Giant Food Inc. reported a $2.41 million dollar loss yesterday for the three months ended Aug. 15 and confirmed that it and three other supermarket chains have asked unions representing 16,000 employes to give up a 70-cents-an-hour raise scheduled to go into effect next Sunday.
Giant's loss was only the first in 10 years for the biggest supermarket chain in the Washington area and was one of the factors cited in a plea to workers to waive raises negotiated in a three-year contract signed last September.
Giant, Safeway Stores Inc., Grand Union Co. and Memco contend they can't afford the raises, which would increase the pay of checkout clerks and other supermarket workers from $8.70 an hour to $9.40.
Union leaders have not yet responded formally to the request, but have indicated they are not willing to relinquish the raises they bargained for.
The unions aren't to blame "when a firm decides to give away groceries in order to capture a greater market share," said Thomas McNutt, president of local 400 of the United Food and Commercial Workers Union.
"I don't see conditions in my area that would warrant such a concession by our members." added McNutt.
Local 400 represents supermarket workers in the Washington area. The same plea to pass up scheduled raises was made to local 692 of the Retail Store Employees Union and Local 117 of the Amalgamated Meat Cutters and Butcher Workers of North America which represent employes of Baltimore area food stores.
The request to waive the annual raise was made in letters sent to the three unions by Roger Olsen, vice president for labor relations of Giant Food. Olsen is serving this year as vice president and spokesman for the Food Employers Labor Relations Association, which bargains with the three unions on behalf of the four supermarket chains.
"We've not had any response from the union," said Olsen, indicating that as of now workers will get their raises as required by the contract.
Olsen's letter was sent several days ago, after Giant had predicted it would report a loss for the second quarter of its fiscal year, but before the final figures were out.
Yesterday Giant's auditors reported the company had a pretax loss of $3,603,000 on sales of $373 million during the three-month period. When a business loses money it can deduct the losses from federal income taxes paid on previous profits. After credit for the taxes saved, Giant lost $2,412,000, equivalent to 50 cents for each share of Giant stock. In the same three months of 1980, Giant earned a profit of $1.5 million (30 cents a share).
Giant's loss resulted from the chain's decision last April to start a "warehouse pricing" campaign and cut the price of about 1,500 grocery items. At the same time Giant stopped marking prices on individual items, relying exclusively on its electronic scanning checkouts to ring-up orders.
The move set off what Giant described yesterday as "a wave of competitive price cutting in the Washington and Baltimore markets." Safeway, A&P and others were forced to follow with their own price cuts in what became the most costly supermarket price war in the area's history.
The government's consumer price index showed grocery store prices in the Washington area fell almost 5 percent in three months while prices were going up in the rest of the country.
Yesterday Giant admitted that "in order to meet competition, a significant number of items were being sold at or below their cost to Giant. Also it was not possible during this period to pass along many of the price increases which had been received from manufacturers."
When the price war began, Giant claimed that eliminating item pricing would save money and pay for part of the price cuts. The company said it was counting on the lower prices to bring in so much new business that total profits would stay the same or even grow.
That didn't work. Giant's sales increased 15.6 percent during the latest quarter, which the company said "was in line with Giant's expectations."
But profits plunged so much that the company quietly took down its warehouse prices signs and began increasing prices last month. Safeway quickly eased off as well and A&P this week stopped giving double discounts on manufacturers coupons.
Giant's earnings report yesterday said the company "has raised some prices to levels that, when coupled with the volume the company is enjoying will return it to a profitable operation in the third quarter."
Safeway and Giant contend their prices are still lower than they were before the price war began on April 5.
The price war was just one of the factors the big supermarket chains cited in their request for union workers to give up the raise slated under a contract giving workers raises of 70 cents an hour each year for three years.
By next September, the 90 percent of Washington food store workers covered by union contracts will be earning an average of $10.10 an hour, equivalent to $404 a week for 40 hours. Fringe benefits add $2 to $4 to hourly labor costs; meat cutters and other skilled workers earn more.
The supermarkets warned that high union wages could make it possible for independent supermarkets that do not have union contracts to undercut the big chains' prices and take sales away from them. In the Philadelphia area "there has been a significant increase in nonunion operators and general weakening of the unions' strength" the letter said.