Given that the stores were already underperforming it sounds like the hero pay ordinance may have brought forward a decision to close them rather than initiated it – especially if hero pay pushed them into the red. Shutting a store has consequences and it is not always a good look, however Kroger needs to stay on top of its store fleet and ensure that it is constantly trimming unproductive locations. Over time, the failure to do this creates a sclerotic and flabby company. As for the hero pay, I am sure it is well intended but it is wrong for local councils to intervene in the market in such an arbitrary and haphazard way: and now people have lost their jobs because of it, which is far from a great outcome.

I’m all for rewarding front-line workers for their heroic work, but this needs to be at the discretion of the company, not government. And while there may be some positive publicity as a consequence of providing additional pay, it shouldn’t be the primary motivation – it should be about the workers. The government mandated pay proposed in California is a very slippery and dangerous slope.

It just creates bad optics for Kroger – it makes them appear unsympathetic and uncaring to the situation of their front-line workers. They should have looked at other options rather than closing one million+ facilities and causing customers to look elsewhere to shop.

This may well be an example of “the straw that broke the camel’s back” for already underperforming stores. Retailers do not have a moral commitment to operate stores that are losing money because customer are not buying enough to keep the stores open. If there is no way to balance a temporary increase in hourly rates (such as canceling bonuses), retailers may have no choice but to close those stores.

This is way worse than bad optics or bad timing. It’s deeply flawed management thinking and behavior. I have read so many positive things about Kroger’s business practices. This leaves me scratching my head.

Sorry, this is a naked attempt by the grocery union to embarrass the chains. I quote union president John Grant, “Faced with sharing their windfall with their employees, [Kroger] chose instead to destroy 250 families’ lives in the middle of a pandemic.” I have family members who have been part of unions for years but this is just wrong; it is wrong to use the front-line workers as pawns. Kroger either gives into this and fights it forever, or they hold the line with their business model and battle the press. In the end the customer and employee loses.

Kroger is going to face some big blow-back on this over time. They can say whatever they want and try to point figures at local governments, but at the end of the day when Kroger posts huge sales and earnings gains there will be questions and bad public relations. I get these stores may be in “soft markets” for Kroger, but since when does Kroger just give up, pack up and go home? Someone should ask Kroger their position on raising the national minimum wage.

This is a slippery slope that’s only going to get deeper and faster. With additional municipalities introducing “hazardous duty” bonuses, the pressure on all retailers will increase. However if perception is reality, the timing is not good.

How perplexing and aggravating. Clearly, Kroger leaders didn’t think to talk to customers before doing this. Customers see up close and personal how hard these associates are working, and they are talking with them at each visit. Does Kroger really want to take a reputation hit like this?

I am with Trader Joe’s on this one. The message is clear, “We care about our workers who service you and therefore we care about you.”

Too often companies look at labor as a cost. It must be approached as an investment and it generates ROI just like any other asset.

The NGA says that labor, including store management is about 14 percent of store revenue. If the pay increase takes it to 20 percent, the grocer can raise prices a mere 1 percent and cover the increase without hurting the bottom line. If they use price increase as an excuse for helping workers and raise prices 2 percent, they can take half of that straight to the bottom line.

Oh boy! Legislating what the big boys pay to their employees at the local level scares the heck out of me. And it apparently is an action that has instigated large changes to Kroger’s market presence. Did the cities up their staff’s income where staff must interact with the public? What other retailers will the cities go after? Surely there have to be more.

Bad move, bad statement. If Neil is right and the stores were underperforming anyway, this was the wrong excuse.

Walmart is drooling.

No retailer wants to operate stores that are unprofitable. Kroger had identified these locations as underperforming. That term covers a wide range of results. It may be that the locations’ profitability was marginal and on a downward trend. Are the optics good? No, but the issue with this type of proclamation is that this one for 120 days may be followed by another.

I think this strategy is much more about the broader notion that local municipalities can dictate your labor costs and therefore your ability to operate. I also believe that it is not a coincidence that this is happening in California where the governor is being recalled, ostensibly because of onerous and in the opinion of many of his constituents, nonsensical diktats. Point being, that in California, Kroger and other retailers have good reason to believe these new rules and regulations may not be as temporary as being postured. Time will tell if Kroger is the hero or the goat with this decision but, given the current mindset in California, it is just as likely the shoppers will blame the rule makers as they do Kroger for this decision.

I find it a bit curious why Kroger would choose to draw a line in the sand in this instance over ordinances that are supposed to be temporary, at a time when their corporate profits are at an all-time high. This three-way dynamic between municipalities, labor unions and retailers over so-called “hero pay” simmers with political, economic, and public relations consequences. Closing a money-losing store when expenses rise beyond the retailers’ control would seem like a simple business decision. Making the move to resist a local ordinance has political resonance, and the PR fallout can be easily predicted. It’s well worth asking why the stores that Kroger wants to close in Long Beach and L.A. were performing poorly in the first place — especially at a time when the grocery business at large is enjoying some of its best financial results in many years. So I cannot help wondering whether Kroger’s decisions were made to cement a precedent for future negotiations or if they were merely opportunistic. Either way, in an era when most localities… Read more »

It is clearly a branding challenge, one frankly large enough that it could easily become a financial issue. The optics are awful, refusing to pay people a little more for potentially risking their lives and the lives of their loved ones. The same argument could possibly be made about underperforming stores, but I think it is a lot easier to shutter a store than it is to be seen as exploiting your entire workforce.

If there is one single way to build a reputation as a thug, it’s to close stores in response to local ordnance for combat pay during a pandemic.

I’m sympathetic to Kroger’s. Theirs is a tough business and I’m sure a bunch of people inside Kroger’s have ironclad logic showing this to be a good move. Unfortunately, these things have consequences.

Once did research in a suburb of Chicago where a Lowe’s store had closed 8 years earlier. Participants still ranted about it in frustration.

The optics are just awful. Shoppers won’t forget. Just provide the “hero pay” to heroic employees. It’s that simple.

No. Pay is still one of the retailers highest costs and having local governments throw a wrench into their pay structure amplifies the incentive to move from certain locations. Sure, some negative PR locally — but the average New York, or LA or (insert location here) consumer is by and large not thinking about whether the store in Long Beach closed. For retailers trying to build community and gain local advantages, it is a marketing investment decision. For everyone else it’s typically a financial decision. Sure it’s nice to be magnanimous, but for many retailers, the PR costs will be negligible and is expected to pass quickly.