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HomeMy WebLinkAbout3A OCR1/ DATE: CITY COUNCIL STAFF REPORT MARCH 11, 2021 LEGISLATIVE SUBJECT: ORDINANCE ESTABLISHING "HERO PAY" FOR FRONT-LINE GROCERY WORKERS FROM: David H. Ready, City Manager BY: Jeffrey Ballinger, City Attorney SUMMARY Due to the specific impacts to grocery workers during the COVID-19 pandemic, the City Council has requested consideration of the proposed urgency ordinance and corresponding regular ordinance, both of which would require grocery stores with up to 300 employees nationally and at least 15 employees per location in Palm Springs to provide premium pay of an additional $4.00 per hour to their workers in Palm Springs for at least 120 days. RECOMMENDATION: 1. That the City Council consider and adopt Urgency Ordinance No. _, entitled "AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE PALM SPRINGS MUNICIPAL CODE BY ADDING CHAPTER 5.87, RELATING TO GROCERY WORKERS IN PALM SPRINGS, AND ESTABLISHING LABOR STANDARDS AND REQUIREMENTS FOR PREMIUM PAY FOR GROCERY WORKERS WORKING IN PALM SPRINGS (four-fifths (4/5) vote required)" 2. That the City Council consider and conduct first reading (introduction) of Ordinance No. __ , entitled, "AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE PALM SPRINGS MUNICIPAL CODE BY ADDING CHAPTER 5.87, RELATING TO GROCERY WORKERS IN PALM SPRINGS, AND ESTABLISHING LABOR STANDARDS AND REQUIREMENTS FOR PREMIUM PAY FOR GROCERY WORKERS WORKING IN PALM SPRINGS"; and 3. That the City Council provide direction as to any additional business sectors to be brought back as part of any subsequent Hero Pay ordinance. ITEMNO. :3. A ---- 2City Council Staff Report March 11 , 2021 --Page 2 Hero Pay Ordinance BACKGROUND: Since March of 2020, the COVID-19 pandemic has dramatically impacted Palm Springs citizens, business owners, employees, and visitors. In April 2020, the City adopted additional protections for grocery workers and customers, including regulations requiring face coverings and social distancing. The City has been at the forefront of implementing emergency protections throughout the pandemic, in order to protect the health of the public, by adopting one of the first stay at home orders in the state, and additional requirements including face mask coverings and a curfew. The global health pandemic has emphasized the importance of workers in industries now highlighted as essential, including front-line grocery workers. Due to the virus, millions of frontline grocery workers nationwide have had to face new job-related hazards not previously considered especially dangerous. In September 2020, Riverside County Public Health Director Dr. Kim Saruwatari reported that the highest number of COVID-19 outbreaks in the region between July and September were reported to stem from grocery stores, with 48 reported outbreaks. The data show the outbreaks impacted both store employees and customers. In a September 29, 2020 Desert Sun article, it was reported that the highest number of outbreaks in the beginning of September were reported in retail and grocery stores. This, while grocery stores across the country have ·seen record profits. The Brookings Institute found that top retail companies had a 39% increase in profit, averaging an extra $16.9 billion in 2020. (https://www.freep.com/story/news/local/michigan/2020/12/04/kroger-walmart-amazon-profits-covid-19-pandemic/6458910002/) Due to these shifting emergency circumstances, at the beginning of the pandemic, a number of grocery companies initially provided extra COVID-19 related compensation to their workers. This bonus, commonly known as "Hero Pay", often was implemented as a temporary hourly wage increase or a one-off bonus for essential workers. However, as the impacts of the pandemic subsided in June, many retail companies ended their temporary wage increase, and there has yet to be a meaningful commitment to restoring it. This has occurred even as the pandemic has continued to disproportionately impact low wage workers, leaving some grocery workers as the primary earners in their households. (https://www.pewsocialtrends.org/2020/09/24/economic-fallout-from-covid-19-continues-to-hit-lower-income-americans-the-hardest/) The December 6, 2020 regional stay-at-home order was lifted on January 25, 2021, but as of the date of this staff report, the virus continues to be widespread throughout Southern California. Vaccines are being distributed throughout Riverside County to front-line essential workers in certain industries and persons who are age 65 and older. The City Council considered a "Hero Pay" ordinance at the February 25, 2021 City Council meeting, and heard from various stakeholders. At that meeting, the City Council requested that a "Hero Pay" ordinance be brought back for possible adoption. 3City Council Staff Report March 11, 2021 --Page 3 Hero Pay Ordinance ANALYSIS: The proposed ordinance 1 would require grocery stores within the City to provide premium pay of an additional $4.00 per hour to their workers for at least 120 days. Cities that have adopted such "Hero Pay" ordinances have provided a range of extra pay ranging from $3.00 to $5.00 per hour. Long Beach --$4.00/hr.; Seattle --$4.00/hr.; San Jose --$3.00/hr.; Montebello --$4.00/hr.; Oakland --$5.00/hr.; Los Angeles County --$5.00/hr.; Los Angeles --$5.00/hr.; Coachella --$4.00/hr. The specific dollar amount remains within the sound discretion of the City Council. "Grocery store" would include stores that devote 70% or more of their business to selling food products or a store that dedicates at least 15,000 square feet of floor space to retailing a general range of food products. Therefore, in addition to stand-alone grocery stores, big box retailers that devote at least 15,000 square feet to food products would be covered by this ordinance. Additionally, grocery stores would only be subject to the ordinance if they employ 300 or more workers nationally and more than 15 employees per location within the City. This local threshold of 15 employees could, in the sound discretion of the City Council, be modified to account for local variations of store sizes. The Long Beach ordinance included a 15 employee threshold. If a grocery store has, on or after the effective date of the ordinance, voluntarily implemented a "Hero pay" increase, that grocery store will be entitled to credit such voluntary "Hero pay" increase amount against the increased amount required by the ordinance. The hiring entity would bear the burden of proving, by clear and convincing written evidence, that its increased amount is voluntary (i.e., not a result of any statutory or contractual requirement). However, grocery stores will not be entitled to any credit for any voluntarily paid "Hero pay" increase that was paid prior to the effective date of the ordinance. Under the ordinance, grocery stores may not retaliate against a worker by reducing compensation or otherwise limiting the worker's earning capacity in order to avoid the application of the Hero pay. In addition, these stores must provide their workers with notice of the ordinance, including their right to premium pay, their right to be protected from retaliation, and their ability to bring a civil action if these rights are violated. Records showing compliance with the ordinance must be kept by the stores for at least two years. Any grocery store that violates the ordinance is subject to appropriate relief at law or equity, including reinstatement of the aggrieved worker, front pay in lieu of reinstatement with full payment of unpaid compensation plus interest in favor of the aggrieved worker, and liquidated damages in an additional amount of up to twice the unpaid compensation. If a worker prevails in a civil action, reasonable attorneys fees and costs may be awarded against the employer, in addition other legal or equitable relief as may be appropriate. 1 An urgency ordinance is being proposed, in order to go into effect immediately upon adoption, and a regular (non-urgency) ordinance is also being proposed, in an abundance of caution. 4City Council Staff Report March 11 , 2021 --Page 4 Hero Pay Ordinance The provisions of the ordinance may be expressly waived in a collective bargaining agreement. Otherwise, any other waiver by a worker of any provision will be deemed contrary to public policy, void, and unenforceable. There are several other jurisdictions that have adopted, are in the process of adopting, or are at least considering, similar "hero pay" or "hazard pay" ordinances. A summary chart including this information is attached to this report. Additional Categories of Protected Workers The proposed ordinance protects employees of certain grocery stores. Unlike the version discussed at the February 25, 2021 City Council meeting, the proposed ordinance does not cover retail pharmacy workers. As the attached material indicated retail pharmacies have not fared as well as grocery stores during the COVID-19 pandemic. As discussions of Hero Pay ordinances have occurred in other cities, some have asked whether other categories of workers should be provided similar protections, including farm workers and restaurant workers. According to a new University of California San Francisco study, California agricultural and restaurant workers have suffered 50% to 60% higher death rates during the pandemic than before the pandemic. (https://www.medrxiv.org/content/10.1101/2021.01 .21.21250266v1) The study's data shows that restaurant cooks carry the most risk of COVID-19-related death in the entire state. The National Center for Farmworker Health, Inc. reported that as of February 1, 2021 more than 480,000 agricultural workers have tested positive for COVID-19 nationwide, a figure likely to be underestimated. (http://www.ncfh.org/msaws-and-covid-19.html) The COVID-19 Farmworker Study (COFS) report entitled Always Essential, Perpetually Disposable: California Farmworkers and the COVID-19 Pandemic explores how the pandemic is exacerbating long-standing crises, vulnerabilities, and economic frailties within the food system and heightening insecurity, risk, and health disparities for farmworkers and their families through a survey of nearly 1,000 farm workers in California. (covid19farmworkerstudy.org) Grocery store, retail pharmacy, restaurant and big box workers have not only had to perform their jobs but have become "de facto public health marshals", enforcing critical mask and social distancing protocols. Over three-quarters of workers (78%) report experiencing or witnessing hostile behavior from customers in response to staff enforcing COVID-19 safety protocols, and nearly 60% report experiencing such hostility at least weekly. (https://onefairwage.site/wp-content/uploads/2020/12/OFW COVID WorkerExp-1.pdf) This raises the question of whether the Council may wish to consider adopting an 5City Council Staff Report March 11 , 2021 --Page 5 Hero Pay Ordinance ordinance that addresses workers in additional sectors, such as retail pharmacy workers and workers at big box retailers. If so, City staff and the City Attorney's Office would seek direction from the City Council, so that such an ordinance can be drafted and brought back at a subsequent Council meeting. Latest Developments On March 19, 2021, the City of Long Beach adopted a Hero Pay ordinance, covering grocery store workers. The following day, the California Grocers Association filed a lawsuit against the City. On January 22, U.S. District Judge Dolly M. Gee denied the Association's request for a temporary restraining order to stop enforcement of the ordinance before a court could hear the case, and set a hearing for February 19 on the Association's request for a preliminary injunction to halt the Long Beach ordinace while the case is pending. On February 25, 2021, Judge Gee issued a ruling, denying the Grocers Association's request for a preliminary injunction. In doing so, the court ruled that the Grocers Assocation failed to demonstrate that it would likely prevail at trial. On February 1, 2021 the Los Angeles Times reported that Kroger, which owns several supermarket chains, said it would close two stores in Long Beach in response to the city's adoption of a "Hero Pay" ordinance. The stores slated for closure are a Ralphs and a Food 4 Less store, affecting 200 workers. Conclusion Therefore, City staff and the City Attorneys Office request that the City Council consider the accompanying ordinances, adopt the urgency ordinance and introduce the regular ordinance, and provide direction on any modifications to be covered in any subsequent ordinance. ENVIRONMENTAL ASSESSMENT: The adoption of this ordinance is exempt from environmental review under the California Environmental Quality Act ("CEQA") pursuant to the following provisions of the CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Urgency Ordinance is exempt under CEQA Guidelines Section 15378(b)(5) in that it is not a "project" under CEQA, and will not result in direct or indirect physical changes in the environment. 6City Council Staff Report March 11 , 2021 --Page 6 Hero Pay Ordinance FISCAL IMPACT: There is not likely to be any direct financial impact to the City as a result of the adoption of the proposed ordinance. There would be a fiscal impact to the grocery stores, as those employers would be required to pay their workers additional compensation. There will also be a positive fiscal impact to the employees of those sectors, as this ordinance will provide them additional compensation. City Attorney Attachments: 1. Urgency Ordinance No. ___ _ 2. Ordinance No. ----3. Summary of Other Jurisdictions' Hero Pay Actions 4. City of Los Angeles Grocery, Drug and Retail Store COVID-19 Hazard Pay Economic Impact Report 5. Article -Windfall profits and deadly risks: How the biggest retail companies are compensating essential workers during the COVID-19 pandemic 6. Article --Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers 7. Article --Food retailers see 'eye-popping profits' during pandemic. But frontline workers get crumbs. 8. Article --Has the Coronavirus Changed Grocers' Profitability? Actually, No. 9. Article --7-Eleven 4Q net profit shrinks 61% on higher costs and Covid-19 impact 10.Article --Walgreens Boots Alliance Reports Fiscal Year 2020 Results 11.Article --Walgreens promises return to profit growth as COVID-19 impact eases -Metro US 12.Article --CVS posts strong Q4 numbers, but pandemic weighs on results 13. Article --Rite Aid looks to buy time on debt as it posts $73M Q 1 loss 14.Article --Rite Aid's stock rockets after big profit beat, raised outlook 7URGENCY ORDINANCE NO. ----AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE PALM SPRINGS MUNICIPAL CODE BY ADDING CHAPTER 5.87, RELATING TO GROCERY WORKERS IN PALM SPRINGS, AND ESTABLISHING LABOR STANDARDS AND REQUIREMENTS FOR PREMIUM PAY FOR GROCERY WORKERS WORKING IN PALM SPRINGS (four-fifths (4/5) vote required) City Attorney Summary The Urgency Ordinance aims to protect and promote the public health, safety, and welfare during the COVID-19 emergency by requiring grocery stores to provide premium pay for grocery workers performing work in Palm Springs. WHEREAS, the new coronavirus 19 ("COVID-19") disease is caused by a virus that spreads easily from person to person and may result in serious illness or death, and is classified by the World Health Organization ("WHO") as a worldwide pandemic; and WHEREAS, COVID-19 has broadly spread throughout California and remains a significant health risk to the community, especially members of our most vulnerable populations; and WHEREAS, on March 4, 2020, California Governor Gavin Newsom proclaimed a state of emergency in response to new cases of COVID-19, directing state agencies to use all resources necessary to prepare for and respond to the outbreak; and WHEREAS, the City Manager acting as Director of Emergency Services issued a Proclamation of Local Emergency regarding COVID-19 on March 14, 2020 that was ratified by the City Council on March 19, 2020; and WHEREAS, on March 19, 2020, California Governor Gavin Newsom issued a "Stay Home -Stay Healthy" proclamation closing all non-essential workplaces, requiring people to stay home except to participate in essential activities or to provide essential business services, and banning all gatherings for social, spiritual, and recreational purposes. In addition to healthcare, public health and emergency services, the "Stay Home -Stay Healthy" proclamation identified grocery stores as essential business sectors critical to protecting the health and well-being of all Californians and designated their workers as essential critical infrastructure workers; and WHEREAS, on December 3, 2020, Governor Newsom issued a Regional Stay at Home Order; and WHEREAS, as of February 16, 2021, the WHO Situation Report reported a global total of 108,822,960 cases of COVID-19, including 2,403,641 deaths; California reported 55575.18100\33746493.1 83,412,057 cases of COVID-19, including 47,107 deaths; and Palm Springs has reported 3,553 cases of COVID-19, including 105 deaths; and WHEREAS, grocery stores are essential businesses operating in Palm Springs during the COVID-19 emergency making grocery workers highly vulnerable to economic insecurity and health or safety risks; and WHEREAS, grocery workers are essential workers who perform services that are fundamental to the economy and health of the community during the COVID-19 crisis. They work in high risk conditions with inconsistent access to protective equipment and other safety measures; work in public situations with limited ability to engage in physical distancing; and continually expose themselves and the public to the spread of disease; and WHEREAS, premium pay, paid in addition to regular wages, is an established type of compensation for employees performing hazardous duty or work involving physical hardship that can cause extreme physical discomfort and distress; and WHEREAS, grocery workers working during the COVID-19 emergency merit additional compensation because they are performing hazardous duty due to the significant risk of exposure to the COVID-19 virus. Grocery workers have been working under these hazardous conditions for months. They are working in these hazardous conditions now and will continue to face safety risks as the virus presents an ongoing threat for an uncertain period, potentially resulting in subsequent waves of infection; and WHEREAS, the availability of grocery stores is fundamental to the health of the community and is made possible during the COVID-19 emergency because grocery workers are on the frontlines of this devastating pandemic supporting public health, safety, and welfare by working in hazardous situations; and WHEREAS, establishing an immediate requirement for grocery stores to provide premium pay to grocery workers protects public health, supports stable incomes, and promotes job retention by ensuring that grocery workers are compensated for the substantial risks, efforts, and expenses they are undertaking to provide essential services in a safe and reliable manner during the COVID-19 emergency. NOW, THEREFORE, the City Council of the City of Palm Springs ordains as follows: SECTION 1. Incorporation of Recitals. The findings and determinations reflected above are true and correct, and are incorporated by this reference herein as the cause and foundation for the action taken by and through this Urgency Ordinance. SECTION 2. Addition to Palm Springs Municipal Code. Chapter 5.87 Premium Pay for Grocery Workers is hereby added to the Palm Springs Municipal Code as follows: 55575.18100\33746493.1 95.87.005 "CHAPTER 5.87 PREMIUM PAY FOR GROCERY WORKERS Purpose. As a result of the COVID-19 pandemic, this Ordinance aims to protect and promote the public health, safety, and welfare during the new coronavirus 19 ("COVID-19") emergency by requiring grocery stores to provide premium pay for grocery workers performing work in Palm Springs. Requiring grocery stores to provide premium pay to grocery workers compensates grocery for the risks of working during a pandemic. Grocery workers face magnified risks of catching or spreading the COVID-19 disease because the nature of their work involves close contact with the public, including members of the public who are not showing symptoms of COVID-19 but who can spread the disease. The provision of premium pay better ensures the retention of these essential workers who are on the frontlines of this pandemic providing essential services and who are needed throughout the duration of the COVID-19 emergency. As such, they are deserving of fair and equitable compensation for their work. 5.87.010 Short title. This Ordinance shall constitute the "Premium Pay for Grocery Workers Ordinance" and may be cited as such. 5.87.020 Definitions. For purposes of this Ordinance: "Adverse action" means reducing the compensation to a designated worker, garnishing gratuities, temporarily or permanently denying or limiting access to work, incentives, or bonuses, offering less desirable work, demoting, terminating, deactivating, putting a designated worker on hold status, failing to rehire after a seasonal interruption of work, threatening, penalizing, retaliating, or otherwise discriminating against a designated worker for any reason prohibited by Section 5.87.090. "Adverse action" also encompasses any action by the hiring entity or a person acting on the hiring entity's behalf that would dissuade a designated worker from exercising any right afforded by this Ordinance. "Aggrieved party" means a designated worker or other person who suffers tangible or intangible harm due to a hiring entity or other person's violation of this Ordinance. "City" means the City of Palm Springs. "Designated worker" means a grocery store worker employed directly by a hiring entity who is entitled to premium pay pursuant to this Ordinance. 55575.18100\33746493.1 10"Grocery worker" means a worker employed directly by a hiring entity at a grocery store. Grocery worker does not include managers, supervisors, or confidential employees. "Grocery store" means a store that devotes seventy percent (70%) or more of its business to retailing a general range of food products, which may be fresh or packaged, or a store that has at least fifteen thousand square feet (15,000 sf) of floor space dedicated to retailing a general range of food products. There is a rebuttable presumption that if a store receives seventy percent (70%) or more revenue from retailing a general range of food products, or if a store has at least fifteen thousand square feet (15,000 sf) of floor space dedicated to retailing a general range of food products, then it qualifies as a grocery store. "Hiring entity" means a grocery store that employs over three hundred (300) designated workers nationally and employs more than fifteen (15) employees per grocery store location in the City of Palm Springs. "Premium pay" means additional compensation owed to a designated worker that is separate from hiring entity payments for providing services, bonuses, and commissions, as well as tips earned from customers. "Respondent" means a grocery store, franchisor, parent company or any person who is alleged or found to have committed a violation of this Ordinance. 5.87.030 Designated worker coverage. For the purposes of this Ordinance, covered designated workers are limited to those who perform work for a hiring entity where the work is performed in the City of Palm Springs. 5.87.040 Hiring entity coverage. A For purposes of this Ordinance, hiring entities are limited to those who employ three hundred (300) or more designated workers nationally and employ more than fifteen (15) employees per grocery store location in the City of Palm Springs. B. To determine the number of designated workers employed for the current calendar year: 1. The calculation is based upon the average number per calendar week of workers who worked for compensation during the preceding calendar year for any and all weeks during which at least one (1) designated worker worked for compensation. For hiring entities that did not have any designated workers during the preceding calendar year, the number of designated workers employed for the current calendar year is calculated based upon the average number per calendar week of designated workers who worked for 55575.18100\33746493.1 11compensation during the first ninety (90) calendar days of the current year in which the hiring entity engaged in business. 2. All designated workers who worked for compensation shall be counted, including but not limited to: (a) Grocery workers who are not covered by this Ordinance; and (b) Designated workers who worked in Palm Springs. 5.87.050 Premium pay requirement. A. Hiring entities shall provide each designated worker with premium pay consisting of an additional Four Dollars ($4.00) per hour for each hour worked. B. Hiring entities shall provide the pay required by Subsection 5.87 .050 (A) for a minimum of one hundred twenty (120) days from the effective date of this Ordinance. C. Unless extended by City Council, this Ordinance shall expire in one hundred twenty (120) days. 5.87.060 Designated worker and consumer protections. A. No hiring entity shall, as a result of this Ordinance going into effect, take any of the following actions: 1. Reduce a designated worker's compensation; 2. Limit a designated worker's earning capacity. B. It shall be a violation if this Ordinance is a motivating factor in a hiring entity's decision to take any of the actions in Subsection 5.87.060 (A) unless the hiring entity can prove that its decision to take the action(s) would have happened in the absence of this Ordinance going into effect. 5.87.070 Notice of rights. A. Hiring entities shall provide covered designated workers with a written notice of rights established by this Ordinance. The notice of rights shall be in a form and manner sufficient to inform designated workers of their rights under this Ordinance. The notice of rights shall provide information on: 1. The right to premium pay guaranteed by this Ordinance; 2. The right to be protected from retaliation for exercising in good faith the rights protected by this Ordinance; and 55575.18100\33746493.l 123. The right to bring a civil action for a violation of the requirements of this Ordinance, including a hiring entity's denial of premium pay as required by this Ordinance and a hiring entity or other person's retaliation against a covered designated worker or other person for asserting the right to premium pay or otherwise engaging in an activity protected by this Ordinance. B. Hiring entities shall provide the notice of rights required by posting a written notice of rights in a location of the grocery store location utilized by employees for breaks, and in an electronic format that is readily accessible to the designated workers. The notice of rights shall be made available to the designated workers via smartphone application or an online web portal, in English and any language that the hiring entity knows or has reason to know is the primary language of the designated worker(s). 5.87.080 Hiring entity records. A. Hiring entities shall retain records that document compliance with this Ordinance for covered designated workers. B. Hiring entities shall retain the records required by Subsection 5.87.080 (A) for a period of two (2) years. C. If a hiring entity fails to retain adequate records required under Subsection 5.87.080 (A), there shall be a presumption, rebuttable by clear and convincing evidence, that the hiring entity violated this Ordinance for each covered designated worker for whom records were not retained. 5.87.090 Retaliation prohibited. No hiring entity employing a designated worker shall discharge, reduce in compensation, or otherwise discriminate against any designated worker for opposing any practice proscribed by this Ordinance, for participating in proceedings related to this Ordinance, for seeking to exercise their rights under this Ordinance by any lawful means, or for otherwise asserting rights under this Ordinance. 5.87.100 Violation. The failure of any respondent to comply with any requirement imposed on the respondent under this Ordinance is a violation of this Ordinance. 5.87.110 Remedies. A. The payment of unpaid compensation, liquidated damages, civil penalties, penalties payable to aggrieved parties, fines, and interest provided under this Ordinance is cumulative and is not intended to be exclusive of any other available remedies, penalties, fines, and procedures. 55575.18100\33746493.1 13B. A respondent found to be in violation of this Ordinance for retaliation under Section 5.87 .090 shall be subject to any appropriate relief at law or equity including, but not limited to reinstatement of the aggrieved party, front pay in lieu of reinstatement with full payment of unpaid compensation plus interest in favor of the aggrieved party under the terms of this Ordinance, and liquidated damages in an additional amount of up to twice the unpaid compensation. 5.87.120 Private right of action. A. Any covered designated worker that suffers financial injury as a result of a violation of this Ordinance, or is the subject of prohibited retaliation under Section 5.87.090, may bring a civil action in a court of competent jurisdiction against the hiring entity or other person violating this Ordinance and, upon prevailing, may be awarded reasonable attorney fees and costs and such legal or equitable relief as may be appropriate to remedy the violation including, without limitation: the payment of any unpaid compensation plus interest due to the person and liquidated damages in an additional amount of up to twice the unpaid compensation; and a reasonable penalty payable to any aggrieved party if the aggrieved party was subject to prohibited retaliation. 5.87.130 Encouragement of more generous policies. A. Nothing in this Ordinance shall be construed to discourage or prohibit a hiring entity from the adoption or retention of premium pay policies more generous than the one required herein. B. Nothing in this Ordinance shall be construed as diminishing the obligation of a hiring entity to comply with any contract or other agreement providing more generous protections to a designated worker than required by this Ordinance. C. In the event a hiring entity has, on or after the effective date of this Ordinance, voluntarily implemented a "Hero pay" increase, and for so long as that "Hero pay" increase remains in effect, such hiring entity shall be entitled to credit such voluntary "Hero pay" increase amount against the increased amount required by Section 5.87.050 of this Ordinance. The hiring entity shall bear the burden of proving, by clear and convincing written evidence, that its increased amount is voluntary (i.e., not a result of any statutory or contractual requirement). A hiring entity shall not be entitled to any credit for any voluntarily paid "Hero pay" increase that was paid prior to the effective date of this Ordinance. 5.87.140 Other legal requirements. This Ordinance provides minimum requirements for premium pay while working for a hiring entity during the COVID-19 emergency and shall not be construed to preempt, limit, or otherwise affect the applicability of any other law, regulation, requirement, policy, or standard that provides for higher premium pay, or that extends other protections to designated workers; and nothing in this 55575.18100\33746493. l 14Ordinance shall be interpreted or applied so as to create any power or duty in conflict with federal or state law. Nothing in this Section shall be construed as restricting a designated worker's right to pursue any other remedies at law or equity for violation of their rights. 5.87.150 Severability. The provisions of this Ordinance are declared to be separate and severable. If any clause, sentence, paragraph, subdivision, section, subsection, or portion of this Ordinance, or the application thereof to any hiring entity, designated worker, person, or circumstance, is held to be invalid, it shall not affect the validity of the remainder of this Ordinance, or the validity of its application to other persons or circumstances. 