2024-05-15-nil-compensation-index-facebookJumbo.png)
What wins college football championships? A potent defense? An explosive offense? In the era of name, image and likeness, it is money.
Lots of it.
It can cost as much as $10.5 million for a title-contending starting offense and defense in the new Power Four conferences. The big-ticket item, of course, lines up behind the center.
A blue-chip quarterback in a Power Four conference — schools like Alabama, Michigan and Washington — can expect to earn hundreds of thousands of dollars annually through name, image and likeness, or N.I.L., deals. A quarterback in the Southeastern Conference can bring in more than $1 million, on average.
Expected annual compensation for starting players in the Power Four conferences by position Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations players’ earnings must rank in the top 25 at their position. Specialist ($60,000) and Tight End ($140,000) positions are not labeled.
How much top-earning football players make in a year
And that is merely an average. Ask the Texas Longhorns.
Quinn Ewers
$1.7 million
Texas
Their starter, Quinn Ewers, has N.I.L. deals worth nearly $2 million annually, according to the website On3, which tracks deals for college athletes.
Arch Manning
$3.1 million
Texas
Arch Manning, his backup who hails from one of football’s royal families, has deals worth more than $3 million.
Carson Beck
$1.4 million
Georgia
Georgia’s quarterback, Carson Beck, brings in enough that he recently bought a Lamborghini that retails for $270,000.
Between the cash pouring into athletic programs via collectives — a fancy name for boosters who funnel much of the N.I.L. money to players — and more lenient transfer rules, a sort of eBay to buy athletes has been created, transforming how powerhouse teams are built.
“It’s whoever wants to pay, the most money raised, the most money to buy the most players, is going to have the best opportunity to win,” Nick Saban, the recently retired football coach at the University of Alabama, told Congress in March.
But how do athletes, coaches and administrators determine the going rates? Many consult the Black Book, a kind of Zillow for college sports, which details an athlete’s expected annual earnings, and, in the case of sports like football and men’s and women’s basketball, even breaking them down by position and conference.
A series of three proportional area charts related to the N.I.L market. The first square shows the overall size of the N.I.L. market, the second shows that 80 percent of the market is made up by donor groups known as collectives and the third shows that only 30 percent of the market is publicly disclosed.
Opendorse, the company behind the Black Book, projects around $1.7 billion in transactions in the N.I.L. market this year.
Of that, 80 percent will come through collectives like Texas’ Team One Foundation and the Classic City Collective at the University of Georgia. But even that is an incomplete picture of a rapidly changing N.I.L. frontier awash with money.
There is no universal requirement for athletes to disclose how much they are being paid. Less than a third of the money that student athletes are making is publicly known, according to Opendorse.
Still, the Black Book is a must have for university collectives and collegiate athletic officials, as well as the lawyers involved in House v. N.C.A.A., an antitrust case in which the Black Book and all Opendorse data from 2016 through 2022 were subpoenaed. The sides recently agreed to a $2.8 billion settlement.
If a federal judge approves it, schools will be allowed to set aside around $20 million per year, beginning in the fall of 2025, to pay athletes. (The proposal also calls for a program by which athletes’ N.I.L. deals could be reviewed.)
The Black Book, copies of which were obtained by The New York Times, shows that, even as football remains the dominant sport financially, sports like women’s basketball have become increasingly lucrative. In her final season at the University of Iowa, Caitlin Clark sold out arenas, increased television ratings and had sponsorship deals valued at $3 million.
Clark may have been the sport’s unicorn, but title-contending programs are expected to spend more than $730,000 on their starting five, with guards being the most valued at $225,000.
The N.I.L. era has also created a new generation of entrepreneurs and given them a more concrete sense of their earning potential. For instance, Alex Glover, a star volleyball player who recently concluded her career at Southern Methodist University, made more than $100,000 from sponsors who wanted to be associated with her Instagram video series, called “Day-In-The-Life of a D1 Volleyballer.”
Livvy Dunne
$3.9 million
L.S.U.
Olivia Dunne, a gymnast at Louisiana State University, has become something of a celebrity in recent years. Dunne, who goes by Livvy, has leveraged a large social media following — she has over five million followers on Instagram — to notch deals with major brands like Nautica and Vuori.
Paige Bueckers
$1.4 million
Connecticut
Paige Bueckers, a standout basketball star at the University of Connecticut, similarly has millions of followers on social media and has signed N.I.L. deals with Nike, Gatorade and Verizon.
The top N.I.L. earners in women’s gymnastics usually make around $20,000 annually, about 10 times as much as their male counterparts, according to data from Opendorse. Besides the major men’s sports — football, basketball and baseball — collegiate female athletes typically earn more than male athletes in the same sport.
