“Unfortunately, Seattle City Council didn’t consider that grocery stores — even in a pandemic — operate on razor-thin profit margins in a very competitive landscape,” the company said in a statement. “When you factor in the increased costs of operating during covid-19, coupled with consistent financial losses at these two locations, and this new extra pay mandate, it becomes impossible to operate a financially sustainable business.”
Hazard pay and other pandemic-related bonuses became popular among corporate grocery and retail giants, amid wider public attention on the plight of essential workers during the early spread of the coronavirus last year. Companies including Kroger, Target, Walmart, Amazon, Rite Aid and Albertsons instituted the policy.
But many companies like Kroger ended hazard pay as the country reopened, declining to reinstate the practice, despite record caseloads around the country. Kroger replaced it with a $400 bonus.
Seattle is one of a handful of left-leaning cities that have sought to address the issue, passing hazard pay mandates for workers at large groceries at the end of January. The law applies to companies with more than 500 workers and stores larger than 10,000 feet. In California, Berkeley, Oakland and Los Angeles have moved forward similar measures.
Business interest groups have denounced the plans, with two, the Northwest Grocery Association and the Washington Food Industry Association, suing Seattle.
Kroger has been a leader in this pushback, too. The company also closed two stores in Long Beach, Calif., after the city passed a measure requiring large grocers to give workers an extra $4 an hour in hazard pay, saying its decision was “a direct result of the City of Long Beach’s attempt to pick winners and losers.”
Kroger’s decision in Seattle was denounced by the United Food and Commercial Workers International Union, which represents workers at many Kroger stores, including those at the locations that will close.
“Kroger has literally made billions in pandemic profits off the sacrifices of grocery workers in Seattle and across the country,” said the union’s president, Marc Perrone. “Kroger’s action today not only threatens these workers, but it also threatens the local food supply. Instead of doing what is right, protecting the community and providing the hazard pay for these essential grocery workers, Kroger is once again trying to intimidate local and national elected leaders.”
Seattle officials were also sharply critical of the company, denouncing the closures as an attempt to “bully” the city’s elected leaders.
“Kroger has posted record earnings during this pandemic,” Council President M. Lorena González said in a statement. “The city’s front line grocery workers, meanwhile, are exposed to covid-19 every day and many are still living paycheck to paycheck.”
Kroger said it would try to relocate the employees from the two stores, about 109 according to the union, but it did not give specifics about how many workers would be laid off in the move.
The company has touted surging profits for investors as sales boomed in 2020. m In its most recent financial release, the company reported an operating profit of $792 million for the third quarter, up threefold from the same quarter a year prior.
Jeff Alexander, 65, a meat wrapper at one of the QFC locations that will close, said he found out about the closure yesterday morning during a meeting. He was surprised because he had been told by superiors that at least the meat and fish department had been a top producer in the district.
“This $4 an hour thing that passed really set it off — to me its retaliation,” he said. “They talk about well we appreciate your hard work, but when it is time to talk about money it’s a whole different story.”
Record-breaking profits at several top retailers have not been shared in large part with their workers, according to a November analysis of 13 major companies by the Brookings Institution, a reflection of how the pandemic has worsened the country’s already pronounced issues with inequality.
The report found that profits rose at these companies some $16.7 billion, or 40 percent, this year, while the average pay for their front-line workers was up only $1.11 an hour, or 10 percent, since the pandemic began.
Kroger has largely funneled profits to shareholders, the Brookings report said, noting that the company bought back $211 million in stock shares during the second quarter in 2020 and announced an additional $1 billion in buybacks in September.
Meanwhile, the company’s cashiers, stockers and other front-line workers entered the “new, deadlier phase of the pandemic earning some of the lowest wages in the industry,” the report said.
Irene B. Garcia, 66, works at a Fred Meyer, a Kroger-owned grocery location in Auburn, Wash., which is not subject to Seattle’s new mandate. She said she was distressed by the news that the company was closing the stores in response to the hazard pay requirement.
“They’re not losing a dime,” she said of the company. “They have never lost anything. Their profits didn’t go down. They know that, but still they’re not willing to give people extra pay to be there, knowing that they’re risking their lives and their family’s lives.”
Garcia said about 20 workers in her store caught the coronavirus during the past year, including herself. She’s not certain where she picked it up, she said. Her 51-year-old son Florentino died of the coronavirus in November. His son works at the Fred Meyer location with her, she said, and also got sick.
Kroger said it has invested an extra $1.5 billion for worker compensation and to implement safety measures at its stores, and it is offering $100 to each worker to get vaccinated.
For its QFC stores, the company says Seattle’s move would result in operating costs increasing by 22 percent — noting that labor costs are about 13 percent of total sales. The average profit margin for any QFC store is around 2 percent, meaning that for every $100 in grocery sales, the stores earn $2.
QFC workers in Seattle already average about $20 an hour, not including benefits such as health care, the company said. And the company questioned why essential municipal employees in Seattle are not being given the same raise.
Tom Geiger, a special projects director at the UFCW 21, which represents workers at the stores that are closing, said the city had to act on hazard pay after companies such as Kroger declined to bring it back.
“The door has been wide open for them to voluntarily reinstate hazard pay that they cut last May, and we see how far that got us,” he said.
Abha Bhattarai and Christopher Ingraham contributed to this report.