MD Ups Minimum Wage To $15/Hr. Impacting 163,000 Employees: 21 Other States Also Raise Lowest Pay Rate
On January 1, the minimum hourly wage in Maryland increased from $13.25 to $15. Maryland Governor Wes Moore, who took office in January 2023, said that he would prioritize reaching the $15 an hour level, and did so two years ahead of the previous schedule. All told, on the same date, 21 other states also increased their hourly minimums.
In the case of food retailers in the Old Line state, many have been paying their store associates more than $15 an hour since 2020 when COVID-related labor shortages created a demand to compensate employees at a higher wage level. Additionally, in Montgomery County, large and mid-sized employers since 2021 have been required to pay a minimum wage of $15 or more to their workers.
With 22 states increasing their minimum wage, an estimated 9.9 million workers will be impacted, according to the Economic Policy Institute. In total, workers will receive $6.95 billion in additional wages from state minimum wage increases. Moreover, 38 cities and counties increased their minimum wages on January 1 above their states’ lowest levels.
In the Mid-Atlantic, Maryland joins Washington, DC ($17 an hour minimum wage), New York and New Jersey as the only states to reach or surpass the mandatory $15 threshold. In neighboring states, the hourly minimum wage levels vary widely.
In Virginia, the current hourly minimum wage is $12 with the next increase to $13.50 an hour slated for January 1, 2025; in Delaware, the amount was raised from $11.75 an hour to $13.25 an hour on January 1; and in Pennsylvania, there is no state minimum wage – the federal standard of $7.25 an hour (last raised in 2009) remains as the de facto state minimum wage.
‘Round the Trade
Costco continues to hit it out of the park. Despite minimal inflation and a tight spending economy, the Issaquah, WA-based club merchant increased its Q1 sales by 6.1 percent to $56.7 billion and saw revenue from membership fees skyrocket 8 percent for the period ended November 26. Comp store sales grew 2 percent in the U.S. and net income during the 13-week period grew from $1.36 billion to $1.6 billion. The big merchant also declared a $15 per share special cash dividend to its shareholders and said that it would open 31 new club stores in fiscal 2024, 24 of them in the U.S. And just before presstime, Costco said that its December sales increased by 10 percent over December 2023 revenue. That’s impressive by itself when you consider that many merchants experienced fairly flat Christmas related numbers last month.
At Walgreens and Rite Aid, the second and third largest drug chains in the U.S. respectively, the news continues to be bad. Bankrupt Rite Aid reached a settlement with the FTC after the Philadelphia-based drug operator was accused of misusing facial recognition technology. While Rite Aid has said that it was falsely accused, it accepted the settlement offer which bans the company from using the AI-related software for five years.
At Walgreens, parent company Walgreens Boots Alliance said it will pay health insurer Humana $360 million to settle a suit in which it was accused of overcharging for prescription drug reimbursements. According to Reuters, both parties have legally tangled before after Walgreens sued Humana in 2022 to have a $642 million judgment concerning falsely inflated prescription charges overturned. Walgreens lost that case, too.
As we near the decision phase of the Kroger-Albertsons deal, there’s some positive financial news to report from the Albertsons camp. The Boise, ID-based retailer posted solid Q3 sales for the 12-week period ended December 2. Overall sales were up 2 percent to $18.6 billion comp store revenue (ex-fuel) grew 2.9 percent, however earnings dipped 9.2 percent from the corresponding period last year.
“We delivered another solid quarter amidst a challenging economic backdrop,” said CEO Vivek Sankaran. “As we look ahead, our ambition is to create ‘customers for life,’ in part through our focus on operational excellence in our stores, driving growth in our digital and pharmacy operations, and deepening our relationships with our customers. While we are benefiting from our productivity initiatives, we expect to continue to see the impacts of investments in associate wages and benefits, cycling significant prior-year food inflation, customers receiving less government assistance, the resumption of student loan payments and other types of payment deferrals.”
Shortly before we went to press, the National Labor Relations Board (NLRB) said that an administrative judge should order 23 closed Starbucks stores to be reopened. Those stores were illegally shuttered, the NLRB argued, because of attempts to organize those units. The case is slated to be heard this summer.
My cynical mind got a chuckle from the recent story about large (French-based) European retailer Carrefour (remember when they were a thing in the U.S. for a nanosecond in the 90s?) banning PepsiCo products because of “unacceptable price increases.” And a few weeks later, PepsiCo countered Carrefour’s decision as one that was really the manufacturer’s choice due to an inability to reach a new contractual agreement with its retail partner. Unfortunately, PepsiCo was the scapegoat on this issue, because I’m sure Carrefour could have picked a dozen large CPGs that would fit the “unacceptable price increase” description. If you talk to retailers across the pond in the U.S., you’ll find their sentiment to be similar, especially in the past year when overall food price inflation has mitigated. Part of the problem is the near giddiness that some CEOs of publicly-traded companies display during their analysts’ conference calls, extoling their earnings while acknowledging they will continue to increase prices when warranted (translation: often). Of course, this feud will ultimately get settled and both parties will continue to do business and this disagreement will be purged from the files like it was a Russian history lesson.
