University Co-op's revenue loss affects distribution of grants toward the University


Photo Credit: Zachary Strain | Daily Texan Staff

Ailing merchandise and textbook sales caused total income for the University Co-operative Society, also known as the University Co-op, to fall approximately $7.6 million from 2009 to 2011.

Michael Granof, chairman of the organization’s board of directors, said the loss in revenue has required the Co-op to expand its services beyond the sale of books and merchandise at the main branch and has affected the organization’s ability to contribute to the University in recent years.
Sales of merchandise are linked to the performance of the UT football team, Granof said. George Mitchell, Co-op president and CEO, said the organization’s licensed merchandise sales fell from more than $23 million in fiscal year 2010 to just less than $18 million in fiscal year 2012.

“I expect the football team to come back,” Mitchell said. “We enjoyed 13 years of a good football team. Knowing Mack Brown, he’ll be back next year big time, and he’ll be back this year, too.”

In addition, textbook sales have continued to fall as professors increasingly post texts online for free, Granof said. Competitors such as Amazon have also gained popularity in recent years, he said. Students purchasing used books have led publishers to charge more for the original copy, because they must recoup their costs in a single sale, he said.

The Co-op makes a profit by selling textbooks for 25 percent more than they pay for them, and students can turn their receipts in at the end of the year for a 10 percent rebate opportunity. Granof said he hopes students understand the market and don’t think the Co-op is driving high prices.

When sales drop, the UT community loses out, Granof said.

“Any money we make goes back to the University,” Granof said. “We want to support activities that enhance the quality of life at the University that otherwise would likely go unfunded.”

The Co-op gave the University $812,000 in grants in the fiscal year that ended July 2011, according to the organization’s tax returns — a huge drop from more than $2.3 million in grants made during the previous year.

The Texas Revue, UT’s annual student talent show, did not receive funding from the Co-op this year, said event chair Courtney Brindle. The Co-op had fully sponsored the Texas Revue the past two years, the business honors senior said.

“It allowed us to advertise, put on the show and give prizes,” Brindle said. “Basically everything for the show was funded by the Co-op.”

The show will still go on this year, but the organization will have to find alternative funding sources, Brindle said.

While revenues have fallen, Mitchell’s pay remains high, said Texas Tech law professor Marilyn Phelan.

“When people contribute to a nonprofit, they don’t expect their money to go to a handful of executives,” Phelan said.

The Co-op paid Mitchell $735,984 for the fiscal year that ended July 2011.

Granof said the board decided Mitchell’s pay after outside consultation with experts. He said some of the consultants recommended Mitchell’s pay be set higher and noted the Co-op has to compete against for-profit companies and must offer competitive pay to its employees.

Granof said Mitchell’s service to the Co-op since 1987 warrants higher pay.

However, Mitchell’s salary is much higher than that of Jim Williams. Williams retired this year from his post as general manager of the Oregon Duck Store, a nonprofit book and merchandise store for the University of Oregon. He first took the job, which is comparable to Mitchell’s, in 1976. When he retired, he was the store’s highest-compensated employee, according to tax forms. He was paid $179,877 in the fiscal year ending July 2011. The Duck Store’s gross receipts for that year totaled more than $42.8 million.

Mitchell is the creative mind behind many of the organization’s innovative successes such as Longhorn apparel for women, children and pets, Granof said.

The best of reputations won’t change the numbers, however. Granof said the best way students can help the Co-op right now is to buy textbooks and merchandise at the store.

When undergraduate studies freshman Daulton Venglar rented his textbooks at the Co-op this year, he said he had no idea the money he spent could have helped fund Camp Texas, a program that helped him transition to UT.

“Without Camp Texas, I don’t know if it would have been scary, but it was good to know that I had friends that were already here,” Venglar said.

Camp Texas consists of several weeklong sessions before the start of every school year that allow incoming freshmen to meet and bond. The Texas Exes partner with the Co-op to sponsor $150,000 that supports the camps, minority scholarships and operating expenses, said Tim Taliaferro, Texas Exes vice president of communications and digital strategy.

“It would be really difficult to replace the Co-op’s contribution that makes Camp Texas run,” Taliaferro said. “It’s an expensive program. It’s a high-impact program that touches many incoming freshmen.”

Granof said the Co-op has funded three annual award banquets for faculty and student research, student activities such as Forty Acres Fest, Explore UT, Texas Revue, lectures and more over the years.

“If we were a person, we’d probably have our name on the side of a building by now,” Mitchell said of how much funding the Co-op has granted. 

To increase revenues in the future the Co-op isn’t placing all of its bets on the recovery of the football team or book sales. This fall, the Fort Worth branch of the Co-op, now called University Stores, began selling Texas Christian University merchandise.

Mitchell said stocking half the store with TCU merchandise was necessary.

“The Fort Worth store was losing money,” Mitchell said. “That’s the first store we had that wasn’t making money.”

The Co-op also has branches in Dallas, Houston and San Antonio.

Mitchell said he received 10 complaints about the store’s decision to sell TCU merchandise, but after speaking with the complainants, they realized the economic benefits of the change.

“I expected much bigger backlash, but there wasn’t at all,” Mitchell said.

Diana Troy, a member of the Fort Worth branch of the Texas Exes, said she has lived in Fort Worth her entire life and except for when the Longhorns face off against the Horned Frogs this Thanksgiving, she supports both teams.

“Looking at it from a business perspective, I think it’s a good strategy,” Troy said.

In addition to selling TCU merchandise at the Fort Worth branch, the Co-op is also considering creating merchandise for high school markets, Granof said. The Co-op market on Guadalupe is another initiative by the organization to help generate revenue.

As the Co-op tries to increase revenues, Granof said having an independent bookstore helps build community. Benefits to students and faculty are the primary argument for not privatizing the store, he said. The store exists for the good of the UT community, not for the good of the Co-op or its executives, Granof said.

The overall outlook this year is not good, Granof said.

“Right now it looks like we’re going to break even, I think,” Granof said. “We may have a small loss. A trip to the national championship wouldn’t hurt us.”

Printed on Friday, November 16, 2012 as: Bookstore revenue drops, affects monetary distribution