5.87.160 Exemption for collective bargaining agreement. All of the provisions of this Ordinance, or any part thereof, may be expressly waived in a collective bargaining agreement, but only if the waiver is explicitly set forth in the agreement in clear and unambiguous terms. 5.87.170 No waiver of rights. Except for a collective bargaining agreement provision made pursuant to Section 5.87.160, any waiver by a designated worker of any or all provisions of this Ordinance shall be deemed contrary to public policy and shall be void and unenforceable. Other than in connection with the bona fide negotiation of a collective bargaining agreement, any request by a hiring entity to a designated worker to waive rights given by this Ordinance shall be a violation of this Ordinance." SECTION 3. CEQA. The City Council determines that the adoption of this Urgency Ordinance is exempt from environmental review under the California Environmental Quality Act ("CEQA") pursuant to the following provisions of the CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Urgency Ordinance is exempt under CEQA Guidelines Section 15378(b )(5) in that it is not a "project" under CEQA, and will not result in direct or indirect physical changes in the environment. SECTION 4. Urgency Findings/Effective Date. Pursuant to City Charter Section 312 and California Government Code Section 36937, this Ordinance is designed to protect the health, safety and welfare of the citizens of the City of Palm Springs and becomes effective immediately upon adoption by a four-fifths (4/5) vote of the City Council. The City Council hereby finds that there is an urgent need to adopt these regulations in order to address the current and immediate threats set forth above. SECTION 5. Severability. If any section or provision of this Urgency Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Urgency Ordinance shall remain valid. The 55575.18100\33746493.1 15City Council hereby declares that it would have adopted this Urgency Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation. SECTION 6. Adoption, Certification, and Publication. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Urgency Ordinance and shall cause the same, or the summary thereof, to be published and posted pursuant to the provisions of law. PASSED, APPROVED AND ADOPTED BY THE PALM SPRINGS CITY COUNCIL THIS 11TH DAY OF MARCH, 2021. ATTEST: ANTHONY J. MEJIA, MMC CITY CLERK 55575.18100\33746493. l CHRISTY HOLSTEGE MAYOR 16CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) I, ANTHONY J. MEJIA, City Clerk of the City of Palm Springs, California, do hereby certify that Urgency Ordinance No. __ is a full, true, and correct copy, and was adopted without introduction at a regular meeting of the City Council held on March 11, 2021 by the following vote: AYES: NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this 11th day of March, 2021. 55575.18100\33746493.1 ANTHONY J. MEJIA, MMC CITY CLERK 17ORDINANCE NO. ----AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, AMENDING THE PALM SPRINGS MUNICIPAL CODE BY ADDING CHAPTER 5.87, RELATING TO GROCERY WORKERS IN PALM SPRINGS, AND ESTABLISHING LABOR STANDARDS AND REQUIREMENTS FOR PREMIUM PAY FOR GROCERY WORKERS WORKING IN PALM SPRINGS City Attorney Summary This ordinance aims to protect and promote the public health, safety, and welfare during the COVID-19 emergency by requiring grocery stores to provide premium pay for grocery workers performing work in Palm Springs. WHEREAS, the new coronavirus 19 ("COVID-19") disease is caused by a virus that spreads easily from person to person and may result in serious illness or death, and is classified by the World Health Organization ("WHO") as a worldwide pandemic; and WHEREAS, COVID-19 has broadly spread throughout California and remains a significant health risk to the community, especially members of our most vulnerable populations; and WHEREAS, on March 4, 2020, California Governor Gavin Newsom proclaimed a state of emergency in response to new cases of COVID-19, directing state agencies to use all resources necessary to prepare for and respond to the outbreak; and WHEREAS, the City Manager acting as Director of Emergency Services issued a Proclamation of Local Emergency regarding COVID-19 on March 14, 2020 that was ratified by the City Council on March 19, 2020; and WHEREAS, on March 19, 2020, California Governor Gavin Newsom issued a "Stay Home -Stay Healthy" proclamation closing all non-essential workplaces, requiring people to stay home except to participate in essential activities or to provide essential business services, and banning all gatherings for social, spiritual, and recreational purposes. In addition to healthcare, public health and emergency services, the "Stay Home -Stay Healthy" proclamation identified grocery stores as essential business sectors critical to protecting the health and well-being of all Californians and designated their workers as essential critical infrastructure workers; and WHEREAS, on December 3, 2020, Governor Newsom issued a Regional Stay at Home Order; and WHEREAS, as of February 16, 2021, the WHO Situation Report reported a global total of 108,822,960 cases of COVID-19, including 2,403,641 deaths; California reported 3,412,057 cases of COVID-19, including 47,107 deaths; and Palm Springs has reported 3,553 cases of COVID-19, including 105 deaths; and 55575.18100\33746554.1 18WHEREAS, grocery stores are essential businesses operating in Palm Springs during the COVID-19 emergency making grocery workers highly vulnerable to economic insecurity and health or safety risks; and WHEREAS, grocery workers are essential workers who perform services that are fundamental to the economy and health of the community during the COVID-19 crisis. They work in high risk conditions with inconsistent access to protective equipment and other safety measures; work in public situations with limited ability to engage in physical distancing; and continually expose themselves and the public to the spread of disease; and WHEREAS, premium pay, paid in addition to regular wages, is an established type of compensation for employees performing hazardous duty or work involving physical hardship that can cause extreme physical discomfort and distress; and WHEREAS, grocery workers working during the COVID-19 emergency merit additional compensation because they are performing hazardous duty due to the significant risk of exposure to the COVID-19 virus. Grocery workers have been working under these hazardous conditions for months. They are working in these hazardous conditions now and will continue to face safety risks as the virus presents an ongoing threat for an uncertain period, potentially resulting in subsequent waves of infection; and WHEREAS, the availability of grocery stores is fundamental to the health of the community and is made possible during the COVID-19 emergency because grocery workers are on the frontlines of this devastating pandemic supporting public health, safety, and welfare by working in hazardous situations; and WHEREAS, establishing an immediate requirement for grocery stores to provide premium pay to grocery workers protects public health, supports stable incomes, and promotes job retention by ensuring that grocery workers are compensated for the substantial risks, efforts, and expenses they are undertaking to provide essential services in a safe and reliable manner during the COVID-19 emergency. NOW, THEREFORE, the City Council of the City of Palm Springs does ordain as follows: SECTION 1. Incorporation of Recitals. The recitals reflected above are true and correct, and are incorporated by this reference herein as the cause and foundation for the action taken by the and through this Ordinance. SECTION 2. Addition to Palm Springs Municipal Code. Chapter 5.87 Premium Pay for Grocery Workers is hereby added to the Palm Springs Municipal Code as follows: 55575.18100\33746554. l 195.87.005 "CHAPTER 5.87 PREMIUM PAY FOR GROCERY WORKERS Purpose. As a result of the COVID-19 pandemic, this Ordinance aims to protect and promote the public health, safety, and welfare during the new coronavirus 19 ("COVID-19") emergency by requiring grocery stores to provide premium pay for grocery workers performing work in Palm Springs. Requiring grocery stores to provide premium pay to grocery workers compensates grocery for the risks of working during a pandemic. Grocery workers face magnified risks of catching or spreading the COVID-19 disease because the nature of their work involves close contact with the public, including members of the public who are not showing symptoms of COVID-19 but who can spread the disease. The provision of premium pay better ensures the retention of these essential workers who are on the frontlines of this pandemic providing essential services and who are needed throughout the duration of the COVID-19 emergency. As such, they are deserving of fair and equitable compensation for their work. 5.87.010 Short title. This Ordinance shall constitute the "Premium Pay for Grocery Workers Ordinance" and may be cited as such. 5.87.020 Definitions. For purposes of this Ordinance: "Adverse action" means reducing the compensation to a designated worker, garnishing gratuities, temporarily or permanently denying or limiting access to work, incentives, or bonuses, offering less desirable work, demoting, terminating, deactivating, putting a designated worker on hold status, failing to rehire after a seasonal interruption of work, threatening, penalizing, retaliating, or otherwise discriminating against a designated worker for any reason prohibited by Section 5.87.090. "Adverse action" also encompasses any action by the hiring entity or a person acting on the hiring entity's behalf that would dissuade a designated worker from exercising any right afforded by this Ordinance. "Aggrieved party" means a designated worker or other person who suffers tangible or intangible harm due to a hiring entity or other person's violation of this Ordinance. "City" means the City of Palm Springs. "Designated worker" means a grocery store worker employed directly by a hiring entity who is entitled to premium pay pursuant to this Ordinance. 55575.18100\33746554.1 20"Grocery worker" means a worker employed directly by a hiring entity at a grocery store. Grocery worker does not include managers, supervisors, or confidential employees. "Grocery store" means a store that devotes seventy percent (70%) or more of its business to retailing a general range of food products, which may be fresh or packaged, or a store that has at least fifteen thousand square feet (15,000 sf) of floor space dedicated to retailing a general range of food products. There is a rebuttable presumption that if a store receives seventy percent (70%) or more revenue from retailing a general range of food products, or if a store has at least fifteen thousand square feet (15,000 sf) of floor space dedicated to retailing a general range of food products, then it qualifies as a grocery store. "Hiring entity" means a grocery store that employs over three hundred (300) designated workers nationally and employs more than fifteen (15) employees per grocery store location in the City of Palm Springs. "Premium pay" means additional compensation owed to a designated worker that is separate from hiring entity payments for providing services, bonuses, and commissions, as well as tips earned from customers. "Respondent" means a grocery store, franchisor, parent company or any person who is alleged or found to have committed a violation of this Ordinance. 5.87.030 Designated worker coverage. For the purposes of this Ordinance, covered designated workers are limited to those who perform work for a hiring entity where the work is performed in the City of Palm Springs. 5.87.040 Hiring entity coverage. A. For purposes of this Ordinance, hiring entities are limited to those who employ three hundred (300) or more designated workers nationally and employ more than fifteen (15) employees per grocery store location in the City of Palm Springs. B. To determine the number of designated workers employed for the current calendar year: 1. The calculation is based upon the average number per calendar week of workers who worked for compensation during the preceding calendar year for any and all weeks during which at least one (1) designated worker worked for compensation. For hiring entities that did not have any designated workers during the preceding calendar year, the number of designated workers employed for the current calendar year is calculated based upon the average number per calendar week of designated workers who worked for 55575.18100\33746554.1 21compensation during the first ninety (90) calendar days of the current year in which the hiring entity engaged in business. 2. All designated workers who worked for compensation shall be counted, including but not limited to: (a) Grocery workers who are not covered by this Ordinance; and (b) Designated workers who worked in Palm Springs. 5.87.050 Premium pay requirement. A. Hiring entities shall provide each designated worker with premium pay consisting of an additional Four Dollars ($4.00) per hour for each hour worked. B. Hiring entities shall provide the pay required by Subsection 5.87 .050 (A) for a minimum of one hundred twenty (120) days from the effective date of this Ordinance. C. Unless extended by City Council, this Ordinance shall expire in one hundred twenty (120) days. 5.87.060 Designated worker and consumer protections. D. No hiring entity shall, as a result of this Ordinance going into effect, take any of the following actions: 1. Reduce a designated worker's compensation; 2. Limit a designated worker's earning capacity. E. It shall be a violation if this Ordinance is a motivating factor in a hiring entity's decision to take any of the actions in Subsection 5.87.060 (A) unless the hiring entity can prove that its decision to take the action(s) would have happened in the absence of this Ordinance going into effect. 5.87.070 Notice of rights. F. Hiring entities shall provide covered designated workers with a written notice of rights established by this Ordinance. The notice of rights shall be in a form and manner sufficient to inform designated workers of their rights under this Ordinance. The notice of rights shall provide information on: 1. The right to premium pay guaranteed by this Ordinance; 2. The right to be protected from retaliation for exercising in good faith the rights protected by this Ordinance; and 55575.18100\33746554.1 223. The right to bring a civil action for a violation of the requirements of this Ordinance, including a hiring entity's denial of premium pay as required by this Ordinance and a hiring entity or other person's retaliation against a covered designated worker or other person for asserting the right to premium pay or otherwise engaging in an activity protected by this Ordinance. G. Hiring entities shall provide the notice of rights required by posting a written notice of rights in a location of the grocery store location utilized by employees for breaks, and in an electronic format that is readily accessible to the designated workers. The notice of rights shall be made available to the designated workers via smartphone application or an online web portal, in English and any language that the hiring entity knows or has reason to know is the primary language of the designated worker(s). 5.87.080 Hiring entity records. H. Hiring entities shall retain records that document compliance with this Ordinance for covered designated workers. I. Hiring entities shall retain the records required by Subsection 5.87.080 (A) for a period of two (2) years. J. If a hiring entity fails to retain adequate records required under Subsection 5.87.080 (A), there shall be a presumption, rebuttable by clear and convincing evidence, that the hiring entity violated this Ordinance for each covered designated worker for whom records were not retained. 5.87.090 Retaliation prohibited. No hiring entity employing a designated worker shall discharge, reduce in compensation, or otherwise discriminate against any designated worker for opposing any practice proscribed by this Ordinance, for participating in proceedings related to this Ordinance, for seeking to exercise their rights under this Ordinance by any lawful means, or for otherwise asserting rights under this Ordinance. 5.87.100 Violation. The failure of any respondent to comply with any requirement imposed on the respondent under this Ordinance is a violation of this Ordinance. 5.87.110 Remedies. K. The payment of unpaid compensation, liquidated damages, civil penalties, penalties payable to aggrieved parties, fines, and interest provided under this Ordinance is cumulative and is not intended to be exclusive of any other available remedies, penalties, fines, and procedures. 55575.18100\33746554.1 23L. A respondent found to be in violation of this Ordinance for retaliation under Section 5.87.090 shall be subject to any appropriate relief at law or equity including, but not limited to reinstatement of the aggrieved party, front pay in lieu of reinstatement with full payment of unpaid compensation plus interest in favor of the aggrieved party under the terms of this Ordinance, and liquidated damages in an additional amount of up to twice the unpaid compensation. 5.87.120 Private right of action. M. Any covered designated worker that suffers financial injury as a result of a violation of this Ordinance, or is the subject of prohibited retaliation under Section 5.87.090, may bring a civil action in a court of competent jurisdiction against the hiring entity or other person violating this Ordinance and, upon prevailing, may be awarded reasonable attorney fees and costs and such legal or equitable relief as may be appropriate to remedy the violation including, without limitation: the payment of any unpaid compensation plus interest due to the person and liquidated damages in an additional amount of up to twice the unpaid compensation; and a reasonable penalty payable to any aggrieved party if the aggrieved party was subject to prohibited retaliation. 5.87.130 Encouragement of more generous policies. N. Nothing in this Ordinance shall be construed to discourage or prohibit a hiring entity from the adoption or retention of premium pay policies more generous than the one required herein. 0. Nothing in this Ordinance shall be construed as diminishing the obligation of a hiring entity to comply with any contract or other agreement providing more generous protections to a designated worker than required by this Ordinance. C. In the event a hiring entity has, on or after the effective date of this Ordinance, voluntarily implemented a "Hero pay" increase, and for so long as that "Hero pay" increase remains in effect, such hiring entity shall be entitled to credit such voluntary "Hero pay" increase amount against the increased amount required by Section 5.87.050 of this Ordinance. The hiring entity shall bear the burden of proving, by clear and convincing written evidence, that its increased amount is voluntary (i.e., not a result of any statutory or contractual requirement). A hiring entity shall not be entitled to any credit for any voluntarily paid "Hero pay" increase that was paid prior to the effective date of this Ordinance. 5.87.140 Other legal requirements. This Ordinance provides minimum requirements for premium pay while working for a hiring entity during the COVID-19 emergency and shall not be construed to preempt, limit, or otherwise affect the applicability of any other law, regulation, requirement, policy, or standard that provides for higher premium pay, or that extends other protections to designated workers; and nothing in this 55575.18100\33746554.1 24Ordinance shall be interpreted or applied so as to create any power or duty in conflict with federal or state law. Nothing in this Section shall be construed as restricting a designated worker's right to pursue any other remedies at law or equity for violation of their rights. 5.87.150 Severability. The provisions of this Ordinance are declared to be separate and severable. If any clause, sentence, paragraph, subdivision, section, subsection, or portion of this Ordinance, or the application thereof to any hiring entity, designated worker, person, or circumstance, is held to be invalid, it shall not affect the validity of the remainder of this Ordinance, or the validity of its application to other persons or circumstances. 5.87.160 Exemption for collective bargaining agreement. All of the provisions of this Ordinance, or any part thereof, may be expressly waived in a collective bargaining agreement, but only if the waiver is explicitly set forth in the agreement in clear and unambiguous terms. 5.87.170 No waiver of rights. Except for a collective bargaining agreement provision made pursuant to Section 5.87.160, any waiver by a designated worker of any or all provisions of this Ordinance shall be deemed contrary to public policy and shall be void and unenforceable. Other than in connection with the bona fide negotiation of a collective bargaining agreement, any request by a hiring entity to a designated worker to waive rights given by this Ordinance shall be a violation of this Ordinance." SECTION 3. CEQA. The City Council determines that the adoption of this Ordinance is exempt from environmental review under the California Environmental Quality Act ("CEQA") pursuant to the following provisions of the CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Ordinance is exempt under CEQA Guidelines Section 15378(b )(5) in that it is not a "project" under CEQA, and will not result in direct or indirect physical changes in the environment. SECTION 4. Effective Date. This ordinance shall become effective 30 days after its adoption. SECTION 5. Severability. If any section or provision of this Ordinance is for any reason held to be invalid or unconstitutional by any court of competent jurisdiction, or contravened by reason of any preemptive legislation, the remaining sections and/or provisions of this Ordinance shall remain valid. The City Council hereby declares that it would have adopted this Ordinance, and each section or provision thereof, regardless of the fact that any one or more section(s) or provision(s) may be declared invalid or unconstitutional or contravened via legislation. 55575.18100\33746554.1 25SECTION 6. Certification. The Mayor shall sign and the City Clerk shall certify to the passage and adoption of this Ordinance and shall cause the same, or the summary thereof, to be published and posted pursuant to the provisions of law. PASSED, APPROVED AND ADOPTED BY THE PALM SPRINGS CITY COUNCIL THIS DAY OF _____ , 2021. ATTEST: ANTHONY J. MEJIA, MMC CITY CLERK 55575.18100\33746554.1 CHRISTY HOLSTEGE MAYOR 26CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS ) I, ANTHONY J. MEJIA, City Clerk of the City of Palm Springs, California, do hereby certify that Ordinance No. __ is a full, true, and correct copy, and was introduced by the City Council at a regular meeting held on the 25 day of February, 2021, and adopted at a regular meeting of the City Council held on the_ day of _____ , 2021 by the following vote: AYES: NOES: ABSENT: ABSTAIN: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Palm Springs, California, this_ day of ____ , 2021. 55575.18100\33746554.1 ANTHONY J. MEJIA, MMC CITY CLERK 27CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status Long Beach Adopted Urgency Ordinance • + $4/hr • Grocery stores who • Litigation pending; on January 22, 2021 employ 300 or more California Grocers • Applies to grocery grocery workers Association v. Long stores with more nationally and Beach (2:21-cv-than 300 employ more than 00524-DMG-AS) employees 15 employees per nationally/more grocery store in the • On February 23, 2021 than 15 per City U.S. District Court grocery store Judge Otis Wright within City heard a challenge to the Long Beach • In effect for 120 ordinance. Decision days is 12ending. Los Angeles Enacted Ordinance requiring • +$5/hr • Grocery and Drug County HERO Pay for grocery store Retail Stores with employees (February 22, • Applies to grocery 300 or more 2021) stores with more employees than 300 nationally and 10 or employees more employees on-nationally/more site than 10 employees per store • In effect for 120 days Los Angeles Approved an emergency • +$5/hr • Grocery and Drug Ordinance needed City ordinance to require large Retail Stores with unanimous vote in order to grocery and pharmacy • Applies to grocery 300 or more pass on first reading. stores with more employees Received a 14-1 vote, than 300 nationally and 10 or 55575.00001 \33704466.4 28CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status retailers to provide hazard employees more employees on-therefore requiring final vote pay (February 23, 2021) nationally site on March 3. • In effect for 120 days City and Adopted Resolution urging • +$5/hr • Grocery stores with Non-binding resolution County of Grocery Stores in SF to at least 40 locations San provide Hazard Pay (January • Duration that nationwide who Francisco 5, 2021) City/County is in employ workers in Purple, Red or the City Orange level of Community Disease Transmission Pomona Adopted resolution directing • +$4/hr • Would apply to • Adopted resolution at CM and CA to bring to grocery stores, retail Special Meeting on Council an urgency • Would apply to drug stores and "big January 28, 2021. ordinance requiring all retail stores box" retailers "HERO" pay to grocery that are publicly • Will bring urgency store employees traded with at ordinance in a least 300 meeting in March. employees nationwide and more than 10 employees per store 55575.0000 I \33704466.4 29CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status • Would apply to ALL RETAIL WORKERS • Duration of 120 days Santa Ana Resolution directing CM and • +$4/hr • Would apply to City Manager and City CA to bring to Council an grocery retail Attorney reporting back to urgency ordinance requiring • Applies to employees within Council on March 2, 2021 "HERO" pay to grocery grocery stores City council meeting store employees (January with more than 12, 2021) 300 employees nationally • In effect for 120 or 180 days Santa Directed CM to bring forth Holding off for LA County Monica an emergency ordinance Board of Supervisors to providing for premium pay finalize their ordinance for grocery store employees (February 3, 2021) (January 12, 2021) Coachella Passed urgency ordinance • +$4/hr • Agricultural Urgency Ordinance passed. requiring grocery stores, operations, grocery (February 10, 2021) retail pharmacy, restaurant, • Applies to store, restaurant, or and agricultural employers employers who retail pharmacy provide HERO Pay to their have 300 locations with 300 or employees more workers 55575.00001\33704466.4 30CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status employees (February 10, nationwide and nationally and 2021) at least 5 per employs more than 5 location in the employees per City location in the City • 120 days Berkeley Resolution referring CM and • +$5/hr • Applies to CA to draft an emergency commercial ordinance providing grocery • Would last until establishments employees premium pay City returns to classified as Industry until City returns to Yellow-Yell ow Tier 4 445110 under the Tier 4 designation (January designation North American 19,2021) Industry Classification System with a total floor area over 2,500 square feet and selling 25 linear feet of more of food West Adopted HERO Pay • +$5/hr • Applies to publicly Council would like to expand Hollywood ordinance (February 16, traded or have at ordinance to include other 2021) • In effect for 120 least 300 employees big-box national chains in days nationwide and more the city like Target, CVS, than 15 employees Rite Aid and Best Buy. Will per store in the City consider additional language at next Council meeting (March 3, 2021) 55575.0000 I \33704466.4 31CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status Montebello Adopted HERO Pay • +$4/hr • Grocery and drug California Grocers Ordinance at January 27, retail workers at Association filed a lawsuit 2021 meeting • In effect for 180 publicly traded or days employers who have at least 300 • Applies to employees Grocery and large nationwide and more drug store than 15 employees employees per grocery or drug store location in the City Oakland Adopted HERO Pay • +5/hr • Grocery store chains California Grocers Ordinance on February 2, with 500 or more Association filed a lawsuit 2021 • Applies to grocery employees chains with more nationwide than 500 employees • Duration while threat of COVID-19 stays above the minimum level in the City San Jose Enacted ordinance • +$3/hr • Over 15,000 square CGA has sued City establishing Hazard Pay for feet in size that sells grocery store employees • 120 days household foodstuffs for offsite consumption 55575.00001\33704466.4 32CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status • At least 10% of its sales floor area dedicated to sale non-taxable merchandise • At least 300 employees nationwide Irvine Adopted 9rdinance requiring • +$4/hr • Any retail "HERO Pay" (February 9, establishment that 2021) • 120 days employs at least 15 employees at a retail establishment and whose owner, parent company, franchisor or network of franchises employees 300 or more employees nationally San Leandro Adopted Hazard Pay • +$5/hr • Any retail food Ordinances for Local establishment with Grocery Workers (February • 120 days or 300 or more 17,2021) until city exits employees yellow tier nationwide underthe current statewide health 55575.00001\33704466.4 33CHART OF HERO PAY ORDINANCE ACTION IN OTHER JURISDICTIONS City Adopted Key Language Businesses Regulated Status order framework Calexico Considering ordinance at • +$4/hr • Agricultural next council meeting March operations, grocery 3,2021 • Applies to store, restaurant, or employers who retail pharmacy have 300 locations with 300 or employees more workers nationwide and nationally and at least 5 per employs more than 5 location in the employees per City location in the City 120 days 55575.00001\33704466.4 34REPORT OF THE CHIEF LEGISLATIVE ANALYST DATE: TO: FROM: February 19, 2021 Honorable Members of the City Council Sharon M. Tso rlJ1"'f° Chief Legislative Analyst Council File No. 20-1609 Assignment No. 21-02-0086 Grocery, Drug, and Retail Store COVID-19 Hazard Pay Economic Impact SUMMARY On February 2, 2021, the City Council requested that the City Attorney draft an ordinance that will provide all hourly, non-managerial employees at grocery, drug, and retail stores (with a grocery or drug component) in the City with 300 or more employees nationally and 10 or more employees on-site, with a total of five dollars per hour premium hazard pay in addition to their base wage for the next 120 days. The Council further directed the Office of Wage Standards (Bureau of Contract Administration), with assistance of the City Attorney, to promulgate rules and regulations for implementing the ordinance. Additionally, the Chief Legislative Analyst (CLA) was instructed to report on the ordinance's economic impact, potential legal challenges, strategies to counter such challenges, and the impact on disadvantaged communities. Subsequent to Council action, the City Attorney transmitted the draft ordinance to the Council on February 5, 2021. To prepare this report, our Office reviewed the actions of other cities, interviewed stakeholders, and analyzed research papers on the matter. This report includes a discussion of the draft ordinance, grocery industry economics, potential economic impacts (including on underserved communities), and potential legal challenges. RECOMMENDATION That the City Council note and file this report as it is for informational purposes only. FISCAL IMPACT There is no impact to the General Fund. Any costs associated with the enforcement of the ordinance by the Bureau of Contract Administration will be absorbed by the department. DISCUSSION As a result of the outbreak of the COVID-19 virus, on March 4, 2020, Governor Newsom declared a State of Emergency in California and Mayor Garcetti declared a State of Emergency in the City of Los Angeles. The COVID-19 pandemic has forced the closure of schools and 1 35many businesses, including, but not limited to, movie theaters, bars, restaurants and event venues. On March 19, 2020, Mayor Garcetti issued a "Safer at Home" emergency order, requiring all residents to stay inside their homes and immediately limit all movement outside their homes beyond what is necessary to take care of essential needs. On March 19, 2020, Governor Newsom issued an executive order that required all residents to stay home, except as needed to maintain continuity of operations of essential sectors as critical to protect the health and well-being of all Californians. In accordance with this order, the State Public Health Officer designated a list of Essential Critical Infrastructure Workers. Among this list were workers supporting groceries, pharmacies, convenience stores, and other retail stores that sell food or beverage products. From the beginning of the COVID-19 pandemic, grocery and drug store employees have continued to be essential workers, who face health and safety risks as they support the community's access to food, medicine, and other indispensable services. With restaurants either forced to close or opened for outdoor dining at limited capacity, grocery and drug stores have increasingly been the source of America's meals. The Census Bureau reported that the grocery sector has seen an 11.2 percent increase in sales from 2019 while other types of retail stores have seen less pronounced sales increases or declines. Grocery and drug store employees work in environments where they come into close contact with large numbers of customers over the course of the workday, and these working conditions have resulted in localized outbreaks of COVID-19 across the City's grocery and drug stores. A Harvard study of over 100 employees at one grocery store in Boston, Massachusetts found that employees in customer-facing roles are five times as likely to test positive for COVID-19 as their colleagues in other positions. In another study, researchers at the University of California, San Francisco analyzed death records and estimated excess mortality among Californians 18-65 years of age by occupational sector and occupation, including race and ethnicity. They found that for the period March-October 2020, working age adults experienced a 22 percent increase in mortality compared to historical periods. Excess mortality was highest in food/agriculture workers (39 percent increase), transportation/logistics workers (28 percent increase), facilities (27 percent increase) and manufacturing workers (23 percent increase). Latino Californians experienced a 36 percent increase in mortality, with a 59 percent increase among Latino food/agriculture workers. Black Californians experienced a 28 percent increase in mortality, with a 36 percent increase for Black retail workers. The researchers conclude that in-person essential work is a likely venue of transmission and must be addressed through strict enforcement of health orders and the protections of in-person workers. They add that vaccination programs prioritizing food/agriculture workers are likely to have disproportionately large benefits for reducing COVID-19 mortality. In April 2020, the City Council adopted Ordinance #186591, which provided grocery, drug, and food delivery workers with a series of protections: • Right to schedule changes; • Additional work hours offered to current employees before hiring new employees; • The option of a "no-contact" delivery method; and • Retaliatory actions prohibited. 