The 11-day strike at Stop & Shop stores in New England could impact the supermarket chain’s operating profit by more than $100 million.
In updated financial guidance after the strike, which ended Sunday, parent company Ahold Delhaize estimated a one-off impact of $90 million to $110 million on Stop & Shop’s 2019 underlying operating profit. The total includes lower sales, increased shrink of seasonal and perishable inventory, and additional supply-chain costs.
Overall, Zaandam, Netherlands-based Ahold Delhaize now expects underlying operating margin to be slightly lower in 2019 than in 2018 following the strike. The global food retailer also lowered the percentage growth of underlying earnings per share for 2019 from high single digits to low single digits.
Ahold Delhaize said it expects its free cash flow to be unchanged, at about €1.8 billion ($2.02 billion U.S.) for full-year 2019, “due to the continued business strength of our other U.S. and European brands.” The company added that first-quarter 2019 results, to be reported May 8, won’t be affected by the strike and remain in line with expectations.
More than 31,000 workers from 246 Stop & Shop stores in Massachusetts, Connecticut and Rhode Island walked off the job on April 11 after their contract expired Feb. 23 following weeks of negotiations since January. Stop & Shop and United Food & Commercial Workers (UFCW) union locals 1445, 1459, 919, 371 and 328 continued negotiations during the strike and reached a new contract agreement Sunday evening. Employees returned to work Monday morning.
“I am pleased that Stop & Shop’s management and the five local unions have tentatively reached a fair and responsible contract in which all Stop & Shop associates are offered pay increases, eligible associates have continued excellent health coverage and eligible associates have ongoing defined benefit pension benefits,” Ahold Delhaize CEO Frans Muller said in a statement. “I know that both Stop & Shop management and its associates are proud to welcome customers back and look forward to taking care of them every day.”
Terms of the tentative three-year contract weren’t disclosed. The agreement still must be ratified by members of the five UFCW locals.
Boston-based location data specialist Skyhook estimated that Stop & Shop store visits by loyal customers plummeted 75% from April 12 to 14 compared with visits a week earlier. The estimate stems from a foot traffic analysis of anonymized mobile devices that typically visit Stop & Shop once weekly in Massachusetts, Connecticut and Rhode Island.
Skyhook’s analysis also found that many loyal Stop & Shop customers went to other supermarkets between April 12 and 14, with retailers such as Market Basket, Trader Joe’s, Shaw’s, Star Market and Hannaford (an Ahold Delhaize USA chain) seeing big gains in store visits.
The U.S. Federal Mediation & Conciliation Service (FMCS) — called into talks on April 3 following an impasse — credited Stop & Shop management and the union locals with staying focused on reaching mutually acceptable terms, including provisions on health care and retirement benefits, wage increases and Sunday overtime pay. The strike drew local and national media coverage as well as wide attention from public officials, such as former Vice President Joe Biden.
“Bargaining sessions are no easy task for anyone involved, and I’m proud to see the tenacity and efforts by the parties and FMCS’ mediators pay off with a successful outcome,” stated FMCS Director Nominee Richard Giacolone. “Being able to create a path for workers to get back on the job is great for management and labor, and certainly great for the customers eager to visit Stop & Shop for their grocery needs once again.”
Source: Supermarket News