Kroger Workers Start a 3 Week Strike; Shares Fall

American food and drug retailer The Kroger Co. (KR) and the United Food and Commercial Workers (UFCW) Local 7 Union have been at loggerheads for wage increments. Workers at Colorado’s King Soopers/City Market outlets have decided to go on a three-week strike, after they rejected the company’s latest wage increase offer.

Shares fell 3.2% briefly on the news and ended the day down 1.2% at $47.14 on January 12. Over the past year, KR shares have gained around 45%.

Kroger’s Last, Best, and Final Offer

On January 11, Kroger handed out what it called the “Last, Best, and Final Offer” to the UFCW Local 7 Union. According to the offer, the company would invest $170 million in wage investments and ratification bonuses for all associates over the next three years. Moreover, the company also proposed to invest more into the associate’s healthcare benefits.

The offer includes a $4.50 per hour wage increase in the first year, subject to job classification and tenure. Similarly, KR proposes to raise the starting wages to $16 per hour. A checker with 5+ years of experience will now earn $21.01 per hour, with an 80 cents wage increase in the following two years. A full-time checker would earn $47,000 annually.

The union rejected the offer claiming that they had asked for a wage increase of $6 per hour for all workers irrespective of classification and tenure, and also said many of the terms were the same as the previous rejected offers.

The union, which has more than 8,700 King Soopers/City Market workers, had previously rejected several offers. Kroger has called the union’s decision “reckless and self-serving, without regard for the implications to associates and Coloradans”, and issued a statement saying all the stores will continue to operate as usual.

Company and Union Comments

Joe Kelley, President of King Soopers/City Market, said, “At King Soopers, we want what is right for our associates, and that is more money in their paychecks while continuing to receive industry-leading healthcare benefits… This offer not only puts more money in associates’ pockets but if accepted, promises to bring stability to our associates and Coloradans who have endured enough uncertainty and disruption.”

President of UFCW Local 7, Kim Cordova, said, “The company’s last, best, and final offer, in many ways, is worse than its previous offers,” and stated that the wage increase “still doesn’t cut it.”

Consensus View

The Wall Street community has a Hold consensus rating on the KR stock with 1 Buy, 10 Holds, and 3 Sells. The average Kroger price target of $44.21 implies 6.2% downside potential to current levels.

Insider Trading

According to TipRanks’ Insider Trading Activity, the Insider Signal is currently Very Negative on Kroger, with corporate insiders selling $4 million in shares in the last quarter.

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