Members of United Food & Commercial Workers Local 400 voted September 25 to ratify a new, four-year collective bargaining agreement with Kroger covering 3,500 employees in the Richmond and Tidewater areas that preserves their health and retirement security and increases their wages.
The contract, which is retroactive to August 3 and expires on August 4, 2018, succeeds a three-year agreement.
According to the union, the new contract guarantees raises and will be based on seniority, rather than the previous system, which left raises up to the discretion of store manager. The union did not specify the level of wage increases.
The union said the bargaining was difficult and lengthy, largely due to complications and additional costs imposed by the Affordable Care Act (ACA). The contract includes health care “Maintenance of Benefits,” meaning that Kroger will contribute whatever is necessary to the health care fund to pay all benefits.
“This contract is an improvement,” said Mark P. Federici, president of Local 400. “Our members will keep their current health care benefits and won’t be forced onto the often inferior plans offered through the ACA’s health care exchanges. Kroger will pay their share of benefits in full through the life of the contract, our members’ pensions will be properly funded, and our members won’t be subjected to management playing ‘favorites’ when it comes to pay increases.”
He added, “This contract will enable Kroger to maintain their dominance as the number one grocery retailer, while doing right by the workers whose productivity and customer service have lifted them to the top. We look forward to implementing it and helping these chains expand their market share.”
Kroger is the only organized supermarket chain in the area and while the new contract covers 25 Kroger stores in the Richmond and Hampton Roads areas of Virginia, it does not include the three existing large Marketplace combination stores that Kroger operates in the market. Those three units remain unorganized. Kroger has four more Marketplace units scheduled to open in the next two years. Harris Teeter, which Kroger acquired in January 2013, also is non-union. It has 16 stores in the Richmond-Tidewater-Charlottesville area and continues to operate as a separate division from the parent company.
Earlier this month, Kroger reported net earnings of $347 million, or $0.70 per diluted share, and identical supermarket sales growth, without fuel, of 4.8 percent in the second quarter of fiscal year 2014. Net earnings in the same period last year were $317 million, or $0.60 per diluted share. This marks the retailer’s 43rd consecutive quarter of positive identical supermarket sales growth.
“We are winning with customers because we offer a full range of advantages including a great overall shopping experience, excellent customer service, a complete assortment of both national and corporate brand products, and everyday low prices and promotional offerings,” said Rodney McMullen, Kroger’s chief executive officer. “As we improve our connection with customers, we are also executing our growth plan and delivering on our key performance indicators — all of which is fueling strong financial results for shareholders.”
This is the second consecutive quarter that includes Harris Teeter in Kroger’s statement of operations. Year-over-year percentage comparisons are affected as a result.
Total sales increased 11.6 percent to $25.3 billion in the second quarter compared to $22.7 billion for the same period last year. Total sales, excluding fuel, increased 12.4 percent in the second quarter over the same period last year.
Kroger recorded a $26 million LIFO charge during the second quarter compared to a $13 million LIFO charge in the same quarter last year. The company increased its LIFO estimate for the year to $100 million, resulting in an incremental $0.01 per diluted share charge to earnings in the second quarter. The effect of this charge is included in the company’s updated guidance for 2014.
FIFO gross margin was 20.54 percent of sales for the second quarter. Excluding retail fuel operations, FIFO gross margin decreased 12 basis points from the same period last year.
Operating, general and administrative costs plus rent and depreciation, excluding retail fuel operations, were essentially flat as a percent of sales compared to the prior year. Increases in workers compensation and general liability reserves negatively affected this comparison by 8 basis points.
Second quarter FIFO operating profit, excluding fuel, increased approximately $40 million over the prior year. On a rolling four quarters basis excluding fuel and adjustment items, the company’s FIFO operating margin increased 7 basis points.