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4/1/2020 Higher Wage Bills Will Eat Into Grocers’ Gains - WSJ

https://www.wsj.com/articles/higher-wage-bills-will-eat-into-grocers-gains-11585736657?mod=searchresults&page=1&pos=1 1/3

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https://www.wsj.com/articles/higher-wage-bills-will-eat-into-grocers-gains-11585736657

Supermarkets and e-commerce retailers are doing a roaring trade during the Covid-19 pandemic. But the cost of keeping staff safe and properly paid for the risks they are taking is also rising.

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Higher Wage Bills Will Eat Into Grocers’ Gains Booming sales at supermarkets, as well as e-commerce companies such as Amazon, will be partially offset by demands for pay rises and safer workplaces

As the coronavirus pandemic intensi�ies, essential workers, such as supermarket sta�, are at growing risk of infection by showing up for their jobs. PHOTO: DAVID JOHN GRIFFIN�ZUMA PRESS

April 1, 2020 6�24 am ET

By Carol Ryan

4/1/2020 Higher Wage Bills Will Eat Into Grocers’ Gains - WSJ

https://www.wsj.com/articles/higher-wage-bills-will-eat-into-grocers-gains-11585736657?mod=searchresults&page=1&pos=1 2/3

This week, a group of workers walked out of Amazon’s Staten Island warehouse to protest about safety conditions. At the e-commerce giant’s Whole Foods supermarket chain, some staff called out sick Tuesday to pressure the company to provide health coverage for part- time workers, among other demands. And online grocery site Instacart is being pushed to pay staff a $5 hazard fee for every delivery made to a customer’s door.

As the outbreak intensifies, essential workers are at growing risk of infection by showing up for their jobs. Some retailers, particularly U.S. supermarkets, saw the need to pay more early on. Target said on March 20 that it will invest $300 million for higher wages and paid-leave benefits. Walmart and Amazon have topped-up hourly wages by $2 on a temporary basis.

Absenteeism due to illness may make it increasingly difficult to keep operations running in the coming weeks. Britain’s largest supermarket, Tesco, is hiring 20,000 extra staff to meet surging demand and provide cover for sick colleagues. The company, which spent 12% of total revenue on salaries in its last financial year, has increased hourly wages by 10%.

Keeping work environments safe is an additional expense as infections rise. Amazon disinfects fulfillment warehouses whenever a Covid-19 case is confirmed among its workforce. Some companies, such as British fashion retailer Next, have shut their e-commerce operations completely as staff were worried about infection—though weak demand for clothing may have influenced Next’s decision. “People do not buy a new outfit to stay at home,” the company said in a review of its annual results last month.

For grocers in particular, business has likely never been so strong. For the four weeks through 22 March, U.K. supermarket sales were 20.6% higher than in the same period last year, according to Nielsen data released Tuesday. Brokerage firm Bernstein now expects comparable sales growth at U.S. grocers to be 3.9% for 2020, up from a forecast of 2.5% before the crisis.

But higher costs will eat into these gains, even with the help of tax holidays and economic relief packages announced by governments. Supermarkets’ full-year operating margins will probably be flat due to higher labor and logistics bills, figures Bernstein.

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4/1/2020 Higher Wage Bills Will Eat Into Grocers’ Gains - WSJ

https://www.wsj.com/articles/higher-wage-bills-will-eat-into-grocers-gains-11585736657?mod=searchresults&page=1&pos=1 3/3

While retailers selling essential goods can barely keep up with demand, investors might do well to rein in their expectations. In demanding conditions, workers are understandably higher up the queue for the benefits.

Write to Carol Ryan at [email protected]

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