Back in February, I wrote about the national grocery chain Kroger’s announcement that it was closing low-performing stores in Seattle and Long Beach, California, after the two cities passed laws requiring grocery stores to pay their front-line workers additional $4-per-hour “hero pay” during the pandemic.
“Giant corporations love to use splashy intimidation tactics like this to create fear-inducing headlines, which help to peel support away from worker protections,” I wrote then, adding, “But make no mistake: Even though Kroger’s press releases suggested that the grocery business relies on ‘razor-thin’ profit margins, Kroger has been making a ridiculous amount of money during the pandemic.”
By making a big deal of closing stores that were likely set to be shuttered anyway, Kroger’s message to politicians in states and cities around the country couldn’t be much clearer. And if you read the comment thread on news stories about the Kroger closures from February, you’ll find a vocal minority who believe Kroger is the victim.
“Money does not grow on trees. Business has to make a profit, otherwise it will close,” one Seattle Times reader lectured. (Kroger repeatedly bragged about its record profits throughout the pandemic.)
Those commenters who are worried about poor Kroger’s bottom line would do well to keep in mind a recent tweet from Pitchfork Economics host Nick Hanauer: “Whenever a corporation whines about raising wages, just Google ‘[name of company] stock buybacks’ and you’ll see where all their profits are really going.”
In this case, Hanauer’s tip proves to be right on. Last month, Kroger announced a $1 billion stock-buyback program.
The $1 billion in profits being funneled to shareholders could have been invested in Kroger’s stores, customers, infrastructure, and labor force.
Been there. Nothing you can do but get over it and move on. The virtue signaling reporters who have a job and want to criticize, ain’t gonna help at all. These big chains do as they please. Buyer beware.
This is exactly what happens when liberals with no business experience venture into the deep waters of reality. Now instead of seeing a $4 raise ALL of the Kroger’s employees are out of jobs. Hence the phase, “Get Woke, Go Broke” but they never learn and then scream and yell that everything should be free due to their failures.
Facebook, Google, Twitter and other companies seem to be immune from criticism while others like Kroger are demonized for decisions to keep their businesses on solid financial ground.
Private industry can do what it pleases. Screw the little guy/gal, employees, etc.
Hell before Al Gore’s interweb, we would read the paper and say the same thing at the dinner table – Business is Business, the Rich get Richer.
Nothing has changed except the ability to tell the world how you feel or show a video.
SMH
More Socialist whining from an economically illiterate, politically motivated writer. It’s just an age-old fact that grocery stores and chains operate on thin margins; they make their money from lots of transactions and volume.
The stores in question were in very expensive areas to operate, and were underperforming. That’s business lingo for losing money, not making budgeted profits or hanging on by a thread. The stores in Seattle had union contracts, and the city council passed a law that only affected large grocers, and took effect within a week.
A 40 hr/week job means 2,080 hrs/year so it was an $8,320 raise per F/T worker out of the blue. If a store had 100 employees that’s an overnight increase in labor costs of $832,000 without one cent more in the cash register from customers. Pay increases have ‘hidden costs’, too. Increases in payroll taxes, Social Security taxes and retirement plans are all increased to employers.
So the council of the Peoples Republic of Seattle did nobody a favor in their experiment with giving other people’s money away. That’s the real story.
A word about stock buybacks; they can benefit the company, the shareholders, the managers or all 3 groups. A buyback reduces the number of shares available. If earnings dollars stay constant, the earnings per share (EPS) increases, which is a number Wall St. tracks so the value per share may go up which benefits all shareholders. In publicly traded companies many employees are shareholders, too, either directly or through retirement plans.
A shareholder selling back their shares typically incurs no transaction costs, which is another plus. Buybacks typically offer a sellback price higher than current market price as an inducement to sell.
And, managers with iffy bonus calculations could benefit from an EPS bump from a buyback rather than normal EPS gain from the market at large..
A buyback signals that a company feels its stock is currently a better investment than another store, plant or facility. Ideally, that changes and traditional investment in the normal business can resume.