Expected annual compensation in select Olympic sports
Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations, players’ expected annual earnings must rank in at least the top 50 at their position. The Track/Cross Country category includes athletes in track and field.How men’s and women’s annual earnings compare in smaller sports
“By nature, athletes are disciplined and purpose-driven,” said Blake Lawrence, the co-founder of Opendorse. “What has been really cool to see is how many athletes on our platform, especially the women, lean into the opportunities to be creative and build a brand. They don’t want to get paid just for going to practice and games.”
Lawrence, a former starting linebacker at the University of Nebraska, began Opendorse in 2012 to help his former teammate Prince Amukamara monetize his brand after he entered the N.F.L. as a first-round draft pick with the New York Giants. Lawrence understood the commitment required of college athletes and anticipated that the pay-to-play model was coming sooner rather than later. More than a decade on, some 150,000 athletes have used his platform to grow their name, image and likeness revenues.
The company compiles its numbers based on previous N.I.L. marketing deals signed by a large cross section of football and basketball players and competitors in the so-called nonrevenue Olympic sports. Clients that pay for the information include university athletic departments, their collectives and athlete agencies.
“I know what it takes to be an athlete and wanted to create something like Expedia or Zillow that took the mystery out of getting good value and putting that power in the hands of athletes,” said Lawrence, who offers tutorials on topics like marketing and pay benchmarks on his Instagram feed. “This is all new to them. I see six contracts a second and want them armed with information to make what could be life-changing decisions.”
Like the American economy, college sports have a hierarchy, and its “1 percenters” are the so-called Power conferences like the SEC and the Big Ten.
Expected annual compensation for starting players in each conference by position
Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations players’ earnings must rank in the top 10 at their position.How the Power Four conferences compare
The expected annual N.I.L. compensation for a top-10-earning football player at any position is $216,000 for the Big Ten and $565,000 in the SEC, which is more than three times the annual earnings of $159,000 in the Big 12.
The SEC’s stature is even more pronounced this year. The former Big 12 powerhouses Texas and Oklahoma have joined the conference, which is made up of state universities that have long taken football seriously and invested heavily in athletics. The top-10-earning SEC players at every position — except for tight ends and specialists — earn more annually on average than players in any other Power Four conference. A running back in the SEC can now expect to make about half a million dollars, almost as much as a Big 12 quarterback. Offensive and defensive linemen in the SEC do even better, tallying upward of $700,000.
For the smaller, so-called Group of Five conferences, which include Conference USA and the Mountain West, the new N.I.L. environment puts football championships even further out of reach. The average value of top 25 players at any position at schools such as Liberty (part of Conference USA) or Boise State (in the Mountain West) is just under $50,000.
The money is lucrative in the top tier of men’s and women’s basketball, as well: A starting five of top-25-earning men’s basketball players costs about $3.3 million, with forwards on the top of the pay scale making around $750,000. And while women’s basketball earnings are comparatively much lower, top-level women’s players have had substantial growth since last year, with pay across all positions up by $30,000.
How much top-earning basketball players make
Expected annual compensation for players, on average, by position
Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations players’ earnings must rank in the top 25 at their position.
Even better for basketball stars? With their faces and personalities in full view during games, it is easier for them to enhance revenues beyond collective money through sponsorship partnerships with national brands.
This new market allowed Armando Bacot, who played at the University of North Carolina, to remain in college last season and begin work on a master’s degree in business. His partnerships with the Opendorse clients Dunkin and Kellogg’s Frosted Flakes, as well as others with regional and local companies, have made him a multimillionaire.
Many star players like Bacot are now forgoing the ritual of leaving school after just a year or two to enter the N.B.A. Instead of jumping (ready or not) into the draft in search of riches, more players are choosing the ample N.I.L. pay and more time to work on their games and degrees. (Bacot went undrafted and signed with the Utah Jazz this summer.)
“With more and more veteran guys staying in school longer, it’s going to be harder and harder for freshmen to get big minutes, because coaches would rather have veterans,” said Daniel Hennes, the chief executive of Engage, which represents college basketball stars like Bacot in N.I.L. deals. “So, underclassmen will stay in school longer, and the draft will get older and older. In a lot of ways, that’s good for everyone.”
Mike Boynton is among the many college coaches who are not so sure. He brought the future N.B.A. star Cade Cunningham to Oklahoma State with four years of shoe leather. He outworked more accomplished rivals with national titles on their résumés with the promise of doing right by the young star.
“I can’t work that hard anymore,” said Boynton, now an assistant at the University of Michigan. “Not when you can say, ‘Hey, here’s $500,000 to come spend nine months over here.’”
Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations, players’ expected annual earnings must rank in the top 25 at their position. The Track/Cross Country category includes athletes in track and field.Big sports still pay big money …
… but athletes in the so-called nonrevenue sports are finding increased earnings, too.