2 36The ordinance has a sunset date upon the later of either the Governor or the Mayor lifting the COVID-19 emergency order. Grocery, drug, and retail store employees do not currently have a right to hazard pay, a type of additional compensation for workers performing hazardous duty or involving physical hardship. Due to the essential nature of work provided by these workers and due to the risk these workers face due to higher potential for exposure to COVID-19, the Council seeks to ensure that these workers receive hazard pay commensurate to their risk. 1. Draft Ordinance On February 5, 2021, the City Attorney released a draft hazard pay ordinance (C.F. 20-1609) that would require grocers, drug, and retail stores meeting certain criteria to provide hazard pay as a result of the COVID-19 pandemic. The ordinance mandates that all non-managerial employees at grocery, drug, and retail stores in the City be paid five dollars per hour premium hazard pay in addition to their base wage for the next 120 days. According to the California Grocers Association, it is common for store managers and assistant managers to be paid on a salaried (non-hourly) basis. Should the Council wish to include managers and supervisors that are paid on an hourly basis in the hazard pay proposal, the City Attorney should be requested to amend the ordinance. As proposed, the following grocery, drug, and retail employers would be required to provide the premium hazard pay: • A grocery retail store with more than 300 employees nationwide, and more than 10 employees on-site in the City, that primarily sells food or household goods, including the sale of produce, meats, poultry, fish, deli products, dairy products, canned foods, dry foods, beverages, baked foods, and/or prepared foods; or • A drug retail store with more than 300 employees nationwide, and more than 10 employees on-site in the City, that sells a variety of prescription and nonprescription medicines and miscellaneous items, including, but not limited to, drugs, pharmaceuticals, sundries, produce, meats, poultry, fish, deli products, dairy products, canned foods dry foods, beverages, prepared foods, and other merchandise; or • A retail store with more than 300 employees nationwide, and more than 10 employees on-site in the City, that is over 85,000 square feet and: o Dedicates 10 percent or more of its sales floor to groceries, including, but not limited to, produce, meats, poultry, fish deli products, dairy products, canned foods, dry foods, beverages, baked foods, and/or prepared foods; or o Dedicates 10 percent or more of its sales floor to drug retail, including, but not limited to, drugs, pharmaceuticals, sundries, produce, meats, poultry, fish, deli products, dairy products, canned foods, dry foods, beverages, prepared foods, and other merchandise. The ordinance also includes a private right of action (which allows a private citizen to bring a judicial action) and an urgency clause, in which case the ordinance would go into effect 3 37immediately upon publication. The Office of Wage Standards, under the Bureau of Contract Administration, would be responsible for promulgating the rules, regulations, and enforcement of the ordinance. 2. Hazard Pay Efforts by Other Cities and Existing Hazard Pay for City of Los Angeles Employees Besides Seattle, the majority of cities contemplating hazard pay for grocery and other retail employees are located in California. Five cities have adopted ordinances that provide a range of hazard pay from $3-$5 per hour. They are Long Beach ($4), Seattle ($4), San Jose ($3), Montebello ($4), and Oakland ($5). Nearly all of the cities and counties that have adopted or are drafting ordinances have an employee threshold of 300 and sunset after 120 days. For a detailed chart of each city's ordinance, see Attachment A. While some of the cities listed here provided a staff report on their respective proposal, those reports did not provide a robust level of economic analysis. The City provides its employees with numerous types of hazard pay when the working environment has been determined to be hazardous. For example, employees performing the following work are entitled to 5.5 percent hazard pay above the base salary rate: • Working on a ladder, scaffolding, hydraulic lift platform, etc. • Spraying asphalt, chemicals, paint, etc. • Working in a deep sewer • Cleaning a homeless encampment or illegal dump site Other hazard pay examples include Airport Security Officers that work to direct traffic (11.5 percent hazard pay) and Canine Police Officers (16 percent hazard pay). 3. Grocery Industry Economics and Response to COVID-19 In response to the COVID-19 pandemic, major grocery, drug, and retail chains have provided some form of extra COVID-19 related compensation. Research by the Brookings Institution (Brookings) found that Target, Amazon, Kroger, Albertsons, and Costco provided $2 per hour in hazard pay and some provided additional bonuses. Walgreens and CVS only provided bonuses. By July 2020, all of these companies had canceled their hourly hazard pay, while some continued to provide bonuses. Rather than continue its hourly hazard pay, Target moved up a planned increase of its nationwide starting salary to $15 in July 2020 (it had committed to the increase by the end of 2020 in 2017). Target also continues to provide bonuses. Since the beginning of the pandemic, Trader Joe's has provided employees with $2 per hour hazard pay and recently increased the hazard pay to $4 per hour. As a result of COVID-19, the grocery, drug, and retail industry has faced a number of additional infrastructure and labor costs, including: • Providing employees with personal protective equipment • Increased sanitation and cleaning protocols 4 38• Installation of protective equipment, including plastic barriers, and social distancing markers • Supplemental paid leave • Hiring and training workers or paying overtime wages to existing workers who fill in for those out on paid leave • Biweekly or weekly COVID-19 testing costs • E-commerce staffing and capital costs Labor costs are discussed further in the economic impact section. Additional details concerning hazard pay, bonuses and other benefits provided by retail companies to their employees is described in Attachment B. Industry Overview According to Sageworks (a financial information company), the grocery industry is a low profit margin industry. Companies in this sector achieve success through the substantial volume of goods they sell. According to the United Food and Commercial Workers International Union, there are approximately 26,000 grocery workers in the City, of which 35 percent belong to a union. According to ZipRecruiter, the average pay for a grocery store worker in Los Angeles is $17.51 per hour. In their research paper on hazard pay, Brookings reported on the performance of large retailers in 2019 compared to 2020. The table below shows the change in the net income after taxes (after subtracting all costs) of select companies: Figure 1. Net income after taxes (profit) oflarge grocery, drug, and retail companies in$ millions (first three fmancial quarters). Company 2019 Profit 2020 Profit $Change % Change Albertsons $399 $995 $596 - -149% --~ $1,332 $2,662 $1,330 -Kroger --100% --Amazon $8,320 $14,109 $5,789 70% Costco (only two quarters) $2,003 $2,227 $224 11% Target $2,447 $2,988 $541 22% Walmart $10,740 $15,601 $4,861 45% CVS $4,887 $6,206 $1,319 -'~ 27% --Walgreens (only two II I• 11 quarters) $1,695 $885 -$810 If -48% ·< ' 1,, .. , Source: Brookings Institution Report and compaiw quarterly reports. Brookings reported that the size, scale, and e-commerce capabilities of these large companies enabled many of them to vastly outperform their 2019 profit, with the exception ofWalgreens. 5 39In order to compare the performance of grocery companies pre-COVID and post-COVID, a more appropriate measurement is the net profit margin, which defines how much profit is generated as a percentage of revenue. Put another way, it illustrates how much of each dollar in revenue collected by a company translates into profit. Sageworks reported that the 2017 average net profit margin for the Grocery Stores NAICS code ( 4451) was 2.2 percent, which is among the lowest among American industries1. Taken separately, the net income (profit) of these large retailers is impressive, but it is the net profit margin figure that allows comparison between companies and the industry average to determine the performance of the companies. Net profit margin for 2020 is discussed further below. Publicly Traded Grocers For the publicly traded grocers, we focus on the performance of Kroger (Ralphs and Food 4 Less) and Albertsons (including Vons and Pavilions). These companies are the first and third largest grocery chains in the United States respectively and have a combined 100 stores in the City. These chains have full service stores that are on average 50,000 square feet and have between 100 and 175 employees per store. In 2019, the net profit margin of Kroger and Albertsons was near or below the industry average. The chart below shows the change in net profit margin for both companies from 2019 to 2020 and compares it to the 2017 average net profit margin for grocery stores, supermarkets, and convenience stores (Kroger divided 2020 into three unequal quarters, so they did not have a fourth quarter result for 2020.): Figure 2. Kroger and Albertsons 2019 vs. 2020 Net Profit Margin After Taxes • Kroger • Albertsons 2017 Average 4.00% --------------------------0.00% --------------------------2019 01 201902 2019 03 2020 01 2020 02 202003 Source: Company quarter1y earnings as reported to the U.S. Securities and Exchange Commission At the beginning of the pandemic, net profit margins spiked in the first quarter of 2020 as customers stocked up on essential food and home items. In the most recent financial report for 1 NAICS codes are used to categorize industries. NAICS code 4451 includes grocery stores, supermarkets, and convenience stores. Convenience stores are not included in the draft ordinance. 6 40the 3rd Quarter 2020, the net profit margin for Kroger returned to the first quarter of2019 level, with Albertsons seeing a slight increase over the same period in 2019. While the 2017 average net profit margin of 2.2 percent does contain convenience stores, we use this average as the best available benchmark to grade the performance of Kroger and Albertsons during the last two years. Both companies did not earn above average profits until the first quarter of 2020 during the COVID-19 shopping spike and by the third quarter had dropped below the average. For additional historical context of the economic performance of both Kroger and Albertsons, the following chart shows the fiscal year net profit margin after taxes for both companies between 2015-2019. Only Kroger produced above industry average results during this timeframe (in 2018). Albertsons had a negative net profit margin in 2015 and 2016. Figure 3. Kroger and Albertsons Fiscal Year Net Profit Margin After Taxes • Kroger • Albertsons 3.00% ----,--------~-2.00% -1.00% _____. -2015 ____ __.__ __ -----2016 2017 2017 Average 2018 Source: Company fiscal earnings as reported to the U.S. Securities and Exchange Commission Independent Grocers 2019 For privately held grocers, we use the 2020 Independent Grocers Financial Survey for information on this industry segment, which provides data on the nation's privately held grocery stores. Independent stores are smaller in footprint at an average of 27,000 square feet. Independent stores have an average of 72 employees per store. Labor and benefit costs are 18.42 percent of sales in the western region, meaning that grocers must spend $18.42 in labor and benefit costs in order to receive $100 in sales. The Independent Grocers Financial Survey provides net profit margin before taxes versus the Kroger and Albertsons data above which provides after tax performance. The following chart shows the western region independent grocers net profit before taxes from 2015 to 2019: 7 41Figure 4. Western Region Independent Grocers Net Profit Margin Before Taxes 2015-2019 • Net Profit Margin Before Taxes - -2015-2019 Average 3.00% -,-----1.00% -----,--------+--0.00% -----------""--------___._ ______ __._I ------------2015 2016 2017 2018 2019 The average net profit before taxes was 1.85 percent for independent grocers for the five years before the pandemic. The data also shows that while the western region grocers experienced a net profit of 2.44 percent in 2019, during that year 25 percent of companies had a negative net profit. Much like the publicly traded grocers, COVID-19 resulted in independent grocers experiencing two of the biggest weeks in the history of food retailing in terms of trips, sales, and basket size (the quantity of goods purchased in a single trip). After the March 2020 surge, the number of trips to stores fell well below 2019 levels as shoppers quarantined at home. The Independent Grocers Financial Survey reports that overall sales were up 13 .3 percent for the first six months of2020 vs. the same period in 2019. No net profit margin data is available for 2020. 4. Potential Economic Impacts Businesses that will be required to provide hazard pay To provide the Council with context of the impact of the hazard pay draft ordinance, our Office prepared a list of the potential grocery, drug, and retail chains that could be affected (Attachment C). For the major local and nationwide chains, there is no question these companies have over 300 employees and thus would be subject to providing hazard pay. For the smaller chains, we assume these chains are privately owned and thus their average employee count per store is 72 (based on the Independent Grocers Survey discussed above). To determine how many smaller chains would be included, we must make an educated assumption on the average number of employees for the independent grocery chains located in Los Angeles with more than one location. We also must add employees to account for the corporate or other support (back office) employees who do not work in the store (but who are counted toward the nationwide 300 8 42employee threshold). We inferred that 80 employees per store is a more likely average for the purposes of this analysis. We multiplied the nationwide number of stores by 80 to arrive at an estimated total nationwide employee count for each chain. We note that Attachment C includes drug stores and retail chains. In these industries, there is less of a middle market, with the majority of the stores being either a nationwide chain or small mom and pop establishments (which would not be covered by the ordinance). We reiterate that this list is simply a projection to gauge the degree of how many chains could be included in the hazard pay requirement, and is not the final list of companies that will be required to comply. For the retail chains, we did not analyze which chains have 10 percent or more of their sales floor dedicated to grocery or drug retail. Lar_ge Retailers Large retailers like Walmart and Target would be subject to the draft ordinance, however, as written, the ordinance requires hazard pay on a store by store basis. Target, for example, would be required to include hazard pay for its employees that work at stores larger than 85,000 square feet that dedicate at least 10 percent of the sales floor to grocery or drug retail. Target has several stores that operate in a smaller footprint, including: • 59,000 square foot store at 415 S. La Brea Ave. (CD 4) • 25,000 square foot store at 8900 Sepulveda Blvd. (CD 11) • 39,600 square-foot (future) location at 7021 Hollywood Blvd. (CD 13) • 49,000 square-foot (future) location at 17401 Ventura Blvd. (CD 5) • 24,000 square-foot (future) location at 330 Westlake Ave. (CD 13) Because these stores are under 85,000 square feet, Target would not be required to provide hazard pay to the employees working in these stores. Should the Council wish to include smaller footprint stores of major retailers, the City Attorney would need to amend the draft ordinance to include a provision that if a retailer has one store located in the City that meets the hazard pay ordinance, all stores located in the City would be required to provide hazard pay, regardless of store size. Economic Impacts Implementing the proposed ordinance could have several economic impacts. In order to determine these impacts, we have prepared projections based on certain factors, including the reaction to the City of Long Beach ordinance (which requires hazard pay of $4 for grocery employees), research of the wages of impacted employees, and the number of companies located in the City that could be required to implement hazard pay under the proposed ordinance. Below are the potential economic impacts: • Higher wages for grocery, drug, and retail store workers. According to ZipRecruiter, the average pay for grocery store workers in Los Angeles is $17.51 per hour. A $5 per hour hazard pay would increase the average salary to $22.51 per hour, an increase of 29 percent from the base wage. Employees would have a temporary earnings boost and more spending power, which could trigger a temporary increase in the demand for goods. This 9 43extra demand for goods could result in more business activity in the City, benefiting other City businesses. Employees could also use the higher wages to pay down debt or increase their savings rate. The pay increase will be temporary, lasting for 120 days, unless the ordinance is extended. • Temporarily increases labor costs as a percentage of sales. As discussed above, labor and benefit costs are 18.42 percent of sales in the western region for independent grocers, meaning that grocers must spend $18.42 in labor and benefit costs in order to receive $100 in sales. For the national grocery industry as a whole, including the publicly traded companies, labor expenses account for 13 .2 percent of sales, according to a 2019 study conducted by Baker-Tilly, a tax consulting firm. An increase of the base wage rate by $5 will increase the labor costs as a percentage of sales 4-5 percent to between 17 percent of sales for publicly traded companies and 24 percent of sales for independent companies. Companies would be required to take action to reduce costs or increase revenue as the labor increase will eliminate all current profit margin. The increase will be temporary, lasting for 120 days, unless the ordinance is extended. • Potentially higher prices for consumers. Affected companies could raise prices to counteract the additional wage cost. Economic analysis from the California Grocers Association (which analyzed data from the Bureau of Labor) shows that if grocers pass on the entirety of the hazard pay labor cost to consumers, a typical family of four could see grocery prices increase by $33 per month, for a total of $132 in extra costs over the 120 days the ordinance would be in effect. Based on our limited discussions with grocers, there is a lower likelihood that grocers would pass on 100 percent of the labor costs to consumers. Shoppers are extremely price conscious, particularly in chains that serve low-income communities. However, prices could increase on average to a lesser degree. According to a December 2020 survey conducted by the Public Policy Institute of California, 39 percent of Los Angeles County households making under $40,000 reported reducing the number of meals or cutting back on food as a result of the turmoil caused by COVID-19. Increased food costs may cause further negative impact on these lower income households. • Potentially delayed store openings, renovations, and wage increases/promotions. It is more likely that grocery chains will put a temporary hold on expansion plans and reduce or eliminate wage increases/promotions (this is more likely with non-union stores). • More pressure on struggling stores (especially independent grocers), which could lead to store closures. The Independent Grocers Financial Survey reported that in 2019, 25 percent of western region companies reported a negative net profit. According to the California Grocers Association, between one-sixth to one-third of association stores reported negative earnings. More profitable stores often subsidize unprofitable stores within the same chain. Smaller chains with fewer stores will have less capacity to rely on their profitable stores to make up the increase in labor costs. This will be especially acute 10 44in smaller chains with a majority of stores located in jurisdictions that have passed hazard pay mandates. The publicly traded grocers have stores throughout the country and have more capacity to rely on the profits of stores throughout the nation to subsidize the local labor cost increase. To contain costs, companies may close stores. In response to the City of Long Beach ordinance that provides $4 per hour in hazard pay, Kroger, the parent company of Ralphs and Food 4 Less, announced it was permanently closing two stores located there. It has been reported that both of these stores have historically underperformed for some time before the City Long Beach hazard pay was enacted. Kroger also closed two stores in Seattle in response to the city's $4 hazard pay policy. Closures of stores affect three groups: o Employees -experience a reduction in earnings and could slow or stop certain spending, negatively impacting the local economy. According to the Los Angeles Times, the Long Beach closures will affect 200 workers. o Product Vendors/3rd Party Service Providers -vendors that support the store, for example food vendors, custodial, and security, will see reduced demand for their services. Vendors might lay off or reduce hours of their employees as a result. o Customers -will have to find new grocery locations. The closures of stores could lead to an increase in "food deserts" that lack access to fresh groceries. The California Healthy Places Index (HPI) is a new tool developed by the Public Health Alliance of Southern California that combines economic, education, housing, health care access, neighborhood, environment, transportation, and social factors into an index score at the census tract level. While the Long Beach Ralphs location set for closure is in a tract with a HPI score of 85.5 (meaning the area has healthier community conditions than 85.5 percent of other California census tracts), the Food 4 Less set for closure has an HPI score of 29.2 (and adjacent to an area with a score of 9.9) signifying that this location is located in a disadvantaged neighborhood. We are researching the number of affected stores that are located in or near a food desert and will provide that information in a separate report. • Reduced hours, wages, or jobs. To offset higher labor costs, companies might reduce working hours, benefits, wage rates, or lay-off employees. 5. Potential Leaal ChalJeuaes As requested by the Council, we are providing an overview of current legal challenges to similar ordinances. The California Grocers Association (CGA), the trade association for the state's 11 45approximately 300 grocery retailers and 150 grocery supply companies, recently filed suit against the City of Long Beach in opposition to the city's adopted $4 per hour grocery hazard pay ordinance. In its lawsuit, the CGA asserts that the Long Beach ordinance is invalid on several grounds: • Violates the National Labor Relations Act (NLRA) by regulating zones of activity that Congress intentionally left to be controlled by the free play of economic forces. • Violates the Equal Protection Clause of the United States and California Constitution by improperly singling out certain grocery businesses for disparate treatment while ignoring employers or essential frontline workers outside the industry. • No significant and legitimate public purpose exists for the ordinance. The stated purpose for the ordinance (to protect public health, address economic insecurity, and promote job retention) is not rationally related to the discriminatory treatment of CDA's members. • While the city has the ability to enact ordinances to further the health and safety of its citizens, including minimum wage laws, this ordinance is not a minimum labor standard, rather a mandatory hourly bonus, regardless of the wage negotiated during collective bargaining or other agreements. • Violates the Contracts Clause of the United States and California Constitution. Interferes with collective bargaining. The CGA filed a request for a temporary restraining order, which was rejected by the Court. The case is scheduled for a Court hearing on February 23rd for a hearing on a preliminary injunction, which would stop the law while the case is pending. The CGA has also sued the cities of Oakland and Montebello, who have adopted similar actions. At your request we conferred with the City Attorney to discuss the legal strategies that could be used to lessen the likelihood of legal action against the City in relation to this proposal. If the Council wishes to discuss the legal strategies related to the proposed ordinance, we recommend that the City Attorney be requested to address these issues in closed session. Attachments: A. Other Jurisdictions Hazard Pay Actions ctay McCaJter -rq Clay McCarter Analyst B. Bonuses and other benefits provided by retail companies C. Projected Companies That Will Be Required to Include Hazard Pay Under the Draft Ordinance 12 46Attachment A Other Jurisdictions Hazard Pay Actions Ordinance Sunset Jurisdiction Status Hazard Pay Impacted Businesses Eligible Employees Date -· -~~ . ....... . .. ... --. ·--... -· '-.. .. ' ' ·).il' ', -~~ ~ ~ Grocery or drug retail, including retail stores with CIII. ~ r, -L ~· ,I r;r 6r... ·~ 1 • I 1· ,, . : . -' _,..;, - -1 85,000 square feet or more that dedicate 10 ,, -~"' ' " ! [' • ·Jil -·-,. I City of Los Draft ordinance ; 'Q percent of the sales floor to grocery or drug retail. _, -· T ,,..,4"' I '• I ~ , I ,:·, Angeles submitted to I ... Must employ over 300 employees nationally and all hourly, non-managerial ~ ,. .• I , r~; •: (Proposed) Council $5.00 10 or more employees on-site. employees ·" 120days ~ .. ' -- 70% or more of the business activity involves the selling of groceries, and the company employs Employed at a grocery store, except over 300 covered employees nationally, and has managers, supervisors, and Long Beach Adopted $4.00 more than 15 employees per site. confidential employees. 120 days Grocery stores, convenience stores, liquor stores and other retail locations that sell food or beverage products located in unincorporated Los Ordinance in the Angeles County and are publicly traded or have at Los Angeles process of being least 300 employees nationwide and more than County drafted $5.00 10 employees per store. All workers 120 days 120 days or until the city declares the coronavirus local Ordinance in the Grocery store chains that are publicly traded or emergency to be West process of being have at least 300 employees nationwide and over, whichever is Hollywood drafted $5.00 more than 10 employees per store. Frontline workers longer. 13 47Ordinance Sunset Jurisdiction Status Hazard Pay Impacted Businesses Eligible Employees Date Adopted an action to prepare an order or ordinance consistent with any such Grocery stores, convenience stores, liquor stores measures and other retail locations that sell food or imposed in beverage products located in unincorporated Los unincorporated Angeles County and are publicly traded or have at areas of Los least 300 employees nationwide and more than Santa Monica Angeles County. $5.00 10 employees per store. All workers 120 days Grocery and drug stores that are publicly traded Employees not including managers, or have at least 300 employees nationwide and supervisors or confidential Montebello Adopted $4.00 more than 15 employees per store employees 180 days 14 48Ordinance Sunset Jurisdiction Status Hazard Pay Impacted Businesses Eligible Employees Date Retail establishment that employs at least 15 employees on site and employs 300 or more employees nationally and a. (i) devotes 70% or more of its sales floor area to retailing a general range of food products, which may be fresh or packaged, or (ii) receives 70% or more revenue from retailing a general range of food products; b. is more than 85,000 square feet and devotes 10% or more of its sales floor area to the sale of Individual who performs at least merchandise that is non-taxable two hours of work in a calendar pursuant to Section 6359 of the Revenue and week but does not include Ordinance in the Taxation Code; or managerial, supervisory, or process of being c. is retail pharmacy that sells a variety of confidential employees of a Irvine drafted $4.00 presaiption and nonprescription medicines covered employer. 