Union opposes Kroger’s $7.5B stock buyback plan, calls for CEO’s ouster

The challenges for Kroger continued on Friday in the wake of its failed merger with Albertsons, with unions opposing a $7.5 billion stock buyback planned by the Cincinnati, Ohio-based grocery chain, and calling for the replacement of Chairman and CEO Rodney McMullen. 

The United Food and Commercial Workers International Union (UFCW) locals 7, 324, 770, 1564, and 3000, which represent grocery workers across the country, called the buyback plan “a massive giveaway to shareholders.”

The battle over the stock repurchase plan follows court decisions in Oregon and Washington on Tuesday both rejecting the proposed merger of the two grocery chains. Although a decision is still pending in a third court case opposing the merger in Colorado, Albertsons pulled out of the deal on Wednesday and filed a lawsuit against Kroger for breach of contract.  

Kroger said in a statement released Wednesday that $5 billion of the buyback would be an accelerated share repurchase. 

McMullen said that the grocery chain looks forward to “accelerating our flywheel to grow our alternative profit businesses and generate increased cash flows.” 

“The strength of our balance sheet and sustainability of our model allows us to pursue a variety of growth opportunities, including further investment in our store network through new stores and remodels, which will be an important part of our 8-11% TSR (total shareholder return) model over time,” he said.

UFCW said the shareholder payout will preclude Kroger’s promised investments in worker pay and lowering prices. 

“Flip flopping in less than a day’s time from a strategy of aggressive growth through the Albertson’s acquisition on Tuesday to one of dramatic downsizing through shedding $7.5 billion on Wednesday should be seen for what it seems to be—an attempt to buy shareholders’ mercy through a short-term boost to the stock price in order to save CEO Rodney McMullen’s job,” the union said. 

A Kroger spokesperson could not immediately be reached for comment, but McMullen said in the stock repurchase announcement that the grocer remains committed to “investing in America.”

McMullen noted that the grocery retail giant has invested $5 billion in lowering prices since 2003, $2.4 billion in incremental wage increases since 2018, and $3.6-$3.8 billion in annual capital investments.

“Kroger expects to continue to generate strong free cash flow and remains committed to its capital allocation priorities including maintaining its current investment grade debt rating, investing in the business to drive long-term sustainable net earnings growth, and returning excess free cash flow to shareholders via share repurchases and a growing dividend over time, subject to board approval,” the company said on Wednesday. 

The union said the $7.5 billion slated for stock repurchase should be invested back into the company. “This $7.5 billion is on top of the nearly $1 billion the Company already wasted on the failed merger. Apparently, in McMullen’s view, the threats to Kroger’s survival are not so great that the company needs these resources,” the union said. 

UFCW 770 President Kathy Finn said in the press release that the money could be used “to improve our food supply, reduce prices, reduce food deserts, and more,” adding that $7.5 billion is enough to build 280 stores, remodel 3.268 stores (more than Kroger currently operates), provide $158 in discounts to shoppers, and hire 125,691 full-time employees.

“That money is not a personal piggy bank that Rodney McMullen can raid in order to save his job,” Finn said.