Local Notes
MOM’s Organic Market will be opening in Severna Park, MD, its first unit in Anne Arundel County and its 11th in Maryland. The Rockville, MD-based organic retailer operates 23 total stores in six states.
On January 3, Foxtrot Market, the hybrid urban c-store merchant, opened its seventh Washington, DC store (and 33rd overall) in the Adams Morgan section of the District. The Chicago-based retailer last month announced it was merging with another ChiTown retail entity, Dom’s Kitchen & Market. Dom’s, co-founded by the iconic Bob Mariano of Dominick’s supermarkets – now owned by Kroger – fame, currently operates two upscale retail markets in Chicago.
Sprouts will open its sixth Maryland store later this month in Burtonsville, MD and has another Old Line State unit slated to open late this year in Westminster.
Giant Eagle, which more than a few trade observers believe will be on the selling block, will be relocating its corporate headquarters from its current base in O’Hara Township, PA to a new four-story 100,000 square foot facility about 30 miles away in Cranberry Township, PA. The big regional chain expects the new company HQ to be ready in a few months.
It’s official: Getir, the Turkish ultra-fast grocery delivery company, has completed its acquisition of FreshDirect from Ahold Delhaize, which owned the Bronx-based online driven delivery specializing in fresh product. Getir claims that under its ownership, FreshDirect customers (of which there are many in Manhattan and Brooklyn) will benefit from the synergies between the two firms. I’m only a bit skeptical, because Getir’s long-term success is far from proven, and FreshDirect has been largely unprofitable in 25 years of doing business.
We have some deaths to report over the past month. Bernie Kenny, founder of Kenny Family ShopRites of Delaware, passed away late last month at the age of 85. Bernie truly was one of a kind – a great merchant, a generous philanthropist, a caring parent (and foster parent) with a heart of gold. Bernie Kenny was classic old school – he never finished high school, but after enlisting in the Army, he became an Army Ranger. He began his grocery career at 12 years old in New Jersey, became an executive at Pathmark (where I first met him) and then left to become a ShopRite member with two stores in Delaware. That operation grew to six stores in the First State, which are now supervised by two of his children, Chris and Melissa. Over the years, he created the Kenny Family Foundation and, along with his six children (two natural and four adopted) cared for 113 foster children with his wife Peggy. A deft operator and a skilled merchant, Bernie’s exterior could be a tough as his Master Sergeant image conveyed, but down deep he was a sensitive and devout man who never forgot his roots or the importance of family and giving back. A true mensch, I’m gonna miss Bernie Kenny!
Also passing away was David Soul – you know, Hutch (the blond one) from the ‘70s TV series “Starsky & Hutch” (1975-1979). Hutch, er, Soul (birth name: David Solberg) first caught my eye playing the role of bad guy vigilante motorcycle cop in “Magnum Force” (1973) the second installment of the five Clint Eastwood “Dirty Harry” series of films best remembered for Eastwood’s classic lines: “Do you feel lucky, Punk!” and “A man’s got to know his limitations.” Unfortunately, after “Starsky & Hutch,” Soul, 80, found acting roles tough to come by and he spiraled into alcoholism, finally recovering in the late 80s after discovering religion. He eventually moved to London (in 1995), where his career became somewhat rejuvenated. And here’s a trivia bit about Soul that you might not have known: in 1977, his song “Don’t Give Up On Us” reached number one on the Billboard “hot 100” charts.
Tom Smothers, the older half of famed comedy act The Smothers Brothers, has died at the age of 86. The understated comic, who gained fame (and scorn) from the brothers’ hit (and controversial) television series “The Smothers Brothers Comedy Hour” (1967-1969), helped revolutionize TV comedy – their show was really a precursor to such others as “Laugh In” and “Saturday Night Live.” Tom Smothers (guitar), who along with his brother Dick (bass), actually began as a comedy folk singing duo. After years of losing the 9:00 p.m. Sunday night slot to NBC’s “Bonanza,” CBS executives gave the brothers a shot (really a longshot) to show their stuff. And from the beginning, their stuff was different, much different. Addressing topical issues of the time (Vietnam, religion, racial problems and recreational drugs), this new form of comedy instantly appealed to baby boomers who could relate to those issues. Musical groups such as The Who, Buffalo Springfield, Jefferson Airplane and The Doors also appeared, creating an even stronger bond with teenagers and young adults. However, seemingly tame dialogue (by today’s standards) like this – Tom: We spend over 50 billion dollars a year on defense. We don’t need more allies. Dick: Well, what do we need? Tom: We need… more enemies. – continued to irk CBS executives who promptly cancelled the show in April 1969. And to throw even colder water on the comedic duo, “The Smothers Brothers Comedy Hour” was replaced by “Hee Haw.”