For many athletes — those who aren’t top stars in the marquee sports — the N.I.L. era is different, though no less exciting. Zoe Ledet, a 19-year-old sprinter at West Virginia State University, joined TikTok in 2020, at the height of Covid-era teenage boredom. She said she quickly amassed a following for “funny skits, hair care, you know, relatable stuff” and now has 1.7 million followers on the platform and nearly 300,000 on Instagram. Still, Ledet never thought brands would be interested in working with her as an athlete.
“I knew that big track athletes like Sha’Carri could get deals with Nike, but I didn’t know there were smaller deals to be had,” said Ledet, referring to the Olympic sprinter Sha’Carri Richardson.
West Virginia State
Last year, during her freshman season, Ledet was approached by B.E. Collective+, an organization that supports student athletes from historically Black colleges and universities in the N.I.L. market. She signed with the group and had N.I.L. deals worth about $3,500 in her first year.Zoe Ledet
$3,500
For Ledet, those earnings aren’t life-changing money, but she has been able to use platforms like the BE Collective+ and Opendorse to gain a better sense of her value in the new marketplace. Her followers now ask her to post more about track and to share videos from meets, content that she hopes will in turn lead to more N.I.L. deals.
“There are a lot of athletes bigger than me, of course, but N.I.L. has allowed athletes like me to widen our platform and get more recognition, too,” she said.
Source: Opendorse. Data is based on N.I.L. transactions disclosed through or processed by Opendorse between July 1, 2021, and June 30, 2024.
Note: To be included in the calculations, players’ expected annual earnings must rank in at least the top 50 at their position. The Track/Cross Country category includes athletes in track and field.
Look up expected annual N.I.L. earnings by sport
Sport
Position
Div.
Expected annual earnings
Football Football
Quarterback
SEC
$1,043,252
Football Football
Quarterback
Power 4
$819,020
Football Football
Offensive line
SEC
$779,288
Football Football
Defensive line
SEC
$756,497
M. Basketball Men’s basketball
Forward
NCAA DI
$749,201
Football Football
Wide receiver
SEC
$705,554
M. Basketball Men’s basketball
Guard
NCAA DI
$636,472
M. Basketball Men’s basketball
All
NCAA DI
$630,796
Football Football
Wide receiver
Power 4
$614,561
Football Football
Linebacker
SEC
$584,629
Business
'My kids go to Costco now,' and other reasons Rite Aid, Walgreens and CVS are hurting
!['My kids go to Costco now,' and other reasons Rite Aid, Walgreens and CVS are hurting 'My kids go to Costco now,' and other reasons Rite Aid, Walgreens and CVS are hurting](https://ca-times.brightspotcdn.com/dims4/default/3624e1b/2147483647/strip/true/crop/3899x2047+0+276/resize/1200x630!/quality/75/?url=https%3A%2F%2Fcalifornia-times-brightspot.s3.amazonaws.com%2F4d%2Fad%2F0a80891a4077b6c7d49f86040823%2F1473696-la-fi-chain-pharmacies-look-to-cut-costs-close-locations-mdb-03.jpg)
These are tough days for pharmacy chains.
From Gardena to Venice to Koreatown, storefronts that used to be Rite Aid drugstores sit empty. On Lincoln Boulevard, the outline of the Rite Aid logo can still be seen above shuttered doors.
The retail pharmacy chain has closed more than 200 stores since filing for Chapter 11 bankruptcy protection in 2023 and announced plans in July to shut down 18 more locations in California as it struggles to deal with creditors and lawsuits over opioid prescriptions.
Competitors CVS and Walgreens are also cutting costs and closing stores, reflecting challenges in the industry that have been brewing for years but have recently begun to accelerate, experts say. In June, Walgreens’ chief executive said about a quarter of the company’s 8,600 U.S. stores were underperforming and that a “significant number” of them could be closed.
Walgreens, CVS and Rite Aid are not in identical financial positions, but all three are being forced to examine their footprint and business model as they deal with lowering margins and changing consumer trends.
“Between the pressure on the front of the store plus the pressure on the pharmacy, it’s just getting harder and harder for these guys to operate,” said Brian Tanquilut, an industry analyst at Jefferies.
On the retail side, chain pharmacies are facing heavy competition from giants such as Amazon and Walmart, a drop in consumer spending and an increase in theft that can eat into profits, analysts said. On the pharmaceutical side, they’re seeing lower margins because of lower reimbursement rates for the drugs they provide to customers.
Much of the pharmacy pinch is rooted in the companies’ dependence on intermediaries called pharmacy benefit managers, or PBMs, who have significant control over how much pharmacies get reimbursed for the drugs they sell to customers.
