Retailers

Kroger to Shutter Three LA Stores: Are More Closures Coming?

Pay mandates make underperforming locations ‘financially unsustainable,’ says grocer
Ralphs exterior
Photograph: Shutterstock

Two Los Angeles Ralphs stores and one Food 4 Less are the latest causalities in the fallout over mandatory hazard pay increases. The Kroger Co. announced the closures of its three “long-struggling” City of Angels stores March 10, a decision the company says was “accelerated by a new Los Angeles City Council mandate that requires a select group of employers to provide extra pay for front-line workers, but not all companies who employ front-line workers.” 

Kroger further asserts the mandate will add an additional $20 million in operating costs over the next 120 days, “making it financially unsustainable to continue operating underperforming locations.” 

Last month Kroger announced it would close two stores in Long Beach, Calif., and two Quality Food Centers (QFC) in Seattle, citing extra pay mandates in those cities escalating operating costs and ultimately forcing the closures of underperforming locations.

As more California counties and cities elsewhere pass similar extra pay mandates, does Kroger expect additional store closures will be necessary?

“Misguided mandates for extra pay could put any struggling store in jeopardy of closing,” John Votava of Ralphs told WGB in an email.

In their defense against extra pay mandates, Kroger and others, like PCC Community Markets in Seattle, point to grocery’s thin profit margins and competitive landscape, which, when combined with elevated operating costs, means some stores will no longer be profitable.   

Ralphs and Food 4 Less provide affordable, fresh groceries, good and stable jobs with growth opportunities to thousands of Los Angeles residents, and proudly supports local community organizations across the city,” said a company spokesperson in a statement. “Unfortunately, the Los Angeles City Council disregarded their own Economic Impact Report by not considering that grocery stores—even in a pandemic—operate on razor-thin profit margins in a very competitive landscape. It’s never our desire to close a store, but when you factor in the increased costs of operating during COVID-19, consistent financial losses at these three locations, and an extra pay mandate that will cost nearly $20 million over the next 120 days, it becomes impossible to operate these three stores.”  

Raising concerns over the three stores closures’ impact to the food supply in Los Angeles, the United Food and Commercial Workers International Union (UFCW) President Marc Perrone issued the following statement:“Hazard pay is not just about recognizing the health risks grocery workers face, it’s about making sure that these essential workers have the support they need to keep our grocery stores safe for customers and ensure all our families have the food we need as the pandemic continues.”

In an effort to turn the focus from additional hazard pay to getting front-line grocery workers vaccinated for COVID-19, Kroger has said it is “focused on and stand[s] ready to work with state and local governments to prioritize vaccine distribution to front-line workers, like our associates, as quickly as possible.”

This week in Los Angeles, Kroger is hosting three vaccine clinics for associates, with additional events to be hosted in the following weeks, the company said. “Prioritizing vaccinations—not arbitrary mandates for extra pay—is what will keep front-line workers protected,” said a company spokesperson.   

To date, nearly 20% of Ralphs and Food 4 Less associates have received their first dose or have been fully vaccinated, the company said. Kroger is encouraging all associates across all its banners to receive the COVID-19 vaccine. Ralphs and Food 4 Less are offering a one-time reward of $100 to associates who receive the recommended doses of the COVID-19 vaccine.

The three stores set to close—a Ralphs at 9616 West Pico Blvd., another at 330 West Slauson Ave., and a Food 4 Less at 5420 West Sunset Blvd.—will remain open and operational for the next 60 days, closing on May 15.   

Ralphs and Food 4 Less will provide the mandated extra pay to all associates, including those in the three locations scheduled to close as well as Kroger’s other 65 stores in Los Angeles.The average hourly wage for Ralphs and Food 4 Less associates in Los Angeles is $18 an hour and total compensation is $24 an hour, with premium healthcare and stable pension benefits, reported the company. 

Since the start of the pandemic, the Kroger Family of Cos., which includes Ralphs and Food 4 Less, has invested $2.5 billion to both reward associates and implement dozens of safety measures that continue to be implemented today, including $1 billion to better secure pensions, said the company, which recently issued an additional $50 million in rewards to front-line associates.  

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