Dive Brief:
- The 11-day strike that affected 246 of Stop & Shop's 415 stores may be over, but the dispute will have lingering effects on parent company Ahold Delhaize’s bottom line. The company lowered its earnings outlook for per-share growth to low single digits from high single digits on Tuesday.
- The strike had $90 million to $110 million one-off impact on underlying operating profit, Ahold Delhaize President and CEO Frans Muller said on a conference call, while total sales loss totaled more than $200 million. The Dutch retailer expects underlying operating margins in 2019 to be a little below the levels reached in 2018.
- “In all the years with Stop & Shop in the last 25 years, we’ve done a very good negotiation process and a fruitful process with the unions," Muller said. "So it’s very unfortunate that this happened, this big strike impact. At the same time, we feel that we have a fair and responsible tentative agreement with the unions, which we are pleased with."
Dive Insight:
More than 30,000 Stop & Shop employees are back to work in Massachusetts, Connecticut and Rhode Island after walking off the job on April 11. Negotiators have agreed to a tentative new deal, which is still subject to ratification votes by the five local unions. The employees walked off the job to protest the company’s plan to cut worker pay by raising health insurance premiums and lowering pension benefits for new employees. During the 11-day strike, some stores closed while others had few customers and sparse staff.
Today, the impact on parent company Ahold Delhaize is clear. The strike could ding company profits by $100 million or more — a figure that factors in lower sales and costs associated with replacing perishable foods and other supplies, Ahold Delhaize CFO Jeff Carr said during yesterday's call. That would be about 3% of the average estimate for 2019 operating profit, according to Bloomberg. Additionally, it may be tough for Stop & Shop to fully recover from the disruption. Geolocation firm Skyhook estimated that loyal customer visits declined 75% during the strike.
Though Ahold Delhaize officials say they're happy with the negotiated agreement, it seems that the unions have won the public relations battle. Thousands of dollars have been donated to a GoFundMe account for employees who weren’t getting paid. The strike even found itself entwined in the 2020 election as Democratic contenders Elizabeth Warren and Joe Biden showed their support for the workers.
The battle might not be over yet for Ahold Delhaize. The company will be renegotiating with both Giant-Landover and Stop & Shop in New York later this year. Meanwhile, New England continues to be a competitive market for grocers. Target and Walmart already have a big footprint and Amazon is staying competitive on prices while increasing its employee wage to a $15 minimum an hour. How these factors play into Ahold Delhaize’s future negotiating tactics remains to be seen.