Two of the largest benefit management companies, OptumRX and Caremark, are owned by insurance companies that have been looking to cut costs by pushing down reimbursement rates, which has punished the pharmacies’ bottom lines.
“The PBMs, all of which now are owned by the insurance companies, have been squeezing what they pay for drugs,” Tanquilut said. “As that has continued to come down, the profitability of these pharmacies has also waned,” he said.
Overall, the three pharmacy chains have struggled on Wall Street this year.
Walgreens stock price, which closed Friday at $9.25, has plummeted more than 65% since the start of the year. In June, when it missed earnings expectations for the quarter, the company warned investors it was bracing for more gloomy performance figures and cut its financial forecast for the fiscal year that ended in August.
A man rides his bike by Walgreens on Friday, Aug. 30, 2024 in Venice.
(Michael Blackshire / Los Angeles Times)
Rite Aid’s languishing stock, meanwhile, took a nosedive when the company entered bankruptcy late last year and the New York Stock Exchange moved to delist it.
CVS stands on slightly more solid ground, said Raymond James healthcare analyst John Ransom, because it owns insurance company Aetna, as well as Caremark, the pharmacy benefit manager.
“CVS is an integrated company,” Ransom said. “They’ve been able to integrate Caremark into the drug retail business in a way that’s made the drug retail business more healthy.”
But that has not made the company immune to market forces. Its stock, which closed at $57.24 Friday, is down 29% this year. CVS slashed its financial outlook and embarked on a $2-billion cost-cutting plan in early August. The company has also been closing locations since 2021, when it announced a realignment plan that would close 900 stores over three years.
CVS is on track to finish its store closures by the end of this year. After the closures, 85% of U.S. residents will still live within 10 miles of a CVS, said Amy Thibault, lead director of external communications for the company.
![A woman walks by a CVS/Pharmacy.](https://ca-times.brightspotcdn.com/dims4/default/4e49a12/2147483647/strip/true/crop/4538x2877+0+0/resize/1200x761!/quality/75/?url=https%3A%2F%2Fcalifornia-times-brightspot.s3.amazonaws.com%2F05%2F69%2F5ceb2c2047f485473e95c99feafe%2F1473696-la-fi-chain-pharmacies-look-to-cut-costs-close-locations-mdb-06.jpg)
A woman walks by a CVS/Pharmacy on Friday, Aug. 30, 2024 in Venice.
(Michael Blackshire / Los Angeles Times)
“The store closure decisions are based on population shifts, consumer buying patterns, a community’s store density, maintaining access to pharmacy services, and future health needs to ensure we have the right kinds of stores in the right locations for consumers,” she said.
There is an overcrowding of drugstores in the country partly as a result of a real estate binge in the ‘90s, Ransom said.
“They’re shutting these stores down in urban markets where you go to a street corner and you see four pharmacies,” he said. “I think part of it is they did it to themselves.”
Walgreens external communications manager Samantha Stansberry said the company is being affected by increased regulatory and reimbursement pressures as well as higher levels of inflation, theft and other types of losses.
“Like most retailers, we have been facing a challenging operating environment,” Stansberry said. “These factors have resulted in a growing number of store closures across the country as we invest in our other locations to deliver a consistent customer experience.”
Walgreens was poised to acquire Rite Aid in a merger in 2015, but the deal ultimately fell through.
Koreatown resident Darleen Stoker was recently shopping at a Rite Aid on Larchmont Boulevard in Hancock Park and noticed rows of empty shelves. She wondered if it was a sign that the location was closing, she said.
“My kids go to Costco now,” Stoker said. “Rite Aid is more for when you realize last minute you need nail polish.”
Other customers in the store said the shelves have been empty for at least two months.
Rite Aid did not respond to multiple requests for comment.
“The remaining Rite Aid stores face a lot of the challenges that they were facing when they were trying to bridge with Walgreens,” Tanquilut said. “It’s a lot of pressure from other retailers, whether that’s the dollar stores, the Walmarts, the Targets of the world, or online retail like Amazon.”
Retail pharmacies are also struggling to adapt to a changing consumer more focused than ever on value, Tanquilut said. Customers have started to realize that sodas cost less at a grocery store than a drugstore, he said.
As inflation drives everyday costs up, consumers are tightening their belts and may be limiting impulse purchases on items found at a drugstore such as snacks and beauty products. A significant portion of purchases at drugstores are spontaneous, Tanquilut said, as customers roam around waiting for their prescription.
Tanquilut said the closing of locations could help CVS, Walgreens and Rite Aid weather the harsh industry conditions that have prompted cost-cutting measures. The density of pharmacies in the country is higher than it needs to be, he said.
“We are ‘over-pharmacied’ as a society,” Tanquilut said. “From a profitability perspective and from a competition perspective, reducing the number of retail pharmacies is not a bad thing.”
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