Do Kroger’s chains have more to gain or lose from closing stores over ‘hero’ pay increases?
It’s safe to say that no retailer feeling forced to pay its workers $4 or $5 an hour more as a result of a local ordinance is happy with the situation. All have groused, but most have chosen to pay the temporary increases knowing that they can either bite the bullet in the short term or make adjustments, such as raising prices.
Trader Joe’s took a different approach with an announcement last month that it would temporarily raise the pay of workers nationally. The chain, which operates more than 500 stores across the U.S., bumped up its hazard pay for associates by $4 an hour. To pay for the increase in wages, Trader Joe’s chose to cancel the midyear bonus it pays its roughly 10,000 workers.
Kroger’s approach has been notably different. In a number of cases, management decided to close underperforming stores in markets where the grocery giant is faced with having to extend hazard pay to its frontline hourly associates.
The supermarket giant said yesterday that it would close three stores in Los Angeles after the city passed an ordinance requiring grocery and pharmacy retailers to extend workers “hero pay” of an additional $5 for the next 120 days. The law applies to grocery and pharmacy retailers with more than 10 employees on site and more than 300 nationwide.
Kroger’s move to close the two Ralphs and one Food 4 Less location in Los Angeles follow its decision to close two others in Long Beach — a Ralphs and a Food 4 Less — after the municipality passed an ordinance requiring Kroger and other retailers to pay $4 an hour to frontline associates for 120 days.
Kroger has criticized hero ordinances as being imbalanced because some retailers are forced to pay workers more money while other employers are exempt. The retailer pointed out that, while it is being required to pay more to its workers, Long Beach was not doing the same for its municipal employees who are in public facing positions.
The Long Beach law applies to stores with 15 or more employees run by companies that employ more than 300 nationwide.
Kroger recently reported that its 2020 same-store sales (excluding fuel) were up 14.1 percent with digital revenues jumping 116 percent. The grocery retailer announced an operating profit of $2.8 billion.
- Kroger To Close 3 Stores In Los Angeles In Response To Approval Of ‘Hero Pay’ Mandate – CBSLA
- LA City Council Approves $5 Hero Pay; Emergency Order Goes To Garcetti For Signature – CBSLA
- Trader Joe’s hikes hazard pay for its U.S. workers, but there’s a catch – CBS News
- Is Kroger justified in closing stores over a hero pay ordinance? – RetailWire
- Kroger Delivers Strong Fourth Quarter and Fiscal Year 2020 Results – The Kroger Co.
DISCUSSION QUESTIONS: Should chain retailers look at temporary pay mandates as more of a branding challenge vs. as a financial issue? How do retailers that frequently publicize the investments they make in communities not see similar opportunities when it comes to underperforming stores?