Kroger Sets Aside Funds for Rivals
The owner of the Ralphs grocery chain has set aside $116 million to compensate two rivals under a controversial mutual-aid pact the trio devised in anticipation of the California supermarket strike and lockout, regulatory filings show.
Kroger Co.'s payout to Safeway Inc. and Albertsons Inc. will probably be between $72 million and $75 million after taxes, analyst Andrew Wolf of BB&T; Capital Markets said Monday. He said that “appears to be appropriate, in light of the losses the companies have reported and the nature of their agreement.”
Kroger said in its annual report to the Securities and Exchange Commission last week that the $116-million pretax figure was for its fiscal year that ended Jan. 31.
The pretax total that will be owed to Safeway and Albertsons is almost sure to be more because the strike and lockout continued after the end of Kroger’s fiscal year.
The Kroger filing didn’t say how Safeway -- the owner of Vons and Pavilions -- and Albertsons would divide the money, which is to be disbursed during Kroger’s current first quarter, which ends April 30.
Spokespeople for Safeway and Albertsons either declined to comment or weren’t available for comment. The companies have consistently said that they wouldn’t release details of the mutual-aid pact.
They came up with the pact to share the pain of labor strife and as a safeguard in case the United Food and Commercial Workers union didn’t apply pressure evenly during the strike and lockout.
That’s exactly what occurred.
Early in the dispute, the UFCW removed its pickets from Ralphs and focused efforts on Von, Pavilions and Albertsons stores. That provided the Ralphs stores owned by Kroger with a windfall of business from people who didn’t want to cross picket lines.
Under the pact, Kroger was then obligated to share that extra cash with the other two chains.
The plan for companies that are normally heated competitors to share money triggered a lawsuit by California Atty. Gen. Bill Lockyer, who alleges that the pact violates federal antitrust laws.
The chains have denied wrongdoing, contending that the pact is a legal, labor-related exemption from antitrust laws.
Lockyer spokesman Tom Dresslar reiterated Monday that “we don’t think that exemption applies here. We think it’s important the courts clarify the law.”
The three chains bargain jointly with the UFCW in Central and Southern California. The strike and lockout, which affected 852 stores and idled 59,000 workers, lasted 4 1/2 months before ending Feb. 29 with a new three-year contract.
Although the chains won major reductions in their future labor expenses, the dispute cost them more than $1.5 billion in combined lost sales.
Albertsons and Safeway have said the strike and lockout reduced their fourth-quarter, after-tax profit by $90 million and $103 million, respectively. Both companies said their losses took into account the payments they expected to receive from Kroger.
Kroger had indicated last month that its payments to its competitors would top $100 million. In reporting its fiscal fourth-quarter results, Kroger said the strike and lockout, along with a small labor dispute in West Virginia, had cut its quarterly profit by $156 million and that much of the amount reflected the mutual-aid money.