120 days 15 49Ordinance Sunset Jurisdiction Status Hazard Pay Impacted Businesses Eligible Employees Date Hazard Pay is required during a Widespread (purple), Substantial (red) or Moderate Any individual working in a (orange) Risk Level, Grocery stores with 500 or more employees qualified grocery store who and until such time nationwide and a retail/wholesale store over qualifies as an employee entitled to as Risk Levels return Oakland Adopted $5.00 15,000 square feet. payment of a minimum wage. to Minimal (yellow). Ordinance is valid from the period of the effective date through and until such time as the County returns to the Yellow-Tier 4 Grocery stores (defined by NAICS Code 445110-designation of Supermarkets and Other Grocery Stores, except COVI D-19 or 120 Ordinance in the Convenience Stores, with a total floor area over days from the process of being 25,000 square feet, and publicly traded entities effective date of the Berkeley drafted $5.00 or businesses with over 300 employees. All employees ordinance 16 50Ordinance Sunset Jurisdiction Status Hazard Pay Impacted Businesses Eligible Employees Date Until the Santa Clara County Health Officer has lifted mandatory Retail establishments that sell meats, poultry, directives for dairy products, fresh fruits and vegetables and implementing the have at least 300 employees nationwide. Includes State's Regional Stay a credit for retail establishments that currently at Home Order provide pay increases related to the COVID-19 related to the San Jose Adopted $3.00 pandemic. COVID-19 pandemic. Grocery business with more than 500 employees worldwide. "Grocery business" would include a retail store that is either: 1. Over 10,000 square feet in size and that is primarily engaged in retailing groceries Valid for as long as for offsite consumption; or the city's 2. Over 85,000 square feet and with 30 percent All employees except executive, coronavirus civil or more of its sales floor area dedicated to the administrative, or professional emergency remains Seattle Adopted $4.00 sale of groceries. roles. in effect. 17 51Attachment B Bonuses and Other Benefits Provided by Retail Companies to Their Employees • Target (an increase by $1 billion from 2019 employee benefits)2 o Bonus Payments • April 2020: $250-$1,500 to 20,000 employees • July 2020: $200 to all hourly employees in stores and distribution centers • October 2020: $200 to 350,000 employees • January 2021: $500-$2,000 to 375,000 employees o Free virtual healthcare visits o 30-day paid leave for vulnerable team members susceptible to the coronavirus o Paid leave options for team members who are symptomatic, have a confirmed case of coronavirus, or have been quarantined due to exposure. o Mental health resources • Amazon ($2.5 billion on special bonuses and incentives in 2020) o Bonus Payments • June: $150-$500 for warehouse, Whole Foods, and delivery workers • December 2020: $150 or $300 for operations employees o An employee diagnosed with COVID-19 receives up to two weeks of pay o Established a $25 million relief fund for employees facing financial hardship or quarantine • Walmart o Bonus Payments • March 2020: $150 or $300 • June 2020: $150 or $300 • November 2020: $150 or $300 • December 2020: $150 or $300 o Employees required to quarantine will receive up to two weeks of pay • Albertsons o Bonus Payments • June 2020: equal to $4 per hour for the average hours worked between March 15 and June 13 • December 2020: equal to $5 per hour for weekly average hours worked during the recent 12-week period • Costco o Bonus Payments • None • Kroger ( over $1 billion in new benefits in 2020) o Bonus Payments • March 2020: $150 or $300 • May 2020: $200 or $400 • June 2020: $200 or $400 • February 2021: $100 for employees who get vaccinated o Store credits and fuel points 2 The source of all employer COVID-19 investments is their respected websites. 18 52o Two weeks paid time off for employees diagnosed with COVID-19, placed under quarantine, or practicing self-isolation o $15 million available to provide financial assistance to employees who face hardship due to COVID-19 o Mental health resources • Walgreens o Bonus Payment • March 2020: $150 or $300 • CVS o Bonus Payments • March 2020: $150-$500 o 14-day paid leave for any employee who tests positive for COVID-19 or needs to be quarantined as a result of potential exposure o Employee Relief Fund 19 53Attachment C Projected Companies That Will Be Required to Include Hazard Pay Under the Draft Ordinance Number of Employees Mid-Size Grocery Stores Locations (estimated)* Super King 8 640 Mitsuwa 11 880 Nijiya 12 960 Lassens 11 880 Zion 7 560 Han Kook 4 320 Erewhon 6 480 Big Saver 10 800 Eataly 8 640 Island Pacific Market 16 1,280 Marukai 4 320 Numero Uno 24 1,920 Super A Foods 8 640 *The number of store locations is multiplied by 80 to determine total employees Large Grocery Stores Northgate Sprouts Kroger (Ralphs/Food 4 Less) Albertsons (Vons/Pavilions) Aldi/Trader Joe's Grocery Outlet Gelsons Vallarta Superior Smart and Final Jons Market El Super Whole Foods 99 Ranch Costco Seafood City Bristol Farms H Mart Mother's Large Retail Stores Walmart/Sam's Club Target Large Drug Stores Walgreens CVS (including Longs Drugs) Rite Aid 20 5421 552/25/2021 { Windfall profits and deadly risks Windfall profits and deadly risks: How the biggest retail companies are compensating essential workers during the COVID-19 pandemic Molly Kinder, Laura Stateler, and Julia Du NOVEMBER 2020 Editor's note: This brief was updated on December 16. Watch the online event held on November 23 with frontline workers and experts on the pay, protections, and policies frontline essential workers still need. DOWNLOADS • Appendix -• Retail companies' COVID-19 compensation: A ranking -A s the number of new COVID-19 infections smashes dailv records, the pandemic has https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 1/28 562/25/2021 A Windfall profits and deadly risks entered its deadliest phase yet. With a dark winter looming, millions of frontline essential retail workers face grave risks to their health, often for very low wages and without the hazard pay they were earning at the start of the pandemic. Meanwhile, the biggest retail companies in the country continue to earn eye-popping profits. In this report, we examine this inequality from two perspectives. As frontline retail workers at top companies face unprecedented risks on the job, what compensation should they earn, and what have they earned so far during the pandemic? And as those large retail companies earn unprecedented profits, how have they balanced investing in their workers and their profits? We find that while top retail companies' profits have soared during the pandemic, pay for their frontline workers-in most cases-has not. In total, the top retail companies in our analysis earned on average an extra $16.7 billion in profit this year compared to last-a stunning 40% increase-while stock prices are up an average of 33%. And with few exceptions, frontline retail workers have seen little of this windfall. The 13 companies we studied raised pay for their frontline workers by an average of just $1.11 per hour since the pandemic began-a 10% increase on top of wages that are often too low to meet a family's basic needs. On average, it has been 133 days since the retail workers in our analysis last received any hazard pay. At most of the biggest retail companies in America, the gap between the struggles and sacrifices of low-wage frontline workers and the wealth they create for their employers and shareholders is wider than ever. Contents 1. Introduction 2. Why retail wages matter 3. What top retail companies P?.:Y frontline workers 4. Hazard P.!!Y and extra COVID-19 compensation 5. Ending hazard pay harms low-wage workers and racial and gender equity 6. Business has boomed during_ the pandemic 7. Who benefits from windfall profits? 8. f..~.!!!panies can-and should-do more. But p~J~~ymakers shouldn't wait. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 2/28 57' 2/25/2021 Windfall profits and deadly risks When the COVID-19 pandemic began to spread across the country in March, Jeffrey Reid-a meat clerk at a Giant Food outside of Washington, D.C. -was thrust onto the frontlines. "One minute, I'm just a hard worker," he said in a March interview. "I get up every day, I do my eight hours, it's like a routine. Then, overnight, grocery workers have become essential personnel." Sales at his store soared as customers stocked up on groceries. He described the "sheer enormity of the pandemic" and the "fear" he could see in people. Reid vowed to carry on working: "I have been in this business for the last 11 years. I am going to keep getting up in the morning and going to work." Initially, Reid was grateful for the modest pay bump his employer, a subsidiary of the Dutch company Ahold Delhaize, gave him. By the summer, that feeling had vanished. Just two months into the pandemic, Giant ended his extra 10% "recognition pay," despite a spike in the company's sales that more than doubled its second-quarter profits. Even as hazard pay for workers like Reid ended, Ahold Delhaize spent more than $862 million repurchasing its stock-more than 1.5 times what it spent on all COVID-19-related costs in the first three quarters of 2020 to protect and compensate its workers. "To me, it's like a slap in the face," said Reid. "All of a sudden, we went from being essential to being sacrificial, all for the sake of the bottom line. Now you're telling us that this thing is still out here, people are still dying, and you want to do away with hazard pay and give a one-time bonus? It's a bunch of B.S., to be honest. It is still a pandemic, the last time I checked. There is a still a hazard out there." All of a sudden, we went from being essential to being sacrificial, all for the sake of the bottom line Jeffrey Reid, meat clerk at Giant Foods The COVID-19 pandemic provides a revealing window into the balance some of America's largest companies strike between their workers and their profits at a time of extreme sacrifices and extreme earnings. When some of the biggest corporations in America earn record profits during a deadly pandemic-because of a deadly pandemic, no less-do they compensate the frontline https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 3/28 582/25/2021 Windfall profits and deadly risks workers risking their lives? Who benefits from the life-threatening, essential work of the country's retail workers? In this report, we analyze compensation to frontline employees at 13 of the 20 biggest retail companies in America. Together, these 13 companies employ more than 6 million workers and include the largest corporations in grocery, big-box retail, home improvement, pharmacies, electronics, and discount retail. We excluded from our analysis seven other top retail companies that either did not have public financial information available or were in retail sectors that were hit hard by the pandemic (such as clothing) and did not provide COVID-19 compensation to workers. Figure 1. America's top 20 retail companies Company I Amazon ___ _ 1 Kroger (Chains: Fred Meyer; Harris Teeter; King Soopers, Kroger; Ralphs, 11 more) National Retail Federation rank #2. #3 Retail type E-commerce Grocery --------------+----------Costco #4 1 Walgreens Boots Alliance #5 Home Depot #6 Big Box Health/Pharmacy Home Improvement -------------------4-c vs Health #7 -+--Target 'Lowe's I Albertsons (Chains: A/bertsons, Randa/ls, Safeway, Star Market, 17 more) --------------1 Apple Store/iTunes f Ahold Delhaize (U.S.) (U.S. chains: Giant Food, Stop & Shop, Hannaford, Food Lion) i ~ .. McDonald's Best Buy ---------Publix Super Markets TJX Companies Aldi Dollar General H.E. Butt Grocery https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ j #8 #9 #10 #11 #12 #13 #14 #15 #16 #17 #18 #19 Health/Pharmacy --......--General Home Improvement Grocery Electronic Grocery Fast Food Electronic Grocery Clothing Grocery Discount Grocery Included 1 in this report 4/28 592/25/202, i Macy's Source: National Retail Federation. Windfall profits and deadly risks l ---#20 I I I -------'----Clothing I l ---J B I Metropolitan Policy Program at BROOKINGS While pay is not the only issue that matters to workers, we chose to focus on compensation in this report. In several dozen interviews we conducted since the start of the pandemic, frontline workers raised the issue of wages and hazard pay more than any other. Other important workers concerns-including safety, benefits, power, and voice-are outside the scope of this report. With few exceptions, we find that companies have offered only modest or negligible extra compensation to workers while earning windfall profits. Three companies-Best Buy, Target, and Home Depot-bucked this trend and provided more generous compensation to workers during the pandemic both in absolute generosity as well as relative generosity compared to their financial performance. These three companies provided the most COVID-19 compensation to workers through temporary pay increases, bonuses, and permanent wage increases. Together, their frontline workers earned an average of $2.53 extra per hour since March, compared to just $0.21 per hour at CVS Health and $0.83 per hour at Albertsons. All three companies earned double-digit profit growth compared to last year, but at more modest levels than the runaway profits some competitors who were less generous to their workers earned. Best Buy, Target, and Home Depot are outliers. The other 10 companies in our analysis were far less generous to frontline workers in both relative and absolute terms. Eight of the 13 companies provided less than $1 per hour extra to frontline workers, averaged over the course of the pandemic. Many of the least generous companies were the most financially successful, posting huge profits. Amazon and Walmart combined earned an extra $10.7 billion in profit compared to last year, an increase of 70% and 45%, respectively. Their workers, on the other hand, have received below-average COVID-19-related compensation: an extra $1,369 ($0.95 per hour) and $900 ($0.63 per hour), respectively, over the eight-plus months of the pandemic-representing just 6% pay bumps for full-time workers that earn starting wages. Meanwhile, Amazon and Walmart's stock prices are up 65% and 41 % since the start of the pandemic, adding more than $70 billion to the wealth of Jeff Bezos, Amazon's CEO, and $45 billion to the Walton family-the country's richest family, who own more than half of Walmart's shares. Amazon and Walmart's stock prices are up 65% and 41% since the start of the pandemic, adding more than $70 billion to the wealth of Jeff Bezos, Amazon's CEO, https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 5/28 602/25/2021 Windfall profits and deadly risks and $45 billion to the Walton family. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 6/28 612/25/202j Windfall profits and deadly risks The decisions by the companies we analyzed to end hazard pay well before the pandemic was over undermine the pledges that many of these same companies made to invest fairly in workers. Just last year, the CEOs of nearly half of the companies in this report-including Amazon, CVS Health, Home Depot, Target, Walgreens, and Walmart-signed a pledge through the Business Roundtable to move away from narrow "shareholder" capitalism to a broader "stakeholder" capitalism. The pledge stipulated a new vision for the role of the corporation: No longer is the purpose of business solely to maximize profits for shareholders. Instead, corporations should also serve the interest of its workers, alongside the community, customers, and other stakeholders. "This starts with compensating them fairly and providing important benefits," read the pledge. While signatories Target, Best Buy, and Home Depot are the top three performers in our analysis and made meaningful investments in frontline workers during the pandemic while permanently raising wages, the other four companies that signed the pledge-Amazon, CVS Health, Walgreens, and Walmart-were among the companies that did the least. The disappointing track record of large retail companies in compensating their frontline workers during the pandemic provides demonstrates the limitations of voluntary corporate action, as well as broader public policy failures. At a time of skyrocketing inequality-in COVID-19 mortality rates, income inequality, unemployment, financial insecurity, racial inequity, and the unequal sacrifices of frontline essential work-the richest companies in America can, and should, do far more. When working could mean dying, frontline workers deserve hazard pay for the duration of the pandemic and a permanent raise to a living wage. Why retail wages matter Last year, the retail sector employed nearly one in 10 workers, or 15 million Americans. The 13 companies we analyzed in this report employ over a third of that number. Walmart and Amazon, the two largest retail companies, are also the two largest private employers in the country. Combined, they employ nearly 3 million workers. Due to their outsized influence on the sector, the compensation and treatment of their employees impact even workers they don't employ. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 7/28 622/25/2021 Windfall profits and deadly risks Retail jobs have become an even more important source of employment during the pandemic. Unemployment levels have skyrocketed for low-wage workers in sectors hit hard by the pandemic recession, such as hospitality and leisure. More than half {51 %) of households earning under $50,000 have experienced employment loss during the pandemic, creating even more financial and food insecurity among low-income households. In a recent survey, just under half of low-wage workers reported having trouble paying bills, and about a third had difficulty paying their rent or mortgage. At a time when tens of millions of people are unemployed and families are struggling, the biggest retail companies are hiring, and providing some of the few employment opportunities available in communities across the country. Many unemployed, low-wage workers have similar education and skill backgrounds as those in the retail sector. With no end in sight to the COVID-19 recession, the importance of the quality of these remaining retail jobs cannot be overstated. Whatto_p_ r~taH _c_ompanies pay https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 8/28 632/25/2021 Windfall profits and deadly risks rron111ne worKers • • While retail jobs can provide an economic lifeline in a time of high joblessness and faltering unemployment relief, the wages are often low and provide little economic stability. Median wages for popular frontline retail jobs (e.g., cashiers, salespersons, and stock clerks) range from $11 to just over $12 per hour-wages so low they would put a family of four below the poverty line. The retail sector's low wages reflect in part the failure of the federal government to raise the minimum wage above the current $7.25 per hour, despite overwhelming public support for a $15 minimum wage. Wages at the 13 retail companies in our analysis mostly follow industry averages, with a few notable exceptions. Before the pandemic, when unemployment was low and the labor market was tight, several prominent retail companies raised wages. CVS Health raised its starting wage to $11 per hour in 2018 and Walmart did the same in 2019. Only two companies in our analysis-Costco and Amazon-had a minimum starting wage of $15 per hour before the pandemic. During the second wave of COVID-19 infections this summer, Target announced it would raise wages from $13 to $15 per hour ahead of its scheduled increase at the end of the year. Best Buy also raised its minimum wage to $15 per hour, announcing the increase the same day it posted double-digit growth in sales compared to last year-noting that "none of this would be possible without the effort and energy of our frontline-employees." Best Buy, Target, and Costco's $15 minimum wages are significantly higher than the market wage for retail work, and lead the entire industry. Amazon's $15 starting wage is just under the average market wage for warehouse laborer jobs ($16.16 per hour). https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 9/28 642/25/2021 Windfall profits and deadly risks The remaining seven companies in our analysis do not have public information about their minimum wages, nor do they report starting wages or average wages for specific entry-level positions. The companies we contacted declined our requests to share this data. We therefore drew data from Payscale.com to approximate average hourly wages for cashiers-a typical frontline position that is usually at the bottom of the wage spectrum. Like other job-aggregator sites, Payscale averages self-reported data from employees over many months. The data is imprecise, but is consistent with other self-reporting pay websites such as Indeed.com and Glassdoor. Frontline workers in locations with lower minimum wages likely earn even less than the average hourly wages presented below. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 10/28 652/25/2021 Windfall profits and deadly risks Lisa Harris, a Kroger cashier outside of Richmond, Va., described the financial struggles her grocery colleagues face with the low wages they earn: "I have coworkers who stand all day serving people, and then have to go pay for their own groceries with food stamps. I am very lucky that my boyfriend works in pizza because that is our survival food. If we can't afford to buy food, he brings home a pizza." 11/ have coworkers who stand all day serving people, and then have to go pay for their own groceries with food stamps" Lisa Harris, cashier at Kroger Like many frontline retail workers we interviewed, Harris would like to see her employer raise wages permanently to a living wage. "I think that $15 an hour should be the minimum," she said in March. "We are heroes every day, and we deserve to be paid as such. We haven't gone from unskilled labor to essential personnel. We always were essential personnel." Hazard oav.and extra COVID-19 compensation When the COVID-19 pandemic hit the U.S. last March, frontline retail jobs were transformed overnight. In most cases, the jobs were still low-paid, but the pandemic gave them a new title: "essential." State and local governments declared grocery stores, pharmacies, and big-box and retail stores essential businesses, allowing them to remain open when nonessential businesses were closed. Working through the spring shutdown, millions of frontline retail workers faced new hazards in jobs that previously were not considered especially dangerous. "It is scary," said Amber Stevens, a grocery cashier in Washington, D.C. "It is very scary. You don't want to pick up anything at work and bring it back home to your family." In recognition of the extraordinary risks their workers were undertaking-and to retain and recruit https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 11/28 662/25/2021 Windfall profits and deadly risks workers for now-risky jobs-all 13 retail companies in our analysis initially provided extra COVID-19-related compensation to frontline workers as the pandemic began. Commonly referred to as "hazard pay," the additional compensation came in the form of small, temporary hourly wage increases, typically between $2 and $2.50 per hour, as well as one-off bonuses. Companies used names like "appreciation pay" and "hero pay." In addition to temporary hazard pay, a few companies permanently raised wages for workers during the pandemic. In this report, we refer to "COVID-19 compensation" as any additional compensation paid to workers during the pandemic, including permanent pay raises. Hazard pay refers only to temporary pay raises and bonuses tied to the pandemic. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 12/28 672/25/2021 Windfall profits and deadly risks The initial hourly wage increases were popular with frontline workers, although some felt they didn't go far enough. In more than a dozen interviews, frontline retail workers shared with us a strong desire for receiving hazard pay while putting their lives on the line every shift. They preferred hourly pay increases of several dollars an hour (similar to overtime or holiday hours) rather than occasional bonuses, which fail to compensate workers for each additional hour worked, are less predictable, and are less generous in most cases. "It should be an hourly raise for the duration of the pandemic," said a Walmart associate who preferred to remain anonymous, reflecting on the periodic bonuses they received in the spring and summer. "Because for a lot of these people working out there-four or five days a week, eight hours a day, risking their lives so much given how the virus is spreading in the country-$2 to $3 extra an hour is a start." By June, nearly every retail company in our analysis ended their temporary wage increases. As nonessential businesses reopened in May and June, retail employers signaled they were returning to "normal"-just weeks before COVID-19 cases spiked during a second peak. The hourly pay increases lasted on average just 79 days, or 11 weeks. As the country heads into yet another infection peak, none of the 13 companies in our analysis are providing hazard pay, beyond the three companies that permanently raised wages. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 13/28 682/25/2021 Windfall profits and deadly risks For most retail workers, hazard pay has been over for months and wages have returned to their pre-pandemic norm. It has been an average of 133 days since the retail workers in our analysis last received hazard pay. Retail workers at large drug store chains have gone the longest (243 days) on average since receiving hazard pay, and received the least amount ($300). Grocery workers follow, with a modest average COVID-19 compensation ($1,175) and more than 140 days on average since hazard pay ended. Hazard pay from the two home improvement companies-Lowe's and Home Depot-was more generous, averaging just over $2,700 from bonuses and wage increases, and have also been the most long-lasting. Lowe's last paid its hourly associates a bonus in November, while Home Depot was the lone company to continue regular pay increases into November through its weekly bonuses. On November 15, however, the company ended weekly bonuses and announced a shift to modest permanent wage increases. Two companies-Best Buy and Target-went the furthest, permanently raising wages to $15 per hour after ending temporary pay bumps in the summer. Figure 8. Take-home COVID-19 pay Total COVID-19 compensation workers received at America's top retail companies over the course of the pandemic Best Buy HomeDepot ___________________ _. Target Lowe's --==========:::1 Amazon -----1==::::1 Kroger ---•====:J Albertsons Ahold Delhaize (avg.) Costco Walmart (U.S.) Dollar General -CVSHealth -Walgreens https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 14/28 692/25/2021 Windfall profits and deadly risks $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 • Temporary wage increases • Bonuses • Permanent wage increases Source: Amount of temporary hourly increases and bonuses are from company websites as of November 2020 -if date is applicable. Methodology: Amount of temporary hourly increases and bonuses are from company websites. The amount earned from temporary hourly increases was calculated for the weeks the increase was in place and assumes a 40-hour work week. The amount earned from permanent wage increases is calculated using the starting wage or average wage for a cashier working 40 hours per week, excluding pandemic-related temporary wage increases. Calculated from when the company announced the increase through November 19, 2020. B Metropolitan Policy Program at BROOKINGS Methodology: Amount of temporary hourly increases and bonuses are from company websites. The amount earned from temporary hourly increases was calculated for the weeks the increase was in place and assumes a 40-hour work week. The amount earned from permanent wage increases is calculated using the starting wage or average wage for a cashier working 40 hours per week, excluding pandemic-related temporary wage increases. Calculated from when the company announced the increase through November 19, 2020. Hazard pay's abrupt end caused widespread dismay, disappointment, and even anger among workers. "They stopped giving us the $2 an hour hazard pay," said Matt Milzman, a Safeway cashier in Washington, D.C., in June. "They gave us all a letter, as if to say, 'Coronavirus is over, you did it, you all are the real heroes, thank you for your service.' That is ridiculous-this is not over. We have not completed a tour of service and now things are safe. No, it is still dangerous ... lt is clear what the priority is: They don't want to pay us. Now they feel that they don't have to." ''The compensation isn't enough-it is pennies." Walmart Associate "It's like we are back to nothing now," said a front-end grocery worker who preferred to remain anonymous, in a June interview. "We were the ones who start during the major thick of it, which is still going on. It's still a pandemic. For someone to look at me and be like, 'Well, you're nothing now, you are what we originally thought about you'-it makes it really hard. We're still out here, we're still https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 15/28 702/25/2021 Windfall profits and deadly risks putting our lives at risk." While the extra hazard pay was initially around $2 per hour, the premature end of it means that typical frontline retail workers earned very small pay increases when their COVID-19 compensation is averaged hourly over the course of the pandemic to today. Workers at CVS Health and Walgreens earned as little as a 2% pay raise when averaged from mid-March to mid-November. Entry-level workers at Walmart, Costco, Kroger, Amazon, Ahold Delhaize, and Albertsons earned less than 10% extra. Figure 9. COVID-19 compensation significantly raised wages of some retail workers I Total COVID-19 Total COVID-19 % wage raise Company compensation compensation per hour from COVID-19 I per worker over pandemic compensation Best Buy I $4,414 $3.07 28% ------I Home Depot $3,271 $2.29 21% -Target $3,200 $2.22 17% --------Lowe's $2,143 $1.49 12% -----.... ----Amazon $1,369 $0.95 6% Kroger $1,249 $0.87 9% Albertsons $1,200 $0.83 8% I Ahold Delhaize (U.S.) $1,075 $0.84 8% l------I $1,040 $0.72 Costco 5% Walmart (U.S.) $900 $0.63 6% ------Walgreens Boots Alliance (U.S.) $300 $0.21 2% ----CVS Health $300 $0.21 2% -------· ------Methodology: Calculated using starting wage or average wage for a cashier or warehouse associate (Amazon) working 40 hours/week between March 7 3, 2020 and November 7 9, 2020. Metropolitan Policy Program Source: Brookings analysis of company COVID-19 Compensation between March 7 3, 2020 and November 7 9, 2020 at BROOKINGS "To me, it seems like a publicity stunt," said a Walmart associate who preferred to remain anonymous, in an August interview. "Walmart is not doing enough compared to every other retailer out there. They can afford to do more than they are to show they appreciate the risks we are taking beina out on the frontline makina them monev. The comnensation isn't enouah-it is nennies." https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 16/28 712/25/2021 Windfall profits and deadly risks --···:::, ----·· -··-.. -··-····-···-·····:::, -··-··· ···-··-J· . ··---···r--··---·-·· ·-·· --··--:::,·· ·-·-.