These are the unexpected winners of the grocery wars
New York (CNN Business)Some major retailers are continuing a controversial practice known as share buybacks in the pandemic, despite ending hazard pay for their workers or not providing any at all.
Kroger (KR) bought back more than $200 million of shares during its latest quarter ending Aug. 15, and its board authorized $1 billion in additional repurchases on Friday. The grocery chain in May halted a $2 per hour pay bump it gave to its workers for doing their jobs in the pandemic.
Two other chains that stayed open throughout the pandemic have made similar moves to repurchase stock. Dollar General’s (DG) board of directors last month greenlighted a $2 billion share buyback program. Meanwhile, Big Lots’ (BIG) board also authorized a $500 million stock buyback program last month.
Big Lots’ $2 hourly pay bump for workers ended in early July. Dollar General did not give workers a wage increase to compensate them for the risks of showing up to the job, but it did pay out bonuses to workers.
Shareholders love buybacks because they boost stock prices by making shares scarcer. But critics argue corporate America’s intense focus with stock buybacks has come at a real cost to American workers. Instead of focusing on short-term rewards for shareholders, they say companies should make long-term investments by retraining workers, ramping up benefits and boosting wages.
The practice is especially controversial at a time when labor advocates have argued that companies should be using their resources to compensate workers at higher rates in the pandemic. Unions and some top Democrats, including vice presidential nominee Kamala Harris, have argued that grocery and retail workers should receive a wage increase for doing their jobs while risking exposure to the coronavirus.
“The sad fact is that the CEOs of most major US companies do not care about their employees—even during the greatest public-health crisis in a century,” said William Lazonick, a professor at University of Massachusetts Lowell who has studied share repurchases.
In response to a CNN Business inquiry on buybacks, a Kroger spokesperson said the company’s “most urgent priority throughout this pandemic has been to provide a safe environment for our associates and customers.”
Since March, it has invested more than $1 billion in additional pay and bonuses to workers and to “safeguard them and our customers through implementation of safety measures,” the spokesperson said.
A Dollar General representative said the company has paid $123 million in “appreciation bonuses” to workers this year.
“Any suggestion that Dollar General has discontinued its investment in COVID-related employee appreciation compensation is false,” a spokesperson said. The spokesperson said Dollar General expects to invest up to approximately $50 million during the second half of the year on these bonuses.
A spokesperson for Big Lots declined to comment.
JPMorgan (JPM) CEO Jamie Dimon and others have defended buybacks as a legitimate use of capital and noted that the money doesn’t disappear. Shareholders can in theory use the cash for other purposes, such as investing in start-ups that boost the economy.
Still, the United Food and Commercial Workers criticized the buybacks at a time when the risks to frontline workers were high from the coronavirus and said the money should have gone to increased pay and protections.
“Asking these workers to put their lives on the line every day, working without hazard pay, while shareholders continue to benefit from stock buybacks, is just wrong,” United Food and Commercial Workers union president Marc Perrone said in an emailed statement.
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