Detroit News - Wednesday, January 7, 2004

Farmer Jack plans to shut 13 stores in Metro area
Struggling grocer to close three locations in Detroit; closures slated for next month

By Karen Dybis, George Hunter and Kim Kozlowski / The Detroit News

DETROIT — Struggling grocery chain Farmer Jack plans to close 13 area stores, including three of five stores in Detroit, as part of an effort to return the company to profitability.

The closures are mostly at older Farmer Jack stores. Locations to be shuttered by mid-February include Harper Woods, Sterling Heights, Lincoln Park, Rochester Hills and Ypsilanti.

The three Detroit locations to be closed are on Rosa Parks Boulevard, West Outer Drive and Telegraph Road.

Dave Manney, communications director for the city of Detroit, said Mayor Kwame Kilpatrick is working with the 106-store chain and its union to keep the three city locations open.

“There’s been a lot of work done by the mayor to ensure first-class, healthy and affordable supermarkets stay in the city of Detroit,” Manney said.

Neither Farmer Jack nor its union would comment Tuesday night on reports that said the company planned to close stores. Manney, however, said city officials have seen the list of stores slated for closure.

Two weeks ago, employees agreed to take a 5 percent wage cut to help boost the chain’s profitability and minimize store closings. It’s not clear how many employees will lose their jobs.

The Detroit-based grocer also is considering store closures in its Ohio market, according to a letter to employees from Farmer Jack President Mike Carter, which was obtained by The Detroit News. Farmer Jack has six stores in the state, including three in Toledo.

“We met with associates in our Ohio area stores to let them know we are assessing the viability of our presence in that market as well as the options available to us,” Carter wrote in the Dec. 31 letter. “No specific course of action has been determined, but when it is we will be sure to share that information with you.”

Farmer Jack workers in Metro Detroit said Tuesday they are worried about their jobs and are awaiting word from the company.

“If they close, I’ll probably have to find another job to tide me over until I graduate,” said Thomas White, a student at Oakland Community College who has worked at the Highland Park store for three years. The Highland Park store is on the list of stores that will be closed. “Most people here are talking of getting unemployment if they close. Some are talking about maybe transferring to other stores, but that’s going to be hard if they’re closing stores because there won’t be any stores for them to transfer to.”

Last week, Farmer Jack announced it was closing its two stores in Lansing.

“Closing stores is always a difficult decision because of impact on our associates,” Carter wrote in the letter to employees. “However, I remain committed to doing what is in the best interest of the overall company and the majority of our associates.”

Farmer Jack and the United Food and Commercial Workers Local 876 in Madison Heights, which represents 8,000 Farmer Jack workers companywide, did not return several calls Tuesday night seeking comment on a television news report that said as many as 12 area stores — including several in Detroit — could be closed within the next month. An attorney for the union, Sam McKnight, declined to comment when reached at his home Tuesday night.

Workers at several stores said they heard the closings may be coming. Last March, Farmer Jack trimmed staff by offering voluntary severance programs to 400 employees and closing stores in Detroit, Eastpointe, Livonia and Warren.

Eric Street has worked at the Highland Park store for about a month.

“All I heard is that the store is supposed to be closing. If that happens, I have no idea what’s I’m going to do,” said Street, of Detroit. “I guess I’ll just have to start looking for another job.”

One shopper said she is loyal to Farmer Jack and would still go there even if there were closures.

Lisa Drayton, 29, and her 8-year-old daughter, Kamaria, shopped Tuesday at the Highland Park Farmer Jack. Drayton, a Blue Cross/Blue Shield customer service representative, said she would miss the store if it closed.

“It’s convenient,” Drayton said. “I shop at Farmer Jack a lot. ... If it closed more stores, it would make it really inconvenient because I’d have to drive further to find another Farmer Jack. But I also worry about the people who work there, like the security guards and the employees who would lose their jobs.”

Ryan Maxwell, a clerk at the Brownstown Township Farmer Jack, which is not on the list, said everyone in the store has heard about several store closings, possibly as soon as next week. But employees have not seen anything official.

“It’s crazy,” said Maxwell, 25, of Romulus. “Not a good place right now. My attitude is look for another job but do a good job while I am here.”

The grocer had warned since October that it was considering a wide range of cost-cutting measures to return to profitability, possibly cutting wages, benefits and real-estate expenses.

In late December, the union that represents area Farmer Jack employees agreed to take a 5 percent wage cut in 2004 to help avoid store closures or layoffs.

Farmer Jack’s actions come as many large companies in Michigan, including major automakers and auto parts suppliers, are laying off employees and trimming pay and health benefits to save money.

The grocer’s cost-cutting measures are a symptom of the growing competition in the food industry. Grocers are struggling to compete with aggressive newcomers to the food industry like Wal-Mart Stores Inc. and Costco Wholesale Corp. Moreover, food has one of the smallest profit margins in retail, typically only 1 percent of sales.

Last month, McKnight said the union understood that Farmer Jack will lose more than $80 million in 2003.

In exchange for concessions in 2004, all Farmer Jack employees can expect a 5 percent wage restoration in 2005. In 2006, all top-rate employee will have a 5 percent wage increase. A top-rate employees is defined as a person who earns at least $13.22 an hour.

Also, all employees can expect a 25-cent raise for the last six months of the contract in 2007.

In that wage agreement, the union said it was told that Farmer Jack employees affected by store closures would be eligible for severance options and job opportunities at other stores under the union’s jurisdiction.

Farmer Jack is a division of the Great Atlantic & Pacific Tea Co. in Montvale, N.J.

You can reach Karen Dybis at (313) 222-2319 or kdybis@detnews.com
Article reference: http://www.detnews.com/2004/business/0401/07/a01-29411.htm