--·····--· Endina hazard oav harms low-waae worKers ana rac1a1 ana gerraer equity The termination of hazard pay was especially detrimental to the lowest-paid workers, whose pay had risen meaningfully when temporary hazard pay was active. The modest hazard pay was an important (but often insufficient) step by companies toward adequately compensating their lowest-paid workers. Between the hourly pay increases and bonuses, entry-level retail workers benefited from raises averaging $1. 91 per hour-a 17% increase. Figure 10. Hourly wages throughout COVID-19 Target, Best Buy, and Home Depot permanently increased hourly wages after ending hazard pay $17 $15 $13 $11 $9 $7 $5 $3 -Wage with temporary increases -Starting hourly wage -Starting wage today (with permanent wage increases) $1 ~ ~' ic,o ; f'\ ;,• #/ ,~ , j ~~• <:)""\ <:)""\ ~""\ ~""\ lb-,. ~ ., CT ~ ; ..J)4 ~ .~ ~ ~~ ~ ~~-o~-~~-o~-~-ri~"'· ~ ..,..;, ., ~lb ~~ 0~o ~0o q:-o ~o~ i ,; V .vlJ O ~ «\,, ~~ .,,,.cl' ft.0 ¥-~0 (3-'l) cj-,O~ '<°'(6 4,,,, V Source: Company websites & Payscale.com as of November 2020. B Metropolitan Policy Program at BROOKINGS "To some people, $2 an hour doesn't seem like a lot," said a retail employee who preferred to remain anonymous. "But the extra $2 makes a huge difference for people and their livelihoods. It's something I can't comprehend, why they think we're not worth more. Profits are up big time. I don't https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 17/28 72,2/25/2021 Windfall profits and deadly risks understand why they think it's okay for people to struggle." The end of hazard pay also undermined racial, ethnic, and gender equity. Women and workers of color are overrepresented among the retail frontline workforce. Women make up a significantly larger share of the frontline workforce in general retail stores and at companies such as Target and Walmart than they do in the workforce overall. Amazon and Walmart employ well above-average shares of Black workers (27% and 21 %, respectively) compared to the national figure of 12%. Figure 11. Black, brown, and female workers are over-represented in retail work Demographics of workers •share of Black workers •Share of Latino/Hispanic workers •share of women workers 70% 60% 60% 56% 59% 50% 48% 40% 30% 26% 20% 10% 0% 47% Walmart hourly Amazon Target General workers workers non-managers merchandise All grocery store workers AIIU.S. workers stores Source: Brookings analysis of company diversity reports and of Bureau of Labor Statistics (BLS). B Metropolitan Policy Program at BROOKINGS Jeffrey Reid, a meat clerk at Giant Foods outside Washington, D.C., discussed these disparities in an October interview: "You've got to look at who's sitting at the top of all these companies, at all these CEOs. They don't look like me. Most grocery workers, like myself, the majority of them are Black and brown, and those are the people that are really affected by this coronavirus. Bottom line is that the people who are responsible for these companies thriving and for the sales are the people who are doing the grunt work on a daily basis, out in these stores, keeping these stores stocked, provided customer service at a high level. That's who makes these companies go, but that's not who's reaping the benefits at all. So when vou look at these comorations. thev want to out orofits over workers anv https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 18/28 732/25/2021. Windfall profits and deadly risks ' -··---··-··-----··· --····-··J--·--··--···-----·.--·--·-··-, ···-J ··-··· --.---.-·-··---·-· ··-···-·--··J day. And that's where it fails society as a whole." Business has boomed during the panaem1c rf He workers struggle, business at the country's largest retail companies has boomed .inV1e l1 pandemic. Amidst a recession that permanently closed 400,000 small businesses by June, the enormous size and scale of the top retail companies have positioned them to flourish and expand their market share. E-commerce capabilities allowed top companies to meet the dramatic shifts in shopping behavior. Customers have flocked to the large big-box and retail chains, preferring fewer but larger shopping trips. Home improvement sales have soared as customers stuck at home take on DIV projects, while grocery stores experience record sales as customers eat more meals at home. Pharmacies and drug stores are the outliers in our analysis. Due to customers making less-expensive purchases and fewer prescriptions being filled as elective procedures are delayed, the retail businesses of CVS Health and Walgreens have experienced uneven growth. Figure 12. Retail companies have experienced record breaking profits so far in 2020 I I I Qs I 2020 profits i 2019 profits : $ change Company reported f _ % Change in 2020 I (t'' ,,·11// r)''S) I\,, ,1,, '-,, ... Walmart 3 $15,601 $10,740 $4,861 45% -----+ -----Amazon 3 $14,109 $8,320 $5,789 70% --------------------------1--------------Home Depot 3 $10,009 $8,761 $1,248 14% CVS Health 3 $6,206 $4,887 Lowe's $4,as1 I $3,n1 $2,988 r $2.447 3 -------Target 3 ------------------1-Costco Kroger Ahold Delhaize (U.S.) Dollar General 2 $2,227 $2,003 2 ! __ s_2_.0_3_1 __ t _ s1,069 3 I s1.s1a s1.311 2 I $1.438 $812 https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ $1,319 $1,086 $541 $224 27% 29% 22% 11% $962 90% $201 15% $626 77% 19/28 74?125/2021 Windfall profits and deadly risks Walgreens (U.S.) l ::,88!> + :;,1,oY!> -~810 -48% -Albertson's 2 $871 $344 $527 153% ----Best Buy 2 $591 $503 $88 17% I TOTAL $63,391 $46,728 $16,662 40% I ----------* Operating income for the U.S. sectors of the company . Source: Company quarterly earnings as of November 2020. Bl Metropolitan Policy Program at BROOKINGS Across the 13 companies in our analysis, revenue was up an average of 14% over last year, while profits rose 40%. Excluding Walgreens-whose business has struggled during the pandemic-profits rose a staggering 48%. Stock prices rose on average 30% since the end of February. In total, the 13 companies reported 2020 profits to date of $63.4 billion, which is an additional $16. 7 billion compared to last year. The two largest companies-Amazon and Walmart-drove the lion's share of this growth; combined, they reported $10.7 billion in additional profit in the first three quarters of the year compared to last year. This is nearly two-thirds of the total for all 13 companies. Figure 13. As case numbers rise, so do the stock prices for many retail companies 200,000 180,000 ffl 160,000 en a, ~ 140,000 Q) C ~ 120,000 ·co "C 0 100,000 Q) 0, ~ 80,000 Q) > a, >. a, "'9 60,000 r-.... 40,000 20,000 0 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep 1-0ct 1-Nov 100% 80% Q) 0 ·.: 60% _e-o 0 1n 40% ~ a, C. E 0 20% 0 .5 Q) C, 0% i .c 0 ~ -20% -40% -Walmart -Amazon -Kroger -Home Depot -Dollar General -Lowe's -Target -CVS Health -Costco -Walgreens Boots Alliance -Best Buy -AD Note: Albertson's is not included because its stock price information is only available since June 26, when the company became public. Source: Brookings analysis of New York Time data for confirmed COV/0-7 9 cases and company stock prices from February 28, 2020 to . . . ------https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ B Metropolitan Policy Program at BROOKINGS 20/28 75?/25/2021-Windfall profits and deadly risks November 19, 2020. These large retail companies have benefited from government policy and spending. Early in the pandemic, state and local governments declared large retail companies as essential businesses, while many smaller retailers were forced to temporarily shut down. Sales at the top retail companies were further buoyed in the spring and summer by generous federal relief, including enhanced unemployment benefits and stimulus checks. As taxpayer dollars fuel profits, are essential workers benefiting? Whotbenefits from windfall pron s? Against this backdrop of staggering profits and growth, we examine how generous the top retail companies have been in providing extra COVID-19 compensation to their frontline workers relative to their financial performance and expenditures. Companies' decisions around stock buybacks during the pandemic are illustrative of their priorities and the relative weight they put on shareholder interests, even in extreme times. Of the nine companies that repurchased shares in 2020, all but one at least temporarily suspended their repurchase programs when the pandemic began. Ahold Delhaize continued to repurchase shares throughout the pandemic, buying $860 million in their own stock since March 1, despite ending hazard pay for its employees. In the first three quarters of 2020, the company has spent more than 1.5 times on stock buybacks than on COVID-19 costs for worker safety and compensation. In the third quarter, Walmart reported $500 million in new share repurchases, but no additional hazard pay for its workers. The cost of Walmart's recent stock buyback was more than 40% what the company spent on hazard pay bonuses over the previous two quarters, before it ended the extra pay. Lowe's plans an "expected repurchase of approximately $3.0 billion of stock" through the fourth quarter of the year, even as the company declined to commit to further COVID-19 bonuses for workers. After ending its "hero pay" in May, Kroger reported $211 million in stock buybacks in the second quarter, and announced a new $1 billion stock buyback program in September, sending stock prices https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 21/28 76?/25/2021-Windfall profits and deadly risks up. Meanwhile, the company's frontline grocery workers have gone 181 days without hazard pay, and will enter this new, deadlier phase of the pandemic earning some of the lowest wages in the industry. Figure 14. Stock buybacks of retail companies Stock buybacks I Planned stock : New stock buyback 2019 stock Company since pandemic I buybacks through I authorizations I buybacks i I began ! end of 2020 since pandemic i ! : I Ahold Delhaize $860 million $1.2 billion $1.2 billion $1.2 billion Dollar General $602 million $2.5 billion $2 billion $1.2 billion ------1 -Lowe's $562million $3 billion -$4.3 billion I I ----Walmart $500 million --$5.7 billion I ---i------>-----------, Kroger I $247 million $600 million-$1 billion $465 million I $1 billion I Walgreens Boots I I $0 $0 $4.2 billion Alliance --1 Home Depot $0 -I -$7 billion I --·--I ' 1 Target $0 $0 -$1.6 billion I -I ---Best Buy $0 -I -$1 billion 1-----I ---==--___ · _i$300 million ---Albertsons $0 -I Source: Company websites and quarterly earnings. Bl Metropolitan Policy Program at BROOKINGS By comparing the money companies spent on COVID-19 compensation with their profits, we can see how their absolute generosity compares to their relative generosity, taking into account their financial means. In the short run, extra pay to workers comes at the expense of profits. We were able to calculate relativeCOVID-19 compensation generosity for the six companies in our analysis that have public data on the total cost of their extra compensation to workers. The numbers are stark-they paint a picture of most companies prioritizing profits and wealth for shareholders over investments in their employees. On average, the six companies' contribution to compensating workers was less than half of the additional profit earned during the pandemic compared to the previous year. Amazon and Walmart could have quadrupled the hazard pay they gave their https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 22/28 77?/25/2021, Windfall profits and deadly risks frontline workers and still earned more profit than the previous year. In other words, Amazon and Walmart could have quadrupled the hazard pay they gave their frontline workers and still earned more profit than the previous year. Albertsons has only reported two quarters of profits; with forthcoming third-quarter profits and no additional hazard pay provided to its workers, its relative generosity will be even less. Only one company-Home Depot-spent more on COVID-19-related pay than it earned in additional profit. Overall, the companies' COVID-19 compensation to workers totaled just 17% of profits. Figure 15. Walrnart, Amazon, and Dollar General's investment in COVID-19 compensation pales in comparison to company profits COVID-19 compensation as a% of total 2020 profits; additional profits earned in 2020 compared to same period in 2019; stock buybacks since the start of the pandemic; and 2019 stock buybacks Dollar General Amazon Walmart Albertsons Lowe's Home Depot Cost of COVID-19 comp. $1.3 billion $1.2 billion $290 million $805 million Additional profit in 2020 $5.8 billion $4.9 billion $527 million $1.1 billion Additional profit in 2020 as a of COVID 19 comp. t-12% 22% 24% 55% 73% s1.1 s1.2 I 130% billi~ _ J_ bil~n __J_ 120% 100% 80% 60% 40% 20% 0% I • Total profit Profit as 2020 a ~c of COVID-19 comp. $1.4billion 5% $14.1 billion 9% $15.6 billion 8% $871 million 33% $4.9 billion 16% $10 billion 30% Stock buybacks since the pandemic $602 $0 $500 $621 million $0 COVID-19 comp. as 2019 ~o of stock stock buybacks buybacks since pandemic 12% $1.2 billion $0 240% $8.2 billion 130% $4.3 billion $8.1 billion • Cost of COVID-19 compensation • Cost of COVID-19 compensation as % of additional profit in 2020 as % of total profit I ·-·-Home Depot Lowe's Albertsona Walmart ($1.7 billion ($805 million) ($290 million) ($1.2 billion) Amazon Dollar General ($1.3 billion) ($73 million) additional profit) COVID-19 comp. as % of 2019 stock buybacks 6% 15% 19% 21% Source: Company quarterly earnings reports as of November 2020. B I Metropolitan Policy Program at BROOKINGS Dollar General stands out as performing especially poorly on both relative and absolute generosity. The company could have given its frontline workers COVID-19 bonuses worth 10 times the amount https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 23/28 78~/25/2021· Windfall profits and deadly risks it gave them in the spring and still have earned more profit than the previous year. In the second quarter, Dollar General spent more than eight times the amount of money on stock buybacks in the middle of the pandemic than it spent on COVID-19 compensation in the first half of the year. In their second quarter earnings report, the company stated it expected to repurchase a total of $2.5 billion in stock by the end of the fiscal year ending in January 2021-14 times the amount it pledged to spend on COVID-19 compensation and more than twice the amount it spent last year on share repurchasing. Another way to examine the relative generosity of companies' COVID~ 19 compensation is to compare the growth in workers' wages to the growth in the companies' profits and stock prices over the pandemic. The companies we analyzed were already profitable companies; the "growth" in profit reflects the extra profit companies earned during the pandemic that was not passed on to workers through additional wages, benefits, and safety measures. Overall, the least generous companies were the ones posting the biggest profit growth on average-a finding that isn't entirely surprising, as wage increases reduce the profits reported in a quarter. The profit of the nine companies whose frontline workers earned less than 10% wage growth since March grew on average by 49%. The average profit growth at more generous companies (those that boosted pay between 12% and 28%) was 21 %. Figure 16. Walmart, Amazon, and Dollar General's investment in COVID-19 compensation pales in comparison to company profits Best Buy ----==::r:======::J Home Depot Target ••t===r=======::::J Lowe's Kroger Albertson's Ahold Delhaize Amazon Costco Dollar General https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 24/28 79~/25/2021, -70% CVS Health -20% 30% •% wage raise from COVID-19 compensation • % company profit change % company stock price change Windfall profits and deadly risks 80% 130% 180% Source: Brookings analysis on hourly wage increase from COVID-19 compensation between March 13, 2020 and November 19, 2020; company quarterly earnings reported for 2020 compared to same time period in 2019; company stock price data compared from February 28, 2020 to November 19, 2020. B I Metropolitan Policy Program at BROOKINGS Over the course of the pandemic, stock prices rose much higher on average at the most generous companies than at the less generous companies. Stock prices at the four most generous companies (which boosted wages more than 10%) grew on average 47%, compared an average of 26% stock price growth at the less generous companies. Target, which tied for first place in our rankings of COVID-19 compensation generosity, also had the highest growth in its stock price. Best Buy and Target's stock prices have soared even after-and perhaps because of-their investments in workers. Target's exceptional financial performance in the third quarter demonstrates that generosity toward workers is not inconsistent with strong returns for shareholders. In the company's recent earnings call, Target's CEO highlighted the company's strategic focus on investments in its workforce, calling Target's team the "secret sauce" and responsible for the best quarter in the company's SO-year history. Comoanies c.an-and should-dg mo.rte. tsut po11cymaKers snoulcfn t wa1 . If ever there was a moment that called for a rebalancing of profits and people, it is now. Large companies are earning windfall profits, buoyed by federal stimulus. There is a national reckoning on racial equity, while disproportionately Black and brown retail workers earn low wages and risk their lives on the job. Alarm is growing about runaway inequality and the unequal sacrifices shouldered by frontline workers putting their lives on the line. At the outset of the pandemic, COVID-19 compensation to frontline workers looked promising. Every company in our analysis introduced some form of hazard pay in the spring. The extra pay was https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 25/28 804/25/2021 • Windfall profits and deadly risks modest, averaging just $1.10 per hour since the start of the pandemic across the 13 companies (and was as little as $0.21 per hour). Given the low starting wages that retail workers earn, the extra hazard pay was still not enough for a typical frontline worker to earn a $15 hourly wage at most companies. But it was a start. Since then, even these small pay increases ended, despite a 40% growth in earnings and nearly $17 billion in additional profit for the companies in this analysis. A few employers stood out as exceptions: Home Depot continued weekly bonuses until mid-November, while two companies-Best Buy and Target-permanently raised wages to $15 per hour. But at most big retail companies, extra hazard pay ended in June, an average of 133 days ago. The American public overwhelmingly supports pay increases for frontline workers. A May survey showed a surge in respect and admiration for grocery workers and other frontline workers who have carried on during the pandemic, even as millions of Americans sheltered safely at home. A survey by Just Capital found that two-thirds of Americans support companies' provision of hazard pay. National support for raising the federal minimum wage has grown since the pandemic began, especially among Republicans and independents. A recent survey found that more than seven in 10 Americans support raising the minimum wage, including a majority of Republicans. "You're making billions and billions of dollars, so spread the wealth. Spread it to the people who are responsible for you making the billions of dollars, for the people who rolling up their sleeves every day, making sure that these companies are running. That's where you need to put the money." Jeffrey Reid The failure of most companies in our analysis to include frontline workers more fully in their pandemic-enabled success highlights the limitations of capitalism and voluntary corporate action. Policy change and structural reform are needed. Policymakers have many ways to change the rules of the game for corporations, from raising the federal minimum wage to reigning in stock buybacks to enabling workers to collectively bargain. With a new presidential administration incoming and control of the U.S. Senate potentially flipping, federal lawmakers must consider ways to permanently aid our frontline workforce in absence of corporate support. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 26/28 812/25/2021 • Windfall profits and deadly risks Ana even 1r tne most successru1 reta11 companies are not 1ega11y rorcea to pay tneir worKers a decent wage, they should anyway. At a time when millions of American families are struggling and hundreds of thousands of small businesses are shuttering, these large companies are earning more profit than ever. Frontline workers will face even greater risks this winter. These companies should listen to employees like Jeffrey Reid, a meat clerk at a Giant Food outside Washington, D.C., who had this to say in October: "Know that grocery workers are human," said Reid. "They take pride in their work. They want to be compensated. They don't mind a hard day's work for a fair wage. Just don't insult a person's integrity. When these stores are making billions and billions of dollars, and then you want to do stock buybacks and take away the hazard pay, it's like a slap in their face. It's just a matter of doing right by your workers. Just do the right thing. You're making billions and billions of dollars, so spread the wealth. Spread it to the people who are responsible for you making the billions of dollars, for the people who rolling up their sleeves every day, making sure that these companies are running. That's where you need to put the money." About the Authors Molly Kinder David M. Rubenstein Fellow -Metropolitan Policy Program Molly Kinder's research examines the present and future of work, especially for low-wage workers and women. Molly's current research brings the voices and perspectives of workers at the frontline of COVID-19 to inform policy recommendations to better compensate, protect, and support essential workers. https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 27/28 822/25/2021 • Windfall profits and deadly risks Laura Stateler Research Assistant -Metropolitan Policy Program Julia Du Research Intern -Metropolitan Policy Program © 2021 THE BROOKINGS INSTITUTION CONTACT MEDIA RELATIONS TERMS AND CONDITIONS PRIVACY POLICY https://www.brookings.edu/essay/windfall-profits-and-deadly-risks/ 28/28 833/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers BROOKINGS The Avenue Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers MollY. Kinder and Laura Stateler Tuesday, December 22, 2020 Jeff Bezos and the Walntart heirs have grown $116 billion richer during the pandentic-35 titnes the total hazard pay given to ntore than 2.5 tnillion Atnazon and Walntart workers. T he COVID-19 pandemic has generated record profits for America's biggest companies, as well as immense wealth for their founders and largest shareholders -but next to nothing for workers. In a report published last month, we found that many of America's top retail and grocery companies have raked in billions during the pandemic but shared little of that windfall with their frontline workers, who risk their lives each day for wages that are often so low they can't support a family. This is especially true of Amazon and Walmart, the country's two largest companies. Together, they have earned an extra $10. 7 billion over last year's profits during (and largely because of) the pandemic-a stunning 56% increase. Despite this surge, we ranked Amazon and Walmart among the least generous of the 13 large retail and grocery companies studied in our report. The two companies could have quadrupled the extra COVID-19 compensation they gave to their workers through their last quarter and still earned more profit than last year. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 1/9 843/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers Figure 1. Amazon and Walmart could have more than quadrupled the COVID-19 compensation to frontline workers and still earned more profit than last year Additional profits earned in 2020 over same period in 2019 compared to cost of COVID-19 compensation $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 Amazon Walmart Lowe's Costco Home Depot I Additional profit in 2020 (billions) I Cost of COVID-19 compensation (billions) Source: Company quarterly earnings and company communications as of December 2020. Only COVID-19 compensation costs incurred during quarters already reported are included. B Metropolitan Policy Program at BROOKINGS Through the end of 2020, the total additional COVID-19 compensation Amazon and Walmart will have provided their frontline workers represents only a small fraction of the companies' extraordinary earnings, and an even smaller percentage of the stunning, pandemic-fueled wealth created for their richest shareholders. Stock prices for Amazon and Walmart have soared 70% and 36%, respectively, since the start of the pandemic. Meanwhile, worker wages will have grown only 7% and 6% by the end of the year, even after the new December bonuses that the two companies announced earlier this month. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 2/9 853/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers Since March, the fortune of Amazon founder Jeff Bezos (the richest person on the planet) has increased by $75.6 billion-42 times the cost of all pandemic hazard pay that Amazon will have given its roughly 1 million workers through the end of this year. The wealth of Alice, Jim, and Rob Walton (billionaire heirs to the Walmart fortune and the country's richest family) has grown by $40. 7 billion since the start of the pandemic-26 times the total amount of pandemic hazard pay Walmart will have provided its more than 1.5 million associates by the end of 2020. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 3/9 863/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers These disparities are also striking when broken down by the hour. Through the end of the year, we calculate that frontline Walmart associates earning starting wages and working 40 hours per week will earn the equivalent of an extra $0. 71 (pre-tax) for every hour they worked since the start of the pandemic. In comparison, the wealth of the three Walton siblings has risen $6.2 million per hour, even while they sleep. Frontline Amazon workers will earn the equivalent of an extra $0. 99 per hour (pre-tax) for each hour worked over the pandemic. Meanwhile Jeff Bezos' wealth has risen $11.5 million an hour. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 4/9 873/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers Workers are risking their lives for 'pennies' Today, the gap between the extraordinary wealth of Jeff Bezos and the Walton family and the struggles and sacrifices of frontline workers like Leah, a Walmart associate who preferred not to use her real name, is wider than ever. Even before COVID-19 pandemic, Leah struggled to make ends meet. The starting wage for Walmart associates like her is just $11 per hour-far less than the $16.54 per hour needed to meet the basic needs of a family, and considerably less than the $15 per hour starting wage at Walmart's competitors Target and Costco. During the pandemic, Leah has questioned the sacrifices she makes for a job that poses a deadly risk to her family but pays too little for her to support them. "At the end of the day, I am making you a rich person and I am putting myself at jeopardy," said Leah in an August interview, a Walmart associate who preferred not to use her real name. "I'm literally scared," Leah said an August interview. "I have two children and a grandbaby. Both of my children have asthma. We are all at risk." Leah explained that with a pay increase of just $2 to $3 extra dollars an hour, she could afford to buy essential items when she needs them most. Walmart's windfall pandemic profits could allow the company to easily afford such a raise: In the first three quarters of 2020, Walmart earned an additional $4. 9 billion compared to last year-a 45% increase. With that, the company could have offered hazard pay to associates like Leah equating to nearly an extra $2.50 per hour and still have earned more profit than the previous year, when workers weren't risking their lives. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 5/9 883/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers Instead, the three one-off bonuses that Walmart paid full-time workers between March and November were worth an equivalent of only $0.63 per hour. In Walmart's last quarter, ending in October, the company did not pay any COVID-19 bonuses at all, despite earning $1.8 billion in extra profits-a 56% increase compared to the previous year-and repurchasing $500 million of its shares. Earlier this month, Walmart announced a new round of bonuses for December. Combined, the four bonuses will translate to just $0. 71 per hour extra for full-time workers since the start of the pandemic through the end of this year-a 6% pay bump for a Walmart associate working 40 hours a week and earning starting wages. That is a fraction of what Leah said she needs just to get by. "It is really pennies that you are giving me to risk me and my family's life," she told us. "Is it worth taking the risk? At the end of the day, I am making you a rich person and I am putting myself at jeopardy." Anlazon and Wal01art's co01petitors exceed their generosity While Leah's low pay at Walmart has increased only modestly in the pandemic, many of her peers at competing retail companies earned significantly more COVID-19 compensation, often on top of higher starting wages. Companies like Costco, Home Depot, Best Buy, and Target grovided more generous COVID-19 comgensation to their workers through a mix of bonuses, hourly hazard pay bumps, and permanent wage increases. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 6/9 893/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers For example, Best Buy's extra COVID-19 compensation was four and half times more generous than the extra pay Walmart workers received and more than three times the extra pay for Amazon workers. The extra COVID-19 compensation for workers at Target, Home Depot, and Costco was approximately three times more generous than Walmart and more than twice as generous as Amazon. