As we all are aware that that Kroger recently announced the closure of three more West Coast stores on March 10th. The Los Angeles lockdowns follow similar announcements in Seattle and Long Beach, totaling seven.
The nation’s largest full-service grocery chain has thrown the challenge to cities that have issued risk pay mandates. Municipal governments are trying to ensure fair compensation limits for frontline retail employees.
Food workers bypass their normal duties covered by collective bargaining agreements, literally risking their lives at work during a pandemic that has killed hundreds of food system workers and infected tens of thousands.
Like other major retailers, Kroger has performed extremely well during the pandemic. They made a record $ 2.5 billion in revenue, from $ 132 billion in sales and comparable store sales of 8% in an industry where 1 or 2% is considered strong.
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Despite these windfall gains, the shutdowns are pushing hundreds of employees out of work and leaving community members looking for a new place to grocery shopping.
Kroger has also been very vocal in opposing mandates, justifying closures at “underperforming” stores that they could not cover these extra expenses, and inspiring further legal action across the California Grocery Association. Like any business, grocers must balance their expenses, cost of goods, and retail prices to reach a specific gross margin target, usually in the 35-40% range.
Gross margin or gross profit for this purpose is calculated as ((retail price minus cost) / retail price). Gross margin is what keeps the lights on, keeps salaries coming and makes sure supplier bills are filled out. It is a weighted combination of single unit gross margins across thousands of products multiplied by their units in a given time frame.
While, the kroger’s Payroll is usually a large portion of the expenses at a particular retailer, and 12-15% of cross-store sales are typically for mid-size formats, although many mass-market and discount retailers are lower and specialty / natural stores are higher. So, while it may seem reasonable to have panic attacks about fulfilling these payment authorizations, there are examples of how retailers have adapted costs, price and margins to achieve a strategic goal. This is what makes Kroger’s reaction to the risk allowance so alarming. It is a very smart process, and it is probably the best in this field. They have one of the best branding software for brand stores in the world.
Their efforts are backed by cutting-edge data and business intelligence that understands what their customers want and how to set prices and lineups by store. By season, by metro area or by geographic region, while looking to dominate market share and fend off brutal competitors. Such as Wal-Mart or HEB. They have emerged from a year of remarkable profits, which was followed by several years of massive shareholder buybacks totaling nearly $ 7 billion, including nearly $ 1 billion since August 2020.
They prefer to fight elected officials, despite their workforce, and turn their backs on communities rather than focus work on the health and well-being of their dedicated employees. This is how food apartheid happens. It’s a shameful and unnecessary episode of America’s largest grocery chain. Their communities and their employees deserve so much better. What are your views? Do employee deserve more? Let us in the comment section below!