Kroger will close 3 grocery stores following Los Angeles hazard pay mandate

(CNN Business) Kroger announced it will close three Los Angeles grocery stores in May amid concerns about the city's new hazard pay mandate, which requires large grocery and pharmacy stores to pay their employees an additional $5 per hour over a four-month span due to the Covid-19 pandemic.

This is at least the third time this year that Kroger has declared plans to shut down locations in select cities, following local government decisions that force stores to increase hourly wages.

The company said Wednesday that the closures of the Los Angeles stores — two of which are operating as Ralphs and one as Food 4 Less — was a decision accelerated by the new pay requirement.

"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," a Kroger spokesperson said.

The Los Angeles City Council voted in late February in favor of the new hourly mandate by a margin of 14-1, as part of a trend among other West Coast cities that are requiring grocers to compensate employees at a higher rate during the pandemic.

In the Los Angeles area, Long Beach and Montebello passed measures earlier this year that required grocery chains to give workers hazard pay. Kroger announced in February the closing of a Ralphs and a Food 4 Less in Long Beach, citing the "misguided decision" by the Long Beach City Council to require hazard pay for grocery workers.

The Seattle City Council passed an ordinance mandating that grocery stores larger than 85,000 square feet had to pay employees an additional $4 per hour in hazard pay. Kroger later announced that two of its QFC stores in Seattle will close in April, with a QFC news release highlighting the hazard pay requirement and the stores' "consistent financial losses."

Kroger's sales increased 14.1% in 2020, yet the company said last week that it expects sales to decline 3-5% compared to the prior year.

Kroger (KR) also bought back $989 million worth of shares during the first three quarters of 2020. In September, Kroger's board authorized $1 billion in new share repurchases. Stock buybacks boost companies' stock prices by making shares scarcer, and critics say companies should instead invest that money in worker pay or benefits.

United Food and Commercial Workers International Union President Marc Perrone called Kroger's actions on Wednesday "a cruel attack on essential workers."

"Essential workers in grocery stores are putting their health at risk every day to make sure families can put food on the table and city leaders are stepping up to ensure they have the hazard pay they have earned," Perrone said in a statement Wednesday. "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."

Kroger said it will be providing the mandated extra pay to all associates, including those at the three stores scheduled to close on May 15 as well as 65 other stores in Los Angeles.