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 7/9 903/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers "Walmart is not doing enough compared to every other retailer out there," a Walmart associate who preferred to remain anonymous told us in an August interview. "They can afford to do more than they are to show they appreciate the risks we are taking being out on the frontline making them money." https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 8/9 913/3/2021 Amazon and Walmart have raked in billions in additional profits during the pandemic, and shared almost none of it with their workers The difference between Walmart and Amazon's generosity and their competitors is especially striking given the companies' rhetoric. Since the start of the pandemic, Walmart and Amazon have lavished their frontline workers with public praise, including TV ads calling them "heroes." However, many of Walmart and Amazon's competitors were significantly more generous to their workers during the pandemic-and did so with a lot less fanfare and less additional profit to pay for it. Costco, for example, drew so little attention to its generous hazard pay-no press releases, no information on their company website, no TV ads-that we didn't even know that the company had sustained its extra $2 per hour hazard pay throughout the pandemic until a proud Costco employee read our November report and informed us. The company has quietly spent $14 million of its pandemic profits each week to compensate its workers, on top of industry-leading starting wages of $15 per hour, according to a Costco executive who responded to our inquiry. As illustrated in Figure 1 above, Costco's generosity resulted in an even balance between additional profits and additional worker pay. A 1noral i1nperative to act Amazon and Walmart do not have to provide living wages or hazard pay to their workers. The prospects of Congress raising the federal minimum wage, mandating hazard pay, or introducing more sweeping changes likely hinge on the outcomes of January's Senate runoff elections in Georgia. And in a weak labor market with millions of unemployed workers, retail companies may not need to raise wages to attract applicants to risky work. But even if these corporate giants are not forced to share their pandemic wealth with the workers who make it possible, they should anyway. Companies like Walmart and Amazon have the means-and the moral imperative-to provide higher hourly hazard pay and raise wages permanently. Their frontline essential workforce, who have helped nearly all the rest of us get through the pandemic, certainly deserve it. Acknowledgments: The authors would like to thank Julia Du, co-author of the "Windfall profits, deadly risks" report, for her excellent research support. https://www.brookings.edu/blog/the-avenue/2020/12/22/amazon-and-walmart-have-raked-in-billions-in-additional-profits-during-the-pandemic-and-shar... 9/9 923/3/2021 SECTIONS 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune $1 FOR 10 WEEKS OFFER ENDS SOON LEARN MORE ABOUT YOUR SUBSCRIPTION LOGIN Mark Giangreco is in limbo at ABC-7 after an on-air line about casting anchor Cher ... Winter is over -for meteorologists. We chart how this season stands up ... Coronavirus in Ill updates: T" ) vaccination ADVERTISEMENT BUSINESS Food retailers see 'eye-popping profits' during pandemic. But frontline workers get crumbs. By SUSAN SELASKY, DETROIT FREE PRESS TRIBUNE CONTENT AGENCY I DEC 08, 2020 TOP BUSINESS VIDEOS Overstock CEO Weighs in on Crypto Market after Company's Early Bet on Bitcoin SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' "'-1l""A/ https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html --1/14 933/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune .;;Jl"'\YC.1'1VYY Profits soared an average of 39% in the first half of the year at supermarket chains and other food retailers thanks to the pandemic, although frontline workers reaped little or no benefit, a new report shows. At Cincinnati-based The Kroger Co., profits for the first two quarters were up a staggering 90%, according to the report from the Brookings Institution, a Washington, D.C.-based think tank. SPECIAL SALE ADVERTISEMENT ADVERTISEMENT ONLY $1 FOR 10 WEEKS Get stories that impact you ~ l"IC' t..11"\\A/ https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 2/14 943/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune -11'\Y C. l'IVYY "We find that while top retail companies' profits have soared during the pandemic, pay for their frontline workers -in most cases -has not," the report said. The report, released Nov. 20, revealed inequalities between retail workers' pay and company profits during the pandemic. Profits earned at top retailers were described as "eye-popping," even as most _quicklY-ended so-called hero naY-that was offered at the beginning of the pandemic in the form of bonuses or temporary bumps in pay for workers. Among the retailers cited in the report: • Kroger saw its net earnings for the first two quarters jump to more than $2.031 billion compared to $1.069 billion in the same period of 2019. Third quarter profits, which were reported last week, were not included in the Brooking Institute report. When those are included, the company's net earnings of $2.662 billion are up just short of 100% for the first three quarters compared to 2019. • Walmart profit was $15.6 billion for the first 3 quarters compared to $10.7 billion for the same period for 2019, a 45% increase. • Amazon, which owns Whole Foods, saw a $17.4 billion profit for the first three quarters, up $6 billion from the same period last year. That amounted to a 53% increase. • Costco's profit was $2.2 billion for the first two quarters of 2020, an increase of $244 million from 2019 or 11%. The study looked at profits at 13 publicly traded retail companies out of the top 20, including several grocery stores and retailers, such as Costco, Target and Amazon, that also sell groceries. The report also looked at how workers were compensated before and after the corona virus pandemic began in March. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' ~11"\\AI https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 3/14 953/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune -JM.V C. l'IVYY "Amazon and Walmart could have quadrupled the hazard pay they gave their frontline workers and still earned more profit than the previous year," said Molly Kinder, one of the report's authors. In an email statement to the Free Press, Rachael Lighty, an Amazon spokesperson, called the Brookings study "flawed" and said it doesn't "provide an accurate picture of wages, benefits and career opportunities that exist for employees at Amazon." Overall, the report revealed, retail companies cited in the analysis earned, on average, an extra $16.9 billion in profit in the first quarters of this year compared -to last year, as grocery stores and their workers became a lifeline for people during the initial lockdown. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' llr.11'\AI https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 4/14 963/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ~/-\Y C. 1'1VYY Heather Day, right, takes part in a May 15, 2020, protest outside the Fred Meyer grocery store in Burien, Washington against Fred Meyer's parent company Kroger. The protest, organized by the United Food and Commercial Workers International Union, targeted Kroger's plan to end the additional $2 hourly "hero pay" bonus that had been paid to work~rs since late March during the coronavirus pandemic. (Ted S. Warren/AP) Despite record-breaking profits at stores, many grocery workers saw hazard pay -typically an extra $2 per hour at the onset -taken away and replaced in some instances with bonuses, sometimes in gift card form. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' 111,,.11"'\\A/ https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 5/14 973/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune -11"\Y C. l'IVYY Kroger was listed under the report's "laggards" category. Under the company name was "from hero pay to zero pay." At the time of the report, it had been 181 days since Kroger workers received hazard pay. Kristal Howard, a Kroger spokesperson, said the company has invested more than $1 billion since March to reward its associates and safety measures to protect them and customers. In September and November, frontline associates received a $100 store credit and 1,000 fuel points. Howard added that Kroger continues provide benefits like paid emergency leave and financial support to associates facing hardships due to COVID-19 through its $15 million Helping Hands fund. After ending extra hazard 'hero' P-aY-, Kroger to give bonus to front-line workers» "Our most urgent priority throughout this pandemic has been to provide a safe environment for our associates and customers while meeting our societal obligation to provide open stores, e-commerce solutions and an efficiently operating supply chain so that our communities have access to fresh, affordable food and essentials," Howard said. The United Food and Commercial Workers union, which represents more than 1.3 million food and retail workers, has been pressing employers to reinstate hazard pay for its members as COVID-19 cases resurge across the country after a drop off during the summer. Grocery workers, both union and nonunion, are also demanding mask mandates, free COVID-testing, paid sick time for those sick or exposed and more. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' t...ln\AI https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 6/14 983/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ;,N,y C. l""IVYY "America's essential workers are facing a holiday season of unparalleled danger as COVID-19 cases explode across the country," Marc Perrone, president of the United Food and Commercial Workers International, said in a Nov. 25 nationwide press call. "With more than 1 million new COVID-19 cases in the past week, and deaths spiking to unprecedented levels, we are entering what could be the deadliest phase of this pandemic for millions of America's essential frontline workers." ADVERTISEMENT The UFCW said among its members affected by COVID-19, there have been 350 frontline worker deaths, including 109 grocery workers. More than 17,400 grocery workers have been infected or exposed to the virus, the UFCW said. Perrone said unless action is taken, "many more essential workers will become sick and more, tragically, will die." Walmart, whose profits were up 45%, gave full-time workers a $300 bonus in April, June and August, the report showed. Delia Garcia, a Walmart spokeswoman, said in an email that the retail giant has given out more than $.1.1 billion in special cash bonuses this year and awarded more than $1.3 billion in quarterly bonuses. The company also offers a COVID-19 SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' ~,n,a, https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 7 /14 993/3/2021 deaths» 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ;;J/-\V C. l'IIIVYY Amazon called its $15 an hour national minimum wage "industry-leading" and says its spent more than $2.5 billion globally on special bonuses and incentives this year. On Thanksgiving Day, Amazon announced a special bonus, totaling more than $500 million ,for frontline U.S. operations employees, according to a news release. Those employed by the company from Dec. 1 to Dec. 31 will receive a $300 bonus for full-time employees and $150 for part-time employees. "More than two years ago we increased our starting wage to at least $15 per hour, more in some places, which is nearly twice the Federal minimum wage," Lighty, the Amazon spokesperson, said. "Since then, we have urged other retailers to do the same and have actively lobbied for a federal minimum wage increase which has been unchanged since 2009." "Unlike many of those cited in the study, Amazon offers full-time jobs with benefits starting on the first day of employment," she said. Still, the study found, frontline grocery and retail workers, considered essential -during the pandemic, saw companies do away with hazard pay and other bonuses. [Most read] Stimulus check UP-dates: Biden, Senate Democrats tighten income limits for P-ay..ments, firm UP-SUP-P-Ort for COVID-19 relief bill » "In more than a dozen interviews, frontline retail workers shared with us a strong desire for receiving hazard pay while putting their lives on the line every shift," the report said. "They preferred hourly pay increases of several dollars an hour Oike overtime or holiday hours) rather than occasional bonuses, which fail to compensate workers for each additional hour worked, are less predictable, and are less generous in most cases," SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' t...ln\AI https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 8/14 1003/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ..11'\YC. l~VYY ADVE • Starting pay or the average hourly pay for a cashier. • COVID-19 compensation generosity based on hours, bonuses and permanent wage increases from March 13-Nov. 19. • Company profit and days since last hazard pay and worker compensation in relation to company financial performance. From the start, workers, and some of the unions that represent them, were very vocal about risking their lives amid a deadly pandemic while working in an industry where wages are often low. ADVERTISEMENT ""l'&T!.a..1--.] ___ 1 ___ ..! __ .... __ 1 _____ ! ___ ---!11! ____ .J:£_ ___ ,1..l!--------.a..!-1 ___ ,1.._!1 _____ 1 ____ £ __ _ SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' ~ln\AI https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 9/14 1013/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune .Jl-'\Y C. l'IVYY The report also analyzed company stock buyback programs where companies repurchase its own shares, often driving up the company stock price. [Most read] DailY-horoscoP-e for March 3, 2021 » "Some suspended the stock buybacks and at the same time that's when they offered hazard pay," Kinder said. But some reinstated stock buybacks, the report said, including Walmart reporting $500 million in new share repurchases for the third quarter, the report said. Once Kroger ended its "hero pay" in May, it reported $211 million in stock buybacks in the second quarter and announced a new $1 billion stock buyback program in September, sending stock prices up, according to the report. "Workers are putting their lives on the line and there's no excuse to not pay frontline workers more," said Kinder. "These are the companies that have the financial resources but also the moral imperative to raise wages." Retailers in the study that didn't sell groceries included Home Depot, Best Buy, CVS and others. Some companies did do better than others. Best Buy, Target and Home Depot were considered leaders who permanently increased wages. [Most read] Amazon announces new logistics facilities in Valparaiso, Merrillville » "These three companies provided the most COVID-19 compensation to workers through temporary pay increases, bonuses, and permanent wage increases," the report found. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' ~ln\A# https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story. html 10/14 1023/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ~l"\YC.1 .. VYY John Cakmakci, of Local 951 based in Grand Rapids, Michigan, said of all the employees and companies the local has labor contracts with, he is most disappointed in Kroger. Local 951 represents nearly 30,000 workers, mainly at Meijer, but also at Kroger, as well as the JBS meat processing plant in Plainwell. When it came to extra worker appreciation or hero's pay, Cakmakci said, Kroger was the last one to come to the table with an offer of temporary pay increases for its workers. Kroger was also the first to stop offering the extra pay, he said. [Most read] Column: Teachers union boss in California caught taking daughter to P-rivate school becomes P-Oster boY-for school choice » "It's baloney," Cakmakci said by phone. "It's absolutely a money grab. Bar none, Kroger is the worst. It's like getting water from rock. I can't believe you guys are making the money you're making and acting like you are losing money." Cakmakci said Kroger gave employees a bonus of a $100 Kroger gift card several weeks ago. They also got 1,000 gas points, which is equal to $1 off a gallon for up to 35 gallons for a one-time use. Privately owned Meijer, though not included in the study, is more generous to its employees, according to Cakmakci. Though the Grand Rapids, Michigan-based retailer also eliminated its additional hourly pay, it gave other bonuses. Meijer employees, he said, received mPerks gift cards of $100 on Labor Day, $250 in November and are expected to receive $250 in December. In between, Meijer employees also received free rotisserie chicken with sides several times. "At least it's something," Cakmakci said. SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you e A\/C' 111,.11"\\A/ https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 11 /14 1033/3/2021 'Eye-popping' COVID-19 profits. Crumbs for frontline workers. -Chicago Tribune ;JN.Y C. l'IVYY ©2020 wwwJr.eeP-,.com. Visit atfr.e{,,._ ___ . __ Distributed by Tribune Content Agency, LLC. Follow _@ChiTribBusiness on Facebook and _@ChiTribBiz on Twitter. CCPANotice Hero Wars For Free. No install HERO WARS I SPONSORED Play just 1 minute to find out why everyone loves this RPG! HERO WARS I SPONSORED Tesla CEO Is Contributing to a $1 Billion Investment In This ew Technology MOTLEY FOOL I SPONSORED dy Jackson: This 3 Minute Routine Transformed My Health CEO Thinks This Tech Could Be 35 Amazons (!t CHICAGO TRIBUNE James Bond actor Sean Connery's causes of death released (!t CHICAGO TRIBUNE Fox News anchors Lou Dobbs, Maria Bartiromo and Jeanine Pirro file motions to dismiss Smartmatic defamation lawsuit By BllTAII SB'EENIDIRUP\IARIETY S NY DAILY NEWS Small dog taunted crocodile for years -until the croc finally ln~t it~ n~t1PnrP SPECIAL SALE ONLY $1 FOR 10 WEEKS Get stories that impact you ~ A\/C' 111.11"\\A/ https://www.chicagotribune.com/business/ct-biz-covid-19-frontline-workers-grocery-retail-20201208-nzbobitsl5bqzof3pyt7wptlve-story.html 12/14 1042/25/2021 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool Has the Coronavirus Changed Grocers· Profitability? Actually, No. Food retailers are no less and no more profitable than they were before the pandemic despite their adaptation efforts. ~ James Brumley {TMFjbrumley) fm Nov 16, 2020 at 10:20Afv1 • Author Bio This article represents the opinion of the writer, who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis --even one of our own --helps us all think critically about investing and make decisions that help us become smarter, happier, and richer. Follow @jbrumley ~ 963 followers } The premise makes enough sense. The expansion of curbside pickup in the age of COVID-19 --along with the growth of online orders --means more grocery store employees are needed. At the same time, since consumers are shopping online, at least some of them will hunt for the lowest prices. Smart food retailers will make a point of being price-competitive. As it turns out though, grocery store operators like Kroger (NYSE:KR) and Albertson's (NYSE:ACI) aren't being overwhelmed by new expenses. That's not to say they haven't seen their costs go up. They have seen their operating spending increase. Those increased costs, however, have only more or less mirrored their respective increases in revenue. The coronavirus pandemic has evenly scaled up the size of grocers' operations. https://www.fool.com/investing/2020/11/16/has-the-coronavirus-changed-grocers-profitability/ 1/6 1052/25/2021 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool IMAGE SOURCE: GETTY IMAGES. Business as usual Three major grocery names in the U.S. have posted results for what most closely aligns with the third calendar quarter of the year. That's a timeframe that covers results beginning a few months after COVID-19 made landfall in the United States, but also a period when the effect of the pandemic was in full force. In other words, their most recent quarters serve as a look at how each name fared after adequate time to develop a response to the contagion. That's {primarily) more curbside pickup sites and in-store fulfillment of online orders. So how much more did all of these added services cost these companies? Not much. Take the recently reported fiscal second-quarter numbers from Kroger as an example. For the three-month stretch ending in mid-August, its cost of sales as a percentage of revenue fell by a little less than a percentage point, while its selling, general, and administrative expenses grew around 30 basis points year over year. The end result was improved profits and improved profit margins. $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 Kroger (KR) Quarterly Income Statement Items (also -expressed as a % of sales) .. -2.00/4 2.7% I i 8/17/2019 8/15/2020 -r,. .. ,., eialo111!u• -Ct:.0. I\ CVftaftll!"AIII" -nftaP9•i .... ,. i .. .,. __ a https://www.fool.com/investing/2020/11 /16/has-the-coronavirus-changed-grocers-profitability/ 2/6 1062/25/2021 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool • '-lliiH, IWI ilGIGol • ~~ana;."fllli:ill~ • Vf1GIGLlll5 IUl,,llllllli:i DATA SOURCE: KROGER INVESTOR RELATIONS. CHART BY AUTHOR. DOLLAR FIGURES ARE IN MILLIONS. Walmart (NYSE:WMT) saw similarly small changes in its relative costs for the quarter ending in July. Selling and administrative expenses were up 7.9% year over year, while merchandise costs grew by a smaller 4.9% year over year. In that the retailer's cost of goods sold is the bigger expense of the two, however, the company's 5.6% top-line improvement translated into an 8.5% year-over-year increase in operating income. $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Walmart (WMT) Quarterly Income Statement Items (also expressed as a% of sales) -4.396 r4.4% / 7/31/2019 7/31/2020 • Cost of sales • SG&A Expenses • Operating income DATA SOURCE: WALMART INVESTOR RELATIONS. CHART BY AUTHOR. DOLLAR FIGURES ARE IN MILLIONS. Even a relatively smaller Albertson's has thrived rather than buckled under big changes in the grocery marketplace. In fact, it's benefited more than most. Though its top line grew 11.2% on a huge e-commerce improvement. its merchandise costs were only up 9.3%, while its selling and administrative spending only grew 6.2% year over year. That led to a triple-digit percentage increase in operating income, producing profit margins more in line with its much bigger rivals. $18,000 ~1,; nnn Albertson's (ACI) Quarterly Income Statement Items (also expresse·d as a% of sales) 3.5% .r 1.0% t https://www.fool.com/investing/2020/11 /16/has-the-coronavirus-changed-grocers-profitability/ 3/6 1072/25/2021 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool I I 9/7/2019 9/12/2020 • Cost of sales • SG&A Expenses • Operating income DATA SOURCE: ALBERTSON'S INVESTOR RELATIONS. CHART BY AUTHOR. DOLLAR FIGURES ARE IN MILLIONS. It's affordable These are important comparisons. More than a few discussions of late have focused on the costs related to adaptations to the new normal. Costco (NASDAO:COST) CFO Richard Galanti, for instance, questions whether or not the potentially added sales justify the added exP-ense of offering curbside pickup stalls. Analysts have expressed cost concerns too. Accenture's global head of retail Jill Standish wrote for Chain Store Age in May, when the pandemic was still young, that the nascent surge in online shopping opportunity "brings with it a higher operating cost structure, which can impact margin." And this may still be a worry for non-grocery retailers that have ramped up their online efforts, added curbside pickup, and use stores as fulfillment centers. At least for the grocers, and mostly-groceries names like Walmart, adapting to the environment by adding contactless shopping options hasn't proven uncontrollably expensive. There is one thing to watch on this front, however. That's the likely scale-back in the usage of online grocery shopping and curbside pickup once the coronavirus pandemic is in the rearview mirror. Grocery retailers will have to pivot resources back into serving more walk-in shoppers, though such a pivot won't necessarily be an easy one. Should you invest $1,000 in The Kroger Co. right now? Before you consider The Kroger Co., you'll want to hear this. https://www.fool.com/investing/2020/11 /16/has-the-coronavirus-changed-grocers-profitability/ 4/6 1082/25/2021 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now ... and The Kroger Co. wasn't one of them. The online investing service they've run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys. See the 10 stocks *Stock Advisor returns as of February 24, 2021 James BrumleY-has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Accenture and Costco Wholesale. The Motley Fool has a disclosure 12.olicY-.. The Motley Fool Makes SG Buy Alert SG is one of the greatest arrivals in technology since the birth of the internet. And in 2020 ... we could see an onslaught of new wealth-building opportunities that would potentially dwarf any that came before them. • Bigger than the dot-com boom • Bigger than the Bitcoin boom of 2017 • Bigger than pot stocks There's a perfect storm being created by some of the biggest tech titans in the world ... with each one fighting tooth and nail to win the SG arms race. But the smart money is doing something different... Fortunately, our team at Motley Fool Rule Breakers has identified one under-the-radar California company that's cleverly positioned itself to dominate the SG industry with its unique business model and technology. Simply click here to get the full story now. Learn more https://www.fool.com/investing/2020/11/16/has-the-coronavirus-changed-grocers-profitability/ 5/6 1092/25/2021 Has the Coronavirus Changed Grocers' Profitability? Actually, No. I The Motley Fool https:llwww.fool.com/investing/2020/11/16/has-the-coronavirus-changed-grocers-profitability/ 6/6 1103/3/2021 7-Eleven 40 net profit shrinks 61% on higher costs and Covid-19 impact Breaking news from around the world Get the Microsoft News extension for Chrome No thanks Add it now (fi) . Prodigy Labs Jl . • -n -~ ,;,. ··1 '..-e."j".: -',; -~. Lebur hampir setengah Confirmed: Zahid's juta demi cinta letter to PM on ... Come Visit Our Lab Space! ES) Prodigy Scientific Learn more .....,_ Papadom kini dalam perisa telur masin Cinemas to re-open on Malaysian group in bid IG fir Friday to buy former... offic1 7-Eleven 4Q net profit shrinks 61% on higher costs and Covid-19 impact Justin Lim 5 days ago © Provided by The Edge > KUALA LUMPUR (Feb 26): 7-Eleven Malaysia Holdings Bhd saw its net profit slump 60.84% to RM4.44 million in the fourth quarter ended Dec 31, 2020 (4QFY20), from RM11.35 million a year earlier. Earnings per share fell to 0.39 sen from 0.99 sen. Quarterly revenue eased 0.22% to RM591.42 million from RM592.73 million, the group's bourse filling showed. The convenience store operator said the re-imposition of the conditional movement control order (CMCO) from October last year had adversely affected its operations in 4QFY20. https://www.msn.com/en-my/money/topstories/7-eleven-4q-net-profit-shrinks-61-on-higher-costs-and-covid-19-impact/ar-BB 1 e30X9?pfr= 1 +++ 1/4 1113/3/2021 7-Eleven 4Q net profit shrinks 61% on higher costs and Covid-19 impact Breaking news from around the world Get the Microsoft News extension for Chrome Seniors Are Ditching Their Auto Insurance and Doing This Instead Ad Comparisons.org Best & Worst Refinance Mortgage Companies Of 2021 Ad Comparisons.org [l> [l> Read more <Q2 3 4 5) YOU MAY LIKE Ad taboola r> Local Program Pays California Homeowne ••• thenocostsolarprogra ... NFL Star Rob Gronkowski's Go To ... 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Walgreens .. -.. .. •.•••••• Bo~ts -.'-.•-••'' Alliance ,_; I f., Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Walgreens Boots Alliance Reports Fiscal Year 2020 Results October 15, 2020 Company Delivers Results at High End of Guidance Range; Expects EPS Growth in Fiscal 2021 Fourth quarter Walgreens Boots Alliance highlights, year-over-year • Sales increased 2.3 percent to $34.7 billion, up 2.3 percent on a constant currency basis • Operating income decreased 26.0 percent to $650 million; Adjusted operating income decreased 27.7 percent to $1.1 billion, down 27.4 percent on a constant currency basis • EPS decreased 42.8 percent to $0.43; Adjusted EPS decreased 28.2 percent to $1.02, down 27.9 percent on a constant currency basis; reflecting an estimated adverse COVID-19 impact of approximately $0.46 Fiscal 2020 highlights, year-over-year • Sales increased 2.0 percent to $139.5 billion, up 2.5 percent on a constant currency basis • Operating income decreased 73.7 percent to $1.3 billion; Adjusted operating income decreased 24.9 percent to $5.2 billion, down 24.8 percent on a constant currency basis • EPS decreased 88.0 percent to $0.52; Adjusted EPS decreased 20.8 percent to $4.74, down 20.6 percent on a constant currency basis; reflecting an estimated adverse COVID-19 impact of approximately $1.06 • Net cash provided by operating activities was $5.5 billion, a decrease of $109 million compared with fiscal 2019; Free cash flow increased 5.6 percent to $4.1 billion Fiscal 2021 guidance • Company introduced fiscal 2021 guidance of low single-digit growth in adjusted EPS at constant currency rates https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 1/29 1153/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance DEERFIELD, II1.-(BUSINESS WIRE)-Walgreens Boots Alliance, Inc. {Nasdaq: WBA) today announced ~ I I:,,. ~ -.--:,,. -~~~ar:.eens firw.\'?~~,..-~ ror the fiscal year and fourth quarter that ended August 31, 2020 . .. . ---,,_._._,, Alliance "'I I-, Executive Vice Chairman and CEO Stefano Pessina said, "I am pleased to report results that came in at the high end of our expectations as we continue to adapt and transform our business model to changing customer needs. Despite uncertainty amid the global COVID-19 pandemic, we are seeing gradual improvement in key U.S. and UK markets and continued strong performance in our wholesale business. I'm also encouraged by the accelerating growth in our e-commerce platforms. Now, more than ever, our pharmacy-centered business is at the heart of community healthcare and we are expanding on that role for the future. I continue to be inspired by the tireless efforts of our teams as they support and care for our customers, patients and communities, while accelerating progress on our clear set of strategic priorities. Looking ahead, we are projecting adjusted EPS growth in fiscal 2021, as reflected in our new guidance." Overview of Fourth Quarter Results Fiscal 2020 fourth quarter net earnings attributable to Walgreens Boots Alliance decreased 44. 9 percent to $373 million compared with the same quarter a year ago and net earnings per share 1 decreased 42.8 percent to $0.43. Adjusted net earnings2 decreased 30. 9 percent to $887 million, down 30.6 percent on a constant currency basis. Adjusted earnings per share were $1.02, down 28.2 percent on a reported currency basis and down 27. 9 percent on a constant currency basis, compared with the same quarter a year ago. The decreases in both net earnings and adjusted net earnings were primarily due to an estimated adverse COVID-19 impact of $0.46, lower U.S. pharmacy gross profit and year-on-year bonus changes, partially offset by Transformational Cost Management Program savings. Sales in the fourth quarter were $34.7 billion, an increase of 2.3 percent from the year-ago quarter on both a reported and constant currency basis. Operating income was $650 million, a decrease of 26.0 percent from the same quarter a year ago. Adjusted operating income was $1.1 billion, a decrease of 27.7 percent from the same quarter a year ago, and a decrease of 27.4 percent on a constant currency basis. The company estimates adverse COVID-19 impact of approximately $520 million, or 34 percentage points of growth. Net cash provided by operating activities was $2.1 billion in the fourth quarter, a decrease of $292 million from the same quarter a year ago. Free cash flow was $1.7 billion, a decrease of $248 million versus the same quarter last year. