Target Stock: Can Nine Employees Affect an Entire Company? (TGT)

To the nine employees working at the Target (TGT) in-store pharmacy in Brooklyn: Congratulations on the formation of your union, before CVS Health (CVS) takes over TGT’s pharmacy division. It looks like you’ve given yourself a layer of protection against the uncertainty that comes with any sort of corporate acquisition.

Target Stock: Can Nine Employees Affect an Entire Company? (TGT)On the flip side, as you may soon learn, the grass isn’t always greener on the other side.

And as for owners of Target stock, while the creation of this pharmacy-specific union looks like it’s going to become CVS Health’s problem soon enough, don’t be fooled — this is the kind of thing that can go viral in various ways, and ultimately poses a threat to the value of Target stock.

Be Careful What You Ask For

By a vote of seven to two, the nine employees working in a Brooklyn Target store’s pharmacy — a mix of pharmacists and pharmacy technicians — have decided to form a union (or microunion in this case) after receiving the green light to do so from the National Labor Relations Board.

The NLRB allows for such geographically focused or store-specific unions in cases where there is “a community of interest.”

The microunion will be associated with the United Food and Commercial Workers union.

The prompt for the formation of the union was reasonable enough. That is, with the advent of new corporate ownership, a cloud of uncertainty was looming over those nine employees. One of them (unnamed) explained:

“We were all happy with our jobs at Target. That wasn’t the problem. It’s more that we didn’t like being thrown into uncertainty”

Specifically, uncertainty in the form of potential layoffs, reductions in pay and other labor changes like new work schedules following the CVS acquisition.

In that superficial light, the creation of a microunion makes sense. Upon deeper inspection of the premise, however, one can’t help but wonder if unionizing only enhanced the very risks these employees were trying to abate.

Potential layoffs were an understandable concern, though not likely a reason to worry. CVS claimed from the onset it was going to extend offers to all existing Target pharmacy employees, presumably at their same or similar pay rates. After all, the last thing CVS wants during this transition is even more disruption.

The big irony? As most owners of Target stock likely know, Target’s pharmacy venture was losing money. The risk of a layoff of was arguably greater if CVS Health had decided to not acquire the retailer’s pharmacy business.

With a unionized store now waiting on it, though, these employees may have just given the owner-elect some motivation to shutter the Brooklyn store, and perhaps other stores where a union is at risk of forming.

As for the “other labor changes” the microunion was looking to sidestep, some sort of change can almost be guaranteed.

Whether it will be a change for the worst, however, remains to be seen. While each pharmacy company has its own processes and systems, the basic business of dispensing drugs in a retailer environment can’t be radically different from one organization to the next.

In other words, in their effort to reduce their risk, these nine pharmacy employees may have actually expanded it, and delegated most of their personal bargaining rights to a union that has little to no experience with the pharmacy business.

As was said, be careful what you ask for.

Risks Posed By a Target Union

And just so there’s no misunderstanding, yes, the formation of this microunion also poses a threat to the value of Target stock, for both the near- and long-term.

In the near term, this turn of events may well cause CVS Health to rethink, or at least reframe, its acquisition of Target’s pharmacy business.

The $1.9 billion deal announced in June essentially allows CVS Health to take over and rebrand more than 1600 of Target’s in-store pharmacies. It was an agreement made before the union was formed, however, and if CVS Health has reason to think it’s stepping a deal that could become a labor-relations nightmare, it could quell the purchase altogether.

That’s the less likely outcome, mind you. More realistically, if CVS truly had that worry, it would simply close the particular pharmacy in question, or at least find a way to ensure the Brooklyn pharmacy is one of a well-defined group of pharmacies slated to be shuttered. But, never say never.

The greatest threat posed by the presence of a union inside Target stores, however, is that it plants ideas in other employees’ heads.

There’s nothing inherently wrong with unions. Alhough some have certainly overstepped their bounds, others have offered needed and deserved employee protection.

By and large, though, unions tend to crimp the flexibility some businesses need — particularly retailers — to operate effectively.

Should Target employees (who will remain Target employees) decide the CVS pharmacy employees in Brooklyn (or anywhere else within the CVS Health pharmacy chain) have the right idea, they too could unionize, demanding a strict adherence to a work schedule, pay based on seniority, well-defined (and well-limited) job duties, and more.

It’s all well and good, but sometimes a store needs someone from the electronics department to help stock shelves in the toiletries aisle. Sometimes the guy pushing the broom may need to help replace light bulbs.

A union could and likely will put an end to that flexibility, forcing Target to hire a greater number of employees, given them all less hours, and even then see less-than-ideal results.

For better or worse, intended or not, it doesn’t take long for workers to adopt an “I don’t work for the company — I work for the union” attitude, and it’s only a matter of time before that becomes evident to customers.

So yes, this seed of discontent could ultimately prove detrimental to Target stock sooner or later if it sprouts.

Bottom Line for Target Stock

Again, none of this is to say the formation of unions is a bad thing. It’s simply to point out that in some cases and scenarios, it may pay to pause before acting.

In this particular case, nine pharmacy employees seemingly wanted to be sure they had their same jobs after an acquisition, but the formation of this particular microunion doesn’t actually reduce the risk of job-loss … CVS could simply close that particular shop.

Just for the record, I personally support the idea of a smart, business-constructive pharmacy union. Most pharmacists and pharmacy technicians are overworked, and if nothing else, pharmacy customers are better served by the industry getting a firmer grip on reasonable working conditions. Pharmacist Eddie Morales cogently makes the point here.

But, the formation of a union is no small matter, and if you can’t do it right, it may be best not done at all.

Specifically, for a union to work and work well, it needs to be big enough to apply real leverage back against the company in question. Nine workers in Brooklyn aren’t going to make a dent in the grand scheme of things. They all just gave up a lot, for very little.

And as for owners of Target stock, while this will all likely be a fading memory in just a few weeks, there’s certainly no upside to this news or what it could potentially lead to.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/09/target-stock-tgt-union-cvs-health/.

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