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 2/29 1163/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Overview of Fiscal Vear Results ~ • I:-. , .... ,-, ... ,.... Walgreens .. •••••••••. Boots ·-· Fis"' 1 K1261Kffl~arnings attributable to Walgreens Boots Alliance decreased 88.5 percent to $456 million, while net earnings per share 1 decreased 88.0 percent to $0.52, compared with the prior year, primarily due to third quarter non-cash impairment charges and costs related to the Transformational Cost Management Program. Excluding these items, adjusted net earnings attributable to Walgreens Boots Alliance2 in fiscal 2020 decreased 24.5 percent to $4.2 billion, down 24.3 percent on a constant currency basis, compared with the prior year. Adjusted earnings per share decreased 20.8 percent to $4.74, down 20.6 percent on a constant currency basis, compared with the prior year, primarily due to estimated adverse COVID-19 impact of approximately $1.06, lower U.S. pharmacy gross profit and year-on-year bonus changes, partially offset by Transformational Cost Management Program savings. Sales increased 2.0 percent to $139.5 billion in fiscal 2020 compared with the prior year. On a constant currency basis, sales increased 2.5 percent. Operating income in fiscal 2020 was $1.3 billion, a decrease of 73.7 percent from the prior year. Adjusted operating income was $5.2 billion, a decrease of 24. 9 percent, and a decrease of 24.8 percent on a constant currency basis. The company estimates adverse COVID-19 impact of approximately $1.2 billion. Net cash provided by operating activities was $5.5 billion in fiscal 2020, a decrease of $109 million from fiscal 2019. Free cash flow was $4.1 billion, an increase of $219 million from fiscal 2019. Company Outlook The company today introduced fiscal 2021 guidance of low single-digit growth in adjusted earnings per share at constant currency rates. While the company anticipates a gradual reduction in COVID-19 impacts, the first half results will continue to be negatively impacted when compared with the pre-COVID-19 first half of fiscal 2020. However, for the second half, the company anticipates strong adjusted EPS growth, as these effects subside and recovery plans take hold in key markets. Significant investments in fiscal 2021 are expected to accelerate the company's customer-centric approach, with specific focus on transforming omnichannel capabilities and offerings across retail and healthcare. These investments are expected to contribute to the second-half growth profile. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 3/29 1173/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Whil~ this guidance anticipates a continued gradual reduction in COVID-19 impacts, the evolution of the p /• -•-'1t. ~ii~is uncertain. COVID-19 could present both incremental risks as well as opportunities for .. -... ... , 1 1 ,.,. Alliance the if1pany s ousiness. Progress on Strategic Priorities Selected highlights of the company's recent progress on strategic initiatives include the following: • Boots.com sales rose 155 percent and Walgreens.com sales rose 39 percent in the fourth quarter. • Walgreens has completed more than 1 million COVID-19 tests at more than 440 sites in 49 states and has increased testing capacity to 500,000 per month. More than 70 percent of testing sites are located in underserved areas. Results are generally provided within 24-72 hours. Walgreens also launched a COVID-19 testing program for businesses. • GuoDa, the Chinese retail pharmacy chain in which WBA has a minority investment, expanded to more than 7,500 pharmacies, nearly double the count when the WBA-GuoDa relationship began in 2018. • Mass personalization boosted Walgreens retail sales by 140 basis points in the fourth quarter. • Walgreens and DoorDash announced an on-demand delivery collaboration. • Customer response to Walgreens pick-up options has been strong, with sales from online orders collected at drive-thru windows and curbside up more than two fold from the third quarter. • The Transformational Cost Management Program remains on track to deliver in excess of $2 billion in annual cost savings by fiscal 2022. • The pace of technology transformation accelerated, with more than 3,500 Walgreens stores converted to retail SAP as of the end of the fourth quarter. Looking Ahead As the company evolves its business model, the focus is on the following key strategic initiatives: • Accelerating the Boots UK turn-around • Advancing omnichannel capabilities, including launching an enhanced customer loyalty program, myWalgreens, to more than 100 million consumers and expanding convenient options for pick-up in as little as 30 minutes https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 4/29 1183/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance • Leveraging investment in VillageMD, opening 500 to 700 full-service doctor offices over the next five ~ I Ii-_ ,, .... ,-... ,.... W~!s_reeos . ••151).nl~.PC,Bt4Bfi 1rnt1al phase of openings planned for fiscal 2021 .. ·---.... ,_._. __ ., Alliance ,,.; I I-, • Continuing implementation of the Transformational Cost Management Program • Expanding COVID-19 testing for businesses and preparing capability for COVID-19 vaccinations Business Divisions Retail Pharmacy USA: Fourth quarter sales in Retail Pharmacy USA increased 3.6 percent to $27.0 billion, including the impact of previously announced store closures, reflecting improved retail sales and prescription volume trends. Sales in comparable stores also increased 3.6 percent from the year-ago quarter. Prescriptions filled in the fourth quarter increased 1.6 percent compared with the same quarter a year earlier. In comparable stores, prescriptions filled increased 3.6 percent from a year earlier, an improvement of 3.2 percentage points compared with the third quarter. The number of prescriptions filled was 287.6 million, including immunizations, adjusted to 30-day equivalents. Pharmacy sales, which accounted for 75.6 percent of the division's sales in the quarter, increased 4.2 percent compared with the year-ago quarter. Comparable pharmacy sales increased 3.2 percent. The division's retail prescription market share on a 30-day adjusted basis in the fourth quarter decreased approximately 30 basis points over the year-ago quarter to 20.7 percent, as reported by IQVIA. This result was mostly due to store closures. Retail prescription market share in fiscal 2020 declined by 40 basis points to 20. 9 percent, compared with 21.3 percent in fiscal 2019. Retail sales increased 1.5 percent in the fourth quarter compared with the year-ago period, including the impact of store optimization programs. Comparable retail sales increased 4.7 percent, boosted by 15 percent growth in the health and wellness category and 8 percent growth in the personal care category. This was partly offset by a 3 percent decrease in the beauty category. Results were boosted by increased demand for PPE and by the performance of the mass personalization initiative. Walgreens.com sales grew 39 percent in the quarter. Gross profit decreased 3.1 percent compared with the same quarter a year ago, reflecting pharmacy reimbursement pressure, lower retail margin due to COVID-19 mix impact and higher retail comprehensive loss. Adjusted gross profit decreased 4.5 percent. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 5/29 1193/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance SG&A decreased by 2.7 percent, reflecting store optimization and acquisition related costs in the year-ago /I.. '" q ~ • ·•~•' ci'~d~G&A decreased by 0.1 percent as savings from the Transformational Cost ... -.. Ma'n~imtmi9f8gram offset COVID-19 related costs, year-on-year bonus changes, inflation and investments. Operating income in the fourth quarter decreased 5.8 percent from the year-ago quarter to $659 million. Adjusted operating income in the fourth quarter decreased 22.2 percent from the year-ago quarter to $884 million. Operating income and adjusted operating income included an adverse impact of approximately $200 million due to COVID-19. Retail Pharmacy International: Retail Pharmacy International had fourth quarter sales of $2.3 billion, a decrease of 14. 9 percent from the year-ago quarter, including a favorable currency impact of 0.5 percent. Sales decreased 15.4 percent on a constant currency basis, mainly due to a 16. 7 percent decrease in Boots UK sales. Boots UK comparable retail sales decreased 29.2 percent on a constant currency basis as footfall in stores continued to be significantly reduced due to COVID-19, particularly in major high street, train station and airport locations. Footfall did, however, improve steadily in the fourth quarter compared with the third quarter. Boots UK market share was lower in all categories except beauty, as the pandemic continued to impact heavily on buying habits and consumers temporarily shifted purchasing to one-stop grocery shopping. Boots.com sales growth accelerated to 155 percent compared with the year-ago quarter, partially offsetting the reduced footfall. Comparable pharmacy sales in Boots UK increased 0.4 percent on a constant currency basis, reflecting favorable timing on National Health Service (NHS) reimbursement, which mitigated the impact of lower prescription volume and reduced demand for pharmacy services during the pandemic. Gross profit decreased 24.7 percent compared with the same quarter a year ago, including a favorable currency impact of 0.7 percent. Adjusted gross profit decreased 25.7 percent on a constant currency basis, reflecting lower UK retail sales, higher fulfillment costs, marketing investments to drive customer traffic and lower fixed supplier contributions. SG&A in the quarter decreased 8.7 percent from the year-ago quarter to $964 million, including an adverse currency impact of 0.9 percent. On a constant currency basis, adjusted SG&A decreased by 9.7 percent. The decreases in SG&A and adjusted SG&A both reflect short-term cost mitigation initiatives and https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 6/29 1203/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance savylQ.~" from the Transformational Cost Management Program. ,.-,-••,, Walgreens :,:,•,:,: Boots Op~•-'"g fH~fflfte in the fourth quarter decreased $181 million from the year-ago quarter to an operating loss of $132 million, primarily as a result of retail sales in the UK. Adjusted operating income decreased $197 million to an adjusted operating loss of $3 million. On a constant currency basis, adjusted operating income decreased $196 million. The estimated adverse COVID-19 impact on both operating income and adjusted operating income was approximately $300 million. Pharmaceutical Wholesale: Pharmaceutical Wholesale had fourth quarter sales of $6.0 billion, an increase of 4.3 percent from the year-ago quarter. On a constant currency basis, sales increased 4.3 percent, led by emerging markets, Germany and France. Operating income in the fourth quarter was $124 million, which included $57 million from the company's equity earnings in AmerisourceBergen, compared with operating income of $129 million in the year-ago quarter, which included $59 million from the company's equity earnings in AmerisourceBergen. Adjusted operating income increased 7.1 percent to $245 million, up 8.3 percent on a constant currency basis, mainly reflecting sales growth and cost management. Dividends Declared During the fourth quarter the WBA board of directors declared a quarterly dividend of 46.75 cents per share, an increase of 2.2 percent. The dividend was payable September 11, 2020 to stockholders of record as of August 19, 2020, and raised the annual rate from $1.83 per share to $1.87 per share. This marked the 45th consecutive year that WBA and its predecessor company, Walgreen Co., have raised the dividend, and the 87th year a dividend has been paid. Conference Call Walgreens Boots Alliance will hold a one-hour conference call to discuss the fourth quarter results beginning at 8:30 a.m. Eastern time today, October 15, 2020. The conference call will be simulcast through the Walgreens Boots Alliance investor relations website at http://investor.walgreensbootsalliance.com. A replay of the conference call will be archived on the website for 12 months after the call. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 7/29 1213/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance The re lay also will be available from 11 :30 a.m. Eastern time, October 15, 2020 through October 22, 2020 by,:-:-,-;, .m1i91~as 8367 within the U.S. and Canada, or +1 416 621 4642 outside the U.S. and Canada, .,. -., usin 1 ·~pla~1~88~ 6490979. 1 All references to earnings per share (EPS) are to diluted EPS attributable to Walgreens Boots Alliance. 2 Please see the "Supplemental Information (Unaudited) Regarding Non-GAAP Financial Measures" at the end of this press release for more detailed information regarding non-GAAP financial measures used, including all measures presented as "adjusted" or on a "constant currency" basis, and free cash flow. Cautionary Note Regarding Forward-Looking Statements: All statements in this release that are not historical includingl without limitation, those regarding estimates of and goals for future tax, financial and operating performance and results (including those under "Company Outlook," "Progress on Strategic Priorities'' and ''Looking Ahead" aboveJ the expected execution and effect of our business strategiesl the potential impacts on our business of the spread and effects of the COVID-19 pandemicl our cost-savings and growth initiatives, pilot programsl strategic partnerships and initiatives, and restructuring activities and the amounts and timing of their expected impact and the delivery of annual cost savings are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 7995. Words such as ''expect,11 ''likely," "outlook," "forecast," "preliminary," "pilot," "would,'' "could," "should," "can," "will," "project," "intend," "plan," "goal," "guidance/' "target," "aim," "continue," "sustain," "synergy," "transform," "accelerate," "model," "long-term," "on track," ''on schedule," "headwind," "tailwind," "believe," "seek," "estimate," "anticipate," "upcoming," "to come," "may," "possible," "assume," and variations of such words and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptionsl known or unknown, that could cause actual results to vary materially from those indicated or anticipated, including, but not limited to, those relating to the spread and impacts of COVID-19, the impact of private and public third-party payers' efforts to reduce prescription drug reimbursements, fluctuations in foreign currency exchange rates, the timing and magnitude of the impact of branded to generic drug conversions and changes in generic drug prices, our ability to realize synergies and achieve financial tax and operating results in the amounts and at the times anticipated, the inherent risks, challenges and uncertainties associated with forecasting financial results of large, complex organizations in rapidly evolving industries, particularly over longer time periods, and during periods with increased volatility and uncertainties, our supply, commercial and framework arrangements and transactions with AmerisourceBergen and their possible effects, the risks associated with the company's equity method investment in AmerisourceBergen, circumstances that could give rise to the termination, cross-termination or modification of any of our contractual obligations, the amount of costs, fees, expenses and charges incurred in connection with strategic transactions, whether the costs and charges associated with restructuring initiatives will exceed estimates, our ability to realize expected https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 8/29 1223/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance savirzg_s and benefits from cost-savings initiatives, restructuring activities and acquisitions and joint v /•,•,-'~ iJCdcJW,iW,~unts and at the times anticipated, the timing and amount of any impairment or other .. -.. ch~• •-;: tJt-Jliw;t;?ng and severity of cough, cold and flu season, risks relating to looting and vandalism in regions in which we operate and the scope and magnitude of any property damage, inventory loss or other adverse impacts, risks related to pilot programs and new business initiatives and ventures generally, including the risks that anticipated benefits may not be realized, changes in management's plans and assumptions, the risks associated with governance and control matters, the ability to retain key personnel changes in economic and business conditions generally or in particular markets in which we participate, changes in financial markets, credit ratings and interest rates, the risks relating to the terms, timing, and magnitude of any share repurchase activity, the risks associated with international business operations, including the risks associated with the withdrawal of the United Kingdom from the European Union and international trade policies, tariffs, including tariff negotiations between the United States and China, and relations, the risks associated with cybersecurity or privacy breaches related to customer information, changes in vendor, customer and payer relationships and terms, including changes in network participation and reimbursement terms and the associated impacts on volume and operating results, changes in pharmaceutical manufacturers' pricing or distribution policies or practices, risks related to competition, including changes in market dynamics, participants, product and service offerings, retail formats and competitive positioning, risks associated with new business areas and activities, risks associated with acquisitions, divestitures, joint ventures and strategic investments, including those relating to the asset acquisition from Rite Aid, the risks associated with the integration of complex businesses, the impact of regulatory restrictions and outcomes of legal and regulatory matters, and risks associated with changes in laws, including those related to the December 207 7 U.S. tax law changes, regulations or interpretations thereof. These and other risks, assumptions and uncertainties are described in Item 7 A (Risk Factors) of our Annual Report on Form 10-K for the fiscal year ended August 37, 2019, our Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2020 and in other documents that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. We do not undertake, and expressly disclaim, any duty or obligation to update publicly any forward-looking statement after the date of this release, whether as a result of new information, future events, changes in assumptions or otherwise. Please refer to the supplemental information presented below for reconciliations of the non-GAAP financial measures used in this release to the most comparable GAAP financial measure and related disclosures. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 9/29 1233/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Notes to Editors: .ti• Ii,. "••••••,... Walgreens .. -.. • •.•••••• Boots Ab' I alO~WeVis Boots Alliance Walgreens Boots Alliance (Nasdaq: WBA) is a global leader in retail and wholesale pharmacy, touching millions of lives every day through dispensing and distributing medicines, and through its convenient retail locations, digital platforms and health and beauty products. The company has more than 100 years of trusted healthcare heritage and innovation in community pharmacy and pharmaceutical wholesaling. Including equity method investments, WBA has a presence in more than 25 countries, employs more than 450,000 people and has more than 21,000 stores. WBA's purpose is to help people across the world lead healthier and happier lives. The company is proud of its contributions to healthy communities, a healthy planet, an inclusive workplace and a sustainable marketplace. WBA is a Participant of the United Nations Global Compact and adheres to its principles-based approach to responsible business. WBA is included in FORTUNE's 2020 list of the World's Most Admired Companies*, ranked first in the food and drugstore category. This is the 27th consecutive year that WBA or its predecessor company, Walgreen Co., has been named to the list. More company information is available at https://www.walgreensbootsalliance.com/. *© 2020, Fortune Media IP Limited. Used under license. (WBA-ER) WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS {UNAUDITED) {in millions, except per share amounts) Three months ended August 31, Twelve months ended August 31, Sales 2020 $ 34,746 2019 $ 33,954 2020 $ 139,537 https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 2019 $ 136,866 10/29 1243/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Cost f,sales ~:•,•,-'.,, Walgreens Gr••• • • tBoots Alliance Selling, general and administrative expenses Equity earnings in AmerisourceBergen Operating income Other income Earnings before interest and income tax provision Interest expense, net Earnings before income tax provision Income tax provision Post tax earnings from other equity method investments Net earnings Net earnings (loss) attributable to noncontrolling interests Net earnings attributable to Walgreens Boots Alliance, Inc. Net earnings per common share: Basic Diluted Weighted average common shares outstanding: Basic Diluted $ $ $ 27,943 6,803 6,210 57 650 43 693 156 537 208 27 356 (17) 373 0.43 0.43 866.5 867.1 -26,727 --$ $ $ 7,228 6,408 59 878 5 883 175 708 26 4 686 9 677 0.75 0.75 899.6 900.7 $ $ $ WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES 111,520 28,017 27,045 341 1,312 70 1,382 639 743 360 41 424 {32) 456 0.52 0.52 879.4 880.3 https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 106,790 30,076 25,242 164 4,998 233 5,231 704 4,527 588 23 3,962 (20) $ 3,982 $ $ 4.32 4.31 921.5 923.5 11/29 1253/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance ~ ·-· ~ ~,;,_,-_,.... Walgreens •• 1 1 •• Boots 9:...,•,•,•,: Att· ,-,-,-, 1ance Assets Current assets: Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total current assets Non-current assets: Property, plant and equipment, net Operating lease right-of-use assets Goodwill Intangible assets, net Equity method investments Other non-current assets Total non-current assets Total assets Liabilities and equity Current liabilities: Short-term debt Trade accounts payable Operating lease obligation Accrued expenses and other liabilities Income taxes CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in millions) August 31, 2020 $ $ $ 516 7,132 9,451 974 18,073 13,342 21,724 15,268 10,753 7,338 677 69,101 87,174 3,538 14,458 2,426 6,539 110 August 31, 2019 $ $ $ 1,023 7,226 9,333 1,118 18,700 13,478 16,560 10,876 6,851 1,133 48,899 67,598 5,738 14,341 5,474 216 https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 12/29 1263/3/2021 Totaj 1.1rrent liabilities .,,,•,••-;.... Walgreens :•:•••:•: Boots ,•-.•:•-.•~ Alliance ~ I J-, Non-current liabilities: Long-term debt Operating lease obligation Deferred income taxes Other non-current liabilities Total non-current liabilities Total equity Total liabilities and equity Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance 27,070 12,203 21,973 1,498 3,294 38,968 21,136 $ 87,174 WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS {UNAUDITED) {in millions) $ 25,769 11,098 1,785 4,795 17,678 24,152 67,598 Twelve months ended August 31, Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Deferred income taxes Stock compensation expense Equity earnings from equity method investments Goodwill and intangible impairments Other Changes in operating assets and liabilities: Accounts receivable, net Inventories $ 2020 424 1,927 {43) 137 {382) 2,016 464 163 63 $ https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 2019 3,962 2,038 100 119 (187) 302 (789) 141 13/29 1273/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance tJler current assets ,:•,•,-;, Walgreens ::: • • ; ~tints payable ... ,-,.,-,"' 1ance Accrued expenses and other liabilities Income taxes Other non-current assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Additions to property, plant and equipment Proceeds from sale leaseback transactions Proceeds from sale of other assets Business, investment and asset acquisitions, net of cash acquired Other Net cash used for investing activities Cash flows from financing activities: Net change in short-term debt with maturities of 3 months or less Proceeds from debt Payments of debt Stock purchases Proceeds related to employee stock plans Cash dividends paid Other Net cash used for financing activities Effect of exchange rate changes on cash, cash equivalents and restricted cash Changes in cash, cash equivalents and restricted cash Net increase (decrease) in cash, cash equivalents and restricted cash ---(31) (25) 1,008 (221) (16) 5,484 (1,374) 724 90 (718) (19) (1,297) (161) 20,367 (21,414) (1,589) 55 (1,747) (157) (4,647) (1) (460) https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results {112) 954 (374) (406) (154) 5,594 (1,702) 3 117 (741) 16 (2,307) 536 12,433 (10,461) (4,160) 174 (1,643) 75 (3,047) (9) 232 14/29 1283/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance ca,.s ,,~ash equivalents and restricted cash at beginning of period ~,•,•,-,..... Walgreens :•••••••: Boots 1,207 ,,-_,•,:,, Alliance "L••-, Casn, cash equivalents and restricted cash at end of period $ 746 WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION (UNAUDITED) REGARDING NON-GAAP FINANCIAL MEASURES (in millions, except per share amounts) $ 975 1,207 The following information provides reconciliations of the supplemental non-GAAP financial measures, as defined under SEC rules, presented in this press release to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States {GAAP). The company has provided the non-GAAP financial measures in the press release, which are not calculated or presented in accordance with GAAP, as supplemental information and in addition to the financial measures that are calculated and presented in accordance with GAAP. These supplemental non-GAAP financial measures are presented because management has evaluated the company's financial results both including and excluding the adjusted items or the effects of foreign currency translation, as applicable, and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the company's business from period to period and trends in the company's historical operating results. These supplemental non-GAAP financial measures should not be considered superior to, as a substitute for or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The company does not provide a reconciliation for non-GAAP estimates on a forward-looking basis (including the information under "Company Outlook" above) where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items and the information is not available without unreasonable effort. This is due to the inherent difficulty of forecasting the timing or amount of various items that have not yet occurred, are out of the company's control and/or cannot be reasonably predicted, and that would impact diluted net earnings per share, the most directly comparable forward-looking GAAP financial measure. For the same reasons, the company is unable to address the probable significance of the unavailable information. Forward-looking non-GAAP financial measures provided without the most directly comparable GAAP financial measures may vary materially from the corresponding GAAP financial measures. Constant currency https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 15/29 1293/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance The company also presents certain information related to current period operating results in "constant .ti.• I :!I. "-•--•-•-," V,(~19.~ens . . cufi "W~\il Is a non-GAAP financial measure. These amounts are calculated by translating current •••••• ,• AU. per •1'esuits8i~ihe foreign currency exchange rates used in the comparable period in the prior year. The company presents such constant currency financial information because it has significant operations outside of the United States reporting in currencies other than the U.S. dollar and this presentation provides a framework to assess how its business performed excluding the impact of foreign currency exchange rate fluctuations. Comparable sales The twelve months ended August 31, 2020 comparable sales and prescriptions filled figures for the company's Retail Pharmacy divisions exclude the benefit of this year's leap day. For the company's Retail Pharmacy divisions, comparable stores are defined as those that have been open for at least 12 consecutive months without closure for seven or more consecutive days, including due to looting or store damage, and without a major remodel or being subject to a natural disaster in the past 12 months. Relocated stores are not included as comparable stores for the first 12 months after the relocation. Acquired stores are not included as comparable stores for the first 12 months after acquisition or conversion, when applicable, whichever is later. Comparable store sales, comparable pharmacy sales, comparable retail sales, comparable number of prescriptions and comparable number of 30-day equivalent prescriptions refer to total sales, pharmacy sales, retail sales, number of prescriptions and number of 30-day equivalent prescriptions, respectively, in such stores. The method of calculating comparable sales varies across the retail industry. As a result, the company's method of calculating comparable sales may not be the same as other retailers' methods. With respect to the Retail Pharmacy International division, comparable store sales, comparable pharmacy sales and comparable retail sales, are presented on a constant currency basis, which is a non-GAAP financial measure. Refer to the discussion above in "Constant currency" for further details on constant currency calculations. Key Performance Indicators The company considers certain metrics, including all comparable metrics, number of prescriptions, number of 30-day equivalent prescriptions and number of locations at period end, to be key performance indicators because the company's management has evaluated its results of operations using these metrics and believes that these key performance indicators presented provide additional perspective and insights when analyzing the core operating performance of the company from period to period and trends in its historical operating results. These key performance indicators should not be considered superior to, https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 16/29 1303/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance as a s bstitute for or as an alternative to, and should be considered in conjunction with, the GAAP _,.. lit. _,. ••••• ~ \Yc!_lgr~ens fi~,;~~1,~~res presented herein. These measures may not be comparable to similarly-titled .. -.. ,, 1 1 ,... Allianca per ance maicators used by other companies. NET EARNINGS AND DILUTED NET EARNINGS PER SHARE Three months ended August 31, Twelve months ended August 31 Net earnings attributable to Walgreens Boots Alliance, Inc. (GAAP} Adjustments to operating income: Impairment of goodwill and intangible assets Transformational cost management Acquisition-related amortization 1 Acquisition-related costs Adjustments to equity earnings in AmerisourceBergen LIFO provision Store damage and inventory losses2 Store optimization Certain legal and regulatory accruals and settlements Total adjustments to operating income Adjustments to other income (expense): Impairment of equity method investment Termination of option granted to Rite Aid Gain on sale of equity method investment Net investment hedging (gain) loss Total adjustments to other income (expense) Adjustments to income tax provision: UK Tax rate change3 Equity method non-cash tax U.S. tax law changes3 2020 $ 373 15 269 113 25 49 6 (7) 5 475 (4) (4) 139 8 2019 $ 677 $ 73 212 121 75 42 60 97 680 8 8 9 (5) 2020 456 2,016 793 461 316 97 95 68 53 3,898 71 (1) 2019 $ 3,982 73 477 493 303 233 136 196 31 1,944 (173} (11) 18 59 (155) 139 60 (6) 18 (8) https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 17/29 1313/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Tax i act of adjustments4 {98} {103} {458) {291) ~-,-".,..,_Wal greens ------To•••~-tM to income tax provision 49 {99) {265) {281) '•\-,.,-,~ 1ance Adjustments to post tax equity earnings from other equity method investments: Adjustments to equity earnings in other equity method investments5 8 17 54 40 ---Total adjustments to post tax equity earnings from other equity method investments 8 17 54 40 Adjustments to net earnings (loss) attributable to noncontrolling interests: Impairment of goodwill and intangible assets {14) Transformational cost management (10) {10) Acquisition-related amortization (4) (4) LIFO provision (1) (1) -----Total adjustments to net earnings {loss) attributable to noncontrolling interests (15} (29) ---------Adjusted net earnings attributable to Walgreens Boots Alliance, Inc. (Non-GAAP measure) $ 887 $1,284 $ 4,175 $ 5,529 -Diluted net earnings per common share (GAAP) $ 0.43 $ 0.75 $ 0.52 $ 4.31 Adjustments to operating income 0.55 0.75 4.43 2.10 Adjustments to other income (expense) 0.01 0.07 (0.17) Adjustments to income tax provision 0.06 (0.11) (0.30) (0.30) Adjustments to equity methods in other equity method investments5 0.01 0.02 0.06 0.04 Adjustments to net earnings (loss) attributable to noncontrolling interests (0.02) (0.03) -----Adjusted diluted net earnings per common share (Non-GAAP measure) $ 1.02 $ 1.43 $ 4.74 $ 5.99 -----Weighted average common shares outstanding, diluted (in millions) 867.1 900.7 880.3 923.5 https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 18/29 1323/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance 1 Excy_JQes impairment of $73 million for indefinite-lived pharmacy licenses intangible asset recorded during the three /• • •",,ermftfll~st 31, 2019, in the Boots reporting unit within the Retail Pharmacy International segment, ... -.. p ' e ~d ~ltttiMEtmpairment of goodwill and intangible assets.' 2 Store damage and inventory losses as a result of looting in the U.S., net of insurance recoveries. 3 Discrete tax-only items. 4 Represents the adjustment to the GAAP basis tax provision commensurate with non-GAAP adjustments and the adjusted tax rate true-up. 5 Beginning in the quarter ended May 31, 2019, management reviewed and refined its practice to reflect the proportionate share of certain equity method investees' non-cash items or unusual or infrequent items consistent with the company's non-GAAP measures in order to provide investors with a comparable view of performance across periods. These adjustments include acquisition-related amortization and acquisition-related costs and were immaterial for periods prior to the quarter ended May 31, 2019. Although the company may have shareholder rights and board representation commensurate with its ownership interests in these equity method investees, adjustments relating to equity method investments are not intended to imply that the company has direct control over their operations and resulting revenue and expenses. Moreover, these non-GAAP financial measures have limitations in that they do not reflect all revenue and expenses of these equity method investees. Reconciliation of Non-GAAP Measures bY. Division Three months ended August 31, 2020 ----Retail Pharmacy Retail Pharmacy Pharaceutical Walgreens Boots USA International Wholesale1 Eliminations Alliance, Inc. ---Sales 26,967 2,300 5,987 (509} 34,746 Gross profit (GAAP} 5,456 832 515 6,803 Transformational cost management (1) (1) (2) LIFO provision 6 6 Store damage and inventory losses2 (6) (6) Adjusted gross profit (Non-GAAP measure) 5,455 831 515 6,801 ---Selling, general and administrative expenses (GAAP) $ 4,797 $ 964 $ 449 $ $ 6,210 Impairment of goodwill and intangible assets (15} (15} Transformational cost management (128} (97} (47) (271} Acquisition-related amortization (77) (17) (19} (113) Acquisition-related costs (18) (1) (6) (25} https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 19/29 1333/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Store mage and inventory losses2 2 2 ~:•,•,-; .... Walgreens ··,-·· itfn (5) (5) St ", ... • •• ,!'1fH!nce I I -------Adjusted selling, general and administrative expenses (Non-GAAP measure) $ 4,572 $ 833 $ 377 $ $ 5,782 ----Operating income (loss) (GAAP) $ 659 $ (132) $ 124 $ $ 650 Impairment of goodwill and intangible assets 15 15 Transformational cost management 127 96 47 269 Acquisition-related amortization 77 17 19 113 Acquisition-related costs 18 1 6 25 Adjustments to equity earnings in AmerisourceBergen 49 49 LIFO provision 6 6 Store damage and inventory losses2 (7) (7) Store optimization 5 5 Adjusted operating income (loss) (Non-GAAP measure) $ 884 $ (3) $ 245 $ $ 1,126 Gross margin (GAAP} 20.2 % 36.2 % 8.6 % 19.6 % Adjusted gross margin {Non-GAAP measure) 20.2 % 36.1 % 8.6 % 19.6 % Selling, general and administrative expenses percent to sales {GAAP) 17.8 % 41.9 % 7.5 % 17.9 % Adjusted selling, general and administrative expenses percent to sales {Non-GAAP measure) 17.0 % 36.2 % 6.3 % 16.6 % Operating margin (GAAP}3 2.4 % {5.8} % 1.1 % 1.7 % Adjusted operating margin {Non-GAAP measure)3 3.3 % {0.1} % 2.3 % 2.9 % https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 20/29 1343/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance 1 Ope clting income for Pharmaceutical Wholesale includes equity earnings in AmerisourceBergen. As a result of the two /-• ~~ W.§Jgre.ens p~~B Iag, operating income for the three and twelve month period ended August 31, 2020 includes .. -.. A" ::. • urM~n equity earnings for the period of April 1, 2020 through June 30, 2020 and July 1, 2019 through June 30, 2020, respectively. Operating income for the three and nine month period ended August 31, 2019 includes AmerisourceBergen equity earnings for the period of April 1, 2019 through June 30, 2019 and July 1, 2018 through June 30, 2019, respectively. 2 Store damage and inventory losses as a result of looting in the U.S., net of insurance recoveries. 3 Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. Reconciliation of Non-GAAP Measures bY. Division Three months ended August 31, 2019 Retail Retail Pharmacy USA Pharmacy Pharmaceutical Walgreens Boots International Wholesale1 Eliminations Alliance, Inc. Sales Gross profit (GAAP) Transformational cost management Acquisition-related costs Store optimization LIFO provision $ 26,040 $ 2,703 $ $ 5,631 $ 1,104 $ 13 5 60 3 Adjusted gross profit (Non-GAAP measure) $ 5,710 $ 1,107 $ Selling, general and administrative expenses (GAAP) $ 4,932 $ 1,055 $ Impairment of goodwill and intangible assets Acquisition-related amortization2 Transformational cost management Acquisition-related costs Store optimization Adjusted selling, general and administrative (78) (130) (58) (91) expenses (Non-GAAP measure) $ 4,574 $ Operating income (GAAP) Impairment of goodwill and intangible assets Transformational cost management $ 700 $ 130 (73) (24) (42) (3) 913 $ 49 $ 73 46 5,742 $ (532) $ 492 $ $ 492 $ 421 (19) (36) (1) 364 $ 129 $ 36 $ $ $ $ https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 33,954 7,228 3 13 5 60 7,309 6,408 {73) (121) (208) {62) (91) 5,852 878 73 212 21/29 1353/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Acqu· · ion-related amortization2 ~:•,•,-;, Walgreens Ac• • • ~ • -ij8t~d costs '\-,.,.,,.,, 1ance Adjustments to equity earnings in AmerisourceBergen LIFO provision Store optimization Adjusted operating income {Non-GAAP measure) Gross margin (GAAP) Adjusted gross margin (Non-GAAP measure) Selling, general and administrative expenses percent to sales (GAAP} Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) Operating margin (GAAP)3 Adjusted operating margin (Non-GAAP measure)3 $ 78 72 60 97 1,135 21.6% 21.9% 18.9% 17.6% 2.7% 4.4% $ 24 3 194 40.8% 41.0% 39.0% 33.8% 1.8% 7.2% $ 19 1 42 229 8.6% 8.6% 7.3% 6.3% 1.2% 2.2% $ $ 121 75 42 60 97 1,558 21.3% 21.5% 18.9% 17.2% 2.4% 4.3% 1 Operating income for Pharmaceutical Wholesale includes equity earnings in AmerisourceBergen. As a result of the two month reporting lag, operating income for the three and twelve month period ended August 31, 2020 includes AmerisourceBergen equity earnings for the period of April 1, 2020 through June 30, 2020 and July 1, 2019 through June 30, 2020, respectively. Operating income for the three and nine month period ended August 31, 2019 includes AmerisourceBergen equity earnings for the period of April 1, 2019 through June 30, 2019 and July 1, 2018 through June 30, 2019, respectively. 2 Excludes impairment of $73 million for indefinite-lived pharmacy licenses intangible asset recorded during the three months ended August 31, 2019, in the Boots reporting unit within the Retail Pharmacy International segment, presented within 'Impairment of goodwill and intangible assets'. 3 Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. Reconciliation of Non-GAAP Measures bY. Division Twelve months ended August 31, 2020 Retail Retail Pharmacy USA Pharmacy Pharmaceutical Walgreens Boots International Wholesale1 Eliminations Alliance, Inc. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 22/29 1363/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Sale~, , ~ $107,701 $ 10,004 $ 23,958 $ {2,126) $ 139,537 ,, ... ,-, ... ,... Walgreens .. -·-Gre 1tiBPJ $ 22,211 $ 3,741 $ 2,063 $ 2 $ 28,017 ~, ••• ,_. 1anc I I Transformational cost management 3 2 5 Acquisition-related costs 67 67 LIFO provision 95 95 Store damage and inventory losses2 54 54 Store optimization 1 1 Adjusted gross profit (Non-GAAP measure) $ 22,432 $ 3,744 $ 2,063 $ 2 $ 28,240 Selling, general and administrative expenses {GAAP) $ 19,515 $ 5,858 $ 1,672 $ $ 27,045 Impairment of goodwill and intangible assets {32) {1,984) {2,016) Transformational cost management {538) {184) {67) {788) Acquisition-related amortization {309) (75) {77) (461) Acquisition-related costs {238) {2) (8) (249) Store damage and inventory losses2 {13) {13) Store optimization {52) (52) Adjusted selling, general and administrative expenses (Non-GAAP measure) $ 18,333 $ 3,613 $ 1,521 $ $ 23,467 Operating income (loss) {GAAP) $ 2,696 $ (2,117) $ 732 $ 2 $ 1,312 Impairment of goodwill and intangible assets 32 1,984 2,016 Transformational cost management 540 186 67 793 Acquisition-related amortization 309 75 77 461 Acquisition-related costs 306 2 8 316 Adjustments to equity earnings in AmerisourceBergen 97 97 LIFO provision 95 95 Store damage and inventory losses2 68 68 Store optimization 53 53 Adjusted operating income {Non-GAAP measure) $ 4,099 $ 130 $ 980 $ 2 $ 5,211 ------https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 23/29 1373/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Gros argin (GAAP) 20.6% 37.4% 8.6% 20.1% ,;-,•,-;, Walgreens Al•••• r~~argin (Non-GAAP measure) 20.8% 37.4% 8.6% 20.2% ,-,-,-, 1ance · Selling, general and administrative expenses percent to sales {GAAP} 18.1% 58.6% 7.0% 19.4% Adjusted selling, general and administrative expenses percent to sales {Non-GAAP measure) 17.0% 36.1% 6.3% 16.8% Operating margin (GAAP)3 2.5% (21.2}% 1.6% 0.7% Adjusted operating margin (Non-GAAP measure}3 3.8% 1.3% 2.3% 3.4% 1 Operating income for Pharmaceutical Wholesale includes equity earnings in AmerisourceBergen. As a result of the two month reporting lag, operating income for the three and twelve month period ended August 31, 2020 includes AmerisourceBergen equity earnings for the period of April 1, 2020 through June 30, 2020 and July 1, 2019 through June 30, 2020, respectively. Operating income for the three and nine month period ended August 31, 2019 includes AmerisourceBergen equity earnings for the period of April 1, 2019 through June 30, 2019 and July 1, 2018 through June 30, 2019, respectively. 2 Store damage and inventory losses as a result of looting in the U.S., net of insurance recoveries. 3 Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. Reconciliation of Non-GAAP Measures bY. Division Sales Gross profit (GAAP) Transformational cost management Acquisition-related costs Store optimization LIFO provision Adjusted gross profit (Non-GAAP measure) Retail Pharmacy USA $104,532 $ 23,511 63 8 136 $ 23,718 ---Selling, general and administrative expenses (GAAP) $ 19,424 Twelve months ended August 31, 2019 Retail Pharmacy Pharmaceutical International Wholesale1 Eliminations $ 11,462 $ 23,053 $ {2,180) $ 4,522 $ 2,041 $ 2 45 $ 4,567 $ 2,041 $ 2 $ 4,084 $ 1,734 $ https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results Walgreens Boots Alliance, Inc. $ 136,866 $ 30,076 45 63 8 136 $ 30,328 -----$ 25,242 24/29 1383/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance lmpai ent of goodwill and intangible /• -.-;... Walgreens (73} (73} as · •••• Boots ...... ... •,.•-•-.•,, Alliance Acq ufsf\1on-related amortization2 (315) (100} (78) (493) Transformational cost management (189) (89) (155) (432) Acquisition-related costs (237) (3) (1) {241) Store optimization {189) {189) Certain legal and regulatory accruals and settlements {31) {31) ---------Adjusted selling, general and administrative expenses (Non-GAAP measure) $ 18,464 $ 3,819 $ 1,499 $ $ 23,783 ----Operating income (GAAP) $ 4,088 $ 438 $ 471 $ 1 $ 4,998 Impairment of goodwill and intangible assets 73 73 Transformational cost management 189 133 155 477 Acquisition-related amortization2 315 100 78 493 Acquisition-related costs 300 3 1 303 Adjustments to equity earnings in AmerisourceBergen 233 233 LIFO provision 136 136 Store optimization 196 196 Certain legal and regulatory accruals and settlements 31 31 ---Adjusted operating income (Non-GAAP measure) $ 5,255 $ 747 $ 939 $ 1 $ 6,942 Gross margin (GAAP) 22.5% 39.5% 8.9% 22.0% Adjusted gross margin (Non-GAAP measure) 22.7% 39.8% 8.9% 22.2% Selling, general and administrative expenses percent to sales {GAAP) 18.6% 35.6% 7.5% 18.4% Adjusted selling, general and administrative expenses percent to sales (Non-GAAP measure) 17.7% 33.3% 6.5% 17.4% https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 25/29 1393/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance 3.9% 3.8% 1.3% 3.5% 5.0% 6.5% 2.4% 4.8% 1 Operating income for Pharmaceutical Wholesale includes equity earnings in AmerisourceBergen. As a result of the two month reporting lag, operating income for the three and twelve month period ended August 31, 2020 includes AmerisourceBergen equity earnings for the period of April 1, 2020 through June 30, 2020 and July 1, 2019 through June 30, 2020, respectively. Operating income for the three and nine month period ended August 31, 2019 includes AmerisourceBergen equity earnings for the period of April 1, 2019 through June 30, 2019 and July 1, 2018 through June 30, 2019, respectively. 2 Excludes impairment of $73 million for indefinite-lived pharmacy licenses intangible asset recorded during the three months ended August 31, 2019, in the Boots reporting unit within the Retail Pharmacy International segment, presented within 'Impairment of goodwill and intangible assets.' 3 Operating margins and adjusted operating margins have been calculated excluding equity earnings in AmerisourceBergen and adjusted equity earnings in AmerisourceBergen, respectively. EQUITY EARNINGS IN AMERISOURCEBERGEN Three months ended Twelve months ended August 31, August 31, ---2020 2019 2020 2019 Equity earnings in AmerisourceBergen (GAAP) $ 57 $ 59 $ 341 $ 164 Acquisition-related amortization 29 30 120 125 Asset Impairment (1) 75 129 Litigation settlements and other 12 12 70 9 LIFO provision 1 (2) 21 PharMEDium remediation costs 3 4 16 16 Loss on early retirement of debt 5 5 Gain on sale of equity investment (3) U.S. tax law changes (17) Other (1) (1) Anti-Trust (2) {28} Certain discrete tax benefits {206} Adjusted equity earnings in AmerisourceBergen (Non-GAAP measure) $ 106 $ 101 $ 437 $ 397 ADJUSTED EFFECTIVE TAX RATE https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 26/29 1403/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance '-I • lit. "•••••-,' Walgreens .. -·--•.•-•.•. Bo~ts ,,._•.,,_•,, Alliance 'a I-, Effective tax rate {GAAP) Impact of non-GMP adjustments U.S. tax law changes Equity method non-cash tax UK tax rate change Adjusted tax rate true-up ------Subtotal Exclude adjusted equity earnings in AmerisourceBergen Adjusted effective tax rate excluding adjusted equity earnings in AmerisourceBergen {Non-GAAP measure) Effective tax rate {GAAP) Impact of non-GMP adjustments U.S. tax law changes Equity method non-cash tax UK tax rate change Three months ended August 31, Three months ended August 31, 2020 2019 -------Earnings before Earnings before Income Effective tax Income Effective tax income tax tax rate income tax provision tax rate provision $ 537 $208 38.7% $ 708 $ 26 3.7% 472 88 688 111 5 (8) (9) (139) 10 (8) $ 1,009 $158 $1,396 $125 (106) (101) $ 902 $158 17.6% $1,295 $125 9.6% Twelve months ended August 31, Twelve months ended August Earnings before income tax provision $ 743 3,958 2020 31,2019 Income tax $360 458 6 (60) (139) Effective tax rate 48.5% --~ Earnings before income tax provision $4,527 1,789 Income tax $588 291 8 (18) Effective tax rate 13.0% https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 27/29 1413/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance Subtqt I), ~;-,•••,, Walgreens .. -.. • •.• •••• Boots ,\,.•:•-.'; Alliance "'I I-, Exclude adjusted equity earnings in AmerisourceBergen Adjusted effective tax rate excluding adjusted equity earnings in AmerisourceBergen (Non-GAAP measure) FREE CASH FLOW $ 4,701 $625 $6,316 $870 (437) (397) $ 4,264 $625 14.7% $5,919 $870 =--=-----14.7% Three months ended August Twelve months ended August Net cash provided by operating activities (GAAP) Less: Additions to property, plant and equipment Free cash flow (Non-GAAP measure) 1 $ $ 2020 2,086 (411) 1,675 31, 2019 -$ 2,378 (456) $ 1,923 -31, 2020 2019 --$ 5,484 $ 5,594 (1,374) (1,702) $ 4,111 $ 3,892 1 Free cash flow is defined as net cash provided by operating activities in a period less additions to property, plant and equipment (capital expenditures) made in that period. This measure does not represent residual cash flows available for discretionary expenditures as the measure does not deduct the payments required for debt service and other contractual obligations or payments for future business acquisitions. Therefore, we believe it is important to view free cash flow as a measure that provides supplemental information to our entire statements of cash flows. Media Relations U.S./ Morry Smulevitz, +1 847 315 0517 International, +44 (0)20 7980 8585 Investor Relations Gerald Gradwell and Jay Spitzer, +1 847 315 2922 https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 28/29 1423/3/2021 Walgreens Boots Alliance Reports Fiscal Year 2020 Results I Walgreens Boots Alliance LEARN MORE Media Contacts Need to reach us? Here you'll find contact information for U.S. and international media inquiries. LEARN MORE © 2027 Walgreens Boots Alliance, Inc. https://www.walgreensbootsalliance.com/news-media/press-releases/2020/walgreens-boots-alliance-reports-fiscal-year-2020-results 29/29 1433/3/2021 Walgreens promises return to profit growth as COVID-19 impact eases -Metro US metre ~ Home Pros News v Things to Do v Contact Us Jobs Webinars Podcasts Business Walgreens promises return to profit gro11 COVID-19 impact eases By Mrinalika Roy and Manas Mishra 0 o comments PostE Cool by conslll'llllllle.@ https://www.metro.us/walgreens-promises-return-to/ 1/6 1443/3/2021 Walgreens promises return to profit growth as COVID-19 impact eases -Metro US Facebook Twitter More (Reuters) -Walgreens Boots Alliance Inc <WBA.O> on Thursday forecast a return profit next year, pinning hopes on shoppers coming back to its stores in the sec year after a safe and effective coronavirus vaccine is developed. The drugstore retailer's shares rose 5% after it predicted a gradual recovery nex adjusted profit rising 30%-40% in the last two quarters of fiscal year 2021 follow of 17%-23% in the first two quarters. Compare Medicare Plans Compare Medicare Plan Costs {Ages 64+) -Shop and Save Tod Medicare Part A, Part B seniorhealthcaredirect. com OPEN Walgreens, whose 2020 adjusted profit fell 21%, has cut jobs, suspended share r and closed some of its UK-based Boots stores to save costs and revive profit grc COVID-19 crisis hammered sales at its stores and pharmacies. The Race for YC Mayor: Maya Wiley, Candidate for ayor, R4 and Equ·ty Advocate Schneps Connects 00:00 00:( SUBSCRIBE: :\\ RSS ti iTunes G Spotify t Stitcher "We think the UK would be one country where there might be more lockdowns. · major risk (of lockdowns) in the United States," Chief Financial Officer James Kel https://www.metro.us/walgreens-promises-return-to/ 2/6 1453/3/2021 Walgreens promises return to profit growth as COVID-19 impact eases -Metro US Walgreen's forecast did not consider any profit from its pharmacies distributing 19 vaccines. While chances of a large lockdown are low, it could result in a bigger hit to Walg compared to any boost from the company's role in vaccine distribution, Kehoe c Drugmakers are racing to develop a coronavirus vaccine with some of the leadir currently being tested in large, decisive studies. U.S. health experts have said a be available to many Americans by July of 2021. The company expects adjusted profit for fiscal 2021 to grow in single digits at co currency rates. Analysts estimate a growth of about 1%, according to IBES data f Walgreens shares, which were last up 3.5%, have lost about 37% this year. The st the worst performers on the bluechip Dow Jones index <.DJI.>. (Reporting By Manas Mishra and Mrinalika Roy in Bengaluru; Editing by Vi nay Dv Patrick Graham) Facebook Twitter More https://www.metro.us/walgreens-promises-retum-to/ 3/6 1463/3/2021 Walgreens promises return to profit growth as COVID-19 impact eases -Metro US Ads by AdChoices O> Sponsored Related Articles Persistently high U.S. weekly jobless claims point to labor market scarring Trump cites teenaged son's bout with coronavirus in calling for schools to reopen China's inflation struggles to perk up despit,. broader recovery https://www.metro.us/walgreens-promises-return-to/ 4/6 1473/3/2021 CVS posts strong 04 numbers, but pandemic weighs on results -Long Island Business News BUSINESS NEWS Get our free LIBN e-alerts & breaking I E-mail address news notifications! ...... ______ __, FILE -In this Wednesday, Feb. 3, 2021 file photo, a CVS pharmacy is seen in Los Angeles. CVS Health Corporation Tuesday, Feb. 16 reported a fourth-quarter net income of $973 million. (AP Photo/Damian Dovarganes, Fil, CVS posts strong Q4 numbers, but pandemic weighs on results .1. By: The Associated Press 0 February 16, 2021 0/S Health easily beat fourth-quarter expectations as revenue from COVID-19 testing and prescription gn helped counter hits from an ongoing global pandemic. The drugstore chain and pharmacy benefit manager also released a forecast for this year that largely fell Street expectations and shares slid Tuesday. The pandemic has kept customers away from drugstores and hurt sales of products like cough and cold tr which normally grow during colder months. The company's health insurance business also has started adding claims for COVID-19 treatments. But a big part of 0/S Health's business, the number of prescriptions filled, continued to climb in the fourtl even though the flu season has been mild and fewer people are going to the doctor and getting new pres We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking "Accept", you consent to the use of ALL the cookies. Cookie setting~ ACCEPT https://libn.com/2021/02/16/cvs-posts-strong-q4-numbers-but-pandemic-weighs-on-results/ 1/3 1483/3/2021 CVS posts strong 04 numbers, but pandemic weighs on results -Long Island Business News offering them. 0/S Health earned $973 million in the final quarter of 2020, with results adjusted for one-time gains and totaling $1.30 per share. That's six cents better per-share than Wall Street had expected, according to a survey by Zacks Investme Research. Revenue grew 4% to $69.55 billion, also beating analyst projections handily. 0/S Health operates one of the nation's largest drugstore chains with nearly 10,000 retail locations. It als prescription drug plans for big clients like insurers and employers through a large pharmacy benefit mana business, and the company sells health insurance through its Aetna arm. Overall net income tumbled 44% compared with the final three months of 2019, the last financial quarter pandemic hit. The decline was due partly to the early extinguishment of $674 million in debt. For the full year, 0/S Health made $7.18 billion on $268.7 billion in revenue, with adjusted earnings total per share. In 2021, the Woonsocket, Rhode Island, company expects full-year earnings to range between $7 .39 and share. That falls mostly below the bar set on Wall Street, where analysts expect, on average, $7 .54 per share ac FactSet. The company expects COVID-19 to have little impact on 2021 adjusted EPS. Revenue from vaccines and 1 the virus will boost operating income by anywhere from $400 million to $500 million. But the insurance business could take a hit similar in size from claims for treating people with COVID-19. New CEO Karen Lynch also said Tuesday that the company's Aetna insurance business plans to re-enter n individual insurance marketplaces created by the Affordable Care Act. Aetna left the markets entirely a fe, ago, and many other insurers scaled back their presence after getting swamped initially with bigger-than-claims and losses. Shares of 0/S Health Corp. slipped 4% to $71.24 while broader markets rose slightly Tuesday. The stock had already climbed about 9% this year. 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Cookie setting~ ACCEPT https://libn.com/2021/02/16/cvs-posts-strong-q4-numbers-but-pandemic-weighs-on-results/ 2/3 1493/3/2021 Rite Aid looks to buy time on debt as it posts $73M 01 loss I Retail Dive G RETAILDIVE BRIEF Rite Aid looks to buy time on debt as it posts $73M Qt loss By Ben Unglesbee Published June 29, 2020 Dive Brief: • Even as Rite Aid's sales grew more than 12% in the first quarter, the drugstore retailer operated at a loss in the period, according to a press release. • Rite Aid's Q1 net loss came to $72. 7 million, an improvement from the previous year's loss that the company attributed to a credit under its financial reporting method. During the quarter, the retailer also took on new costs associated with COVID-19, including hiring an additional 6,000 associates for its store and distribution workforce. • As the retailer continues struggling to turn a profit, it announced an exchange offer on $750 million worth of bonds due in 2023. The exchange would push out their maturity to 2026 in exchange for a higher interest rate. Dive Insight: Rite Aid says it has been on the "front lines" of the COVID-19 crisis, with the company's stores open as essential retail while the pandemic mounted in the U.S. and as nearly 100 of those stores became testing centers for the disease. Its position as a drugstore amid a global health care crisis shows in the numbers. Its Retail Pharmacy Segment revenues were up 6. 7% https://www.retaildive.com/news/rite-aid-looks-to-buy-time-on-debt-as-it-posts-73m-q 1-loss/580700/ 1/3 1503/3/2021 Rite Aid looks to buy time on debt as it posts $73M 01 loss I Retail Dive year over year, to $4.1 billion. Rite Aid's retail business showed an even stronger improvement, with the company's front-end same store sales (excluding tobacco products) up 16% thanks to increases in cleaning products, sanitizers, wipes, paper products, liquor, over-the-counter products and summer seasonal items, according to the company. Despite the revenue boom, Rite Aid's bottom line still struggled, as COVID-19 costs and other expenses took their toll, and as a services contract with Walgreens came to completion. Along with additional hires, Rite Aid provided bonuses to store managers and "pandemic pay" that, according to the company, "ensures associates are compensated if diagnosed with the virus or quarantined because of exposure." The losses makes things more difficult for the retailer's $3.3 billion in long-term debt and other liabilities. The retailer in Q3 of 2019 was able to break a cycle of losses, briefly, with sales increases and a positive profit but returned to a loss in Q4. Pushing out its maturities would give the retailer time to orchestrate a turnaround without taking more dramatic actions should its debt fall into deeper distress. Rite Aid has struggled to stabilize its bottom line and hold on to market share as it tries to compete with massive competitors CVS and Walgreens -which keep getting bigger through acquisitions and partnerships. By contrast, Rite Aid is "structurally disadvantaged," with regional concentration and a lack of national scale, Fitch analysts said in October as they downgraded the retailer's long-term default rating. Since then, COVID-19 has disrupted and defined the entire retail world, for both discretionary retailers and those that have stayed open. Essential businesses have by and large seen their sales spike, https://www.retaildive.com/news/rite-aid-looks-to-buy-time-on-debt-as-it-posts-73m-q1-loss/580700/ 2/3 1513/3/2021 Rite Aid looks to buy time on debt as it posts $73M Q1 loss I Retail Dive but added costs and shifts in spending have also made it difficult for many to turn a profit even while open. "There are certainly challenges brought about by COVID-19, including the decline in acute prescriptions and increased costs incurred to assure the safety of our associates and customers," CEO Heyward Donigan said in a statement. "No matter the challenge, we can execute our strategy and deliver day-to-day operational excellence in the face of a pandemic." Recommended Reading: ':, RETAIL DIVE Drugstores got a lift as essential retailers, but what's next? r1 https://www.retaildive.com/news/rite-aid-looks-to-buy-time-on-debt-as-it-posts-73m-q 1-loss/580700/ 3/3 1523/3/2021 Rite Aid's stock rockets after big profit beat, raised outlook -MarketWatch Rite Aid's stock rockets after big profit beat, raised outlook Published: Dec. 17, 2020 at 8:20 a.m. ET By Tomi Kilgore RAD +1.33% SPX -1.31% Shares of Rite Aid Corp. RAD, +1.33% rocketed 21.6% in premarket trading Thursday, after the drug store chain reported fiscal third-quarter profit and revenue that beat expectations, and raised its full-year outlook to expect earnings rather than potential losses. Net income for the quarter to Nov. 28 fell to $54.1 million, or 8 cents a share, from $53.6 million, or 96 cents a share, in the year-ago period. Excluding non-recurring items, adjusted earnings per share slipped to 40 cents from 54 cents, but was well above the FactSet consensus of 2 cents. Revenue rose 12.0% to $6.12 billion, beating the FactSet consensus of $5.84 billion, as retail revenue grew 5.1% and pharmacy services revenue jumped 29.2%. For fiscal 2021, the company revised its revenue guidance to $23.9 billion to $24.2 billion from $23.5 billion to $24.0 billion, its same-store sales growth view to 3.5% to 4.5% from 3.0% to 4.0% and its adjusted per-share outlook to profit of 45 cents to 85 cents from a loss of 67 cents to a profit of 9 cents. The stock has run up 29.5% over the past three months while the S&P 500 SPX, -1.31% has gained 10.3%. https://www.marketwatch.com/story/rite-aids-stock-soars-after-big-profit-beat-raised-outlook-2020-12-17 1/2 1533/3/2021 Rite Aid's stock rockets after big profit beat, raised outlook -MarketWatch ExP-ert 'mortified and disgusted' bY-Texas reoP-ening_P-lan; it 'will kill Texans,~ -saY-s toP-Democrat Tomi Kilgore Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter@TomiKilgore. Find the Best Mortgage Refinance Rates 0 Purchase or Refinance 0 Purchase @Refinance Location Gos_A_n_g_e-le_s_, -CA __ _ Credit Score [ Excellent (760+} Current Home Value [ $250,000 Current Mortgage Balance [ $169,759 Loan Type ~ 30yr Fixed D 15 yr Fixed 07/1 ARM 0 5/1 ARM 03/1 ARM Filter Results LENDER Sponsored t, !!!,!ter.com Sponsored ~ERAN, Sponsored MO. PAYMENTO No Origination Fees, No Application Fees, Available 24/7 Industry-Leading > Rates and Pre-Approval in Under 3 Minutes! Veterans -Buy or Refinance With Your Benefits Quick & Easy Verification: Your $0 Down VA Loan Starts Here > Direct Home Lending eRLRJNs1 $715 Source: Mortech® & Brown Bag Marketing, Inc. Disclosure See Fu 11 Rates SMARTASSET.COM https://www.marketwatch.com/story/rite-aids-stock-soars-after-big-profit-beat-raised-outlook-2020-12-17 2/2