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What to Ask Yourself Before Investing in Retail


Jan 06, 2021 by Laura Agadoni
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The question: Do retail companies treat their workers fairly?

A new report by Brookings, released in November 2020 and updated December 2020, reveals most major "essential" retailers experiencing record-breaking profits amid the pandemic aren't doing much to compensate their frontline workers for the risks they're taking. Are some retailers doing better than others in this area? You might wish to consider issues like this before investing in commercial real estate.

Not all retail is in trouble

During the pandemic, a lot of small businesses were ordered to lock down and needed to lay off workers as a result. In some cases, these businesses did not (or might not) survive.

But not all retail businesses are facing difficult times; some large retail companies are making more money now than ever before. Because of the pandemic, these companies are making an estimated extra $16.7 billion in profit, according to the Brookings report. But like Scrooge, some of these companies gleefully count their windfall without recognizing the frontline workers who helped make these riches happen -- possibly risking their lives just by showing up to work.

Although retailers aren't legally obligated to offer hazard pay, the question is whether they're morally obligated to do so. If you want to understand the type of company you invest in, you'll want to know what's happening.

The Brookings report analyzed 13 of 20 of the largest U.S. retail companies:

  1. Walmart (NYSE: WMT)
  2. Amazon (NASDAQ: AMZN)
  3. Kroger (NYSE: KR)
  4. Costco (NASDAQ: COST)
  5. Walgreens (NASDAQ: WBA)
  6. Home Depot (NYSE: HD)
  7. CVS Health (NYSE: CVS)
  8. Target (NYSE: TGT)
  9. Lowe's (NYSE: LOW)
  10. Albertsons (NYSE: ACI)
  11. Ahold Delhaize (Giant Food, Food Lion) (OTC: ADRNY)
  12. Best Buy (NYSE: BBY)
  13. Dollar General (NYSE: DG)

Of the 13, three stood out as being generous with their employees: Home Depot, Target, and Best Buy. All three provided bonuses and pay increases to workers during the pandemic, even though these three companies didn't earn as much as some of their competitors.

The other 10 companies were not as giving, even though they were posting huge profits. Walmart and Amazon: We're especially looking at you. Walmart's profit was up 45% from last year, and Amazon saw a whopping 70% increase. But their employees wouldn't know much about that; they received below-average COVID-19 compensation (6% pay increases for full-time workers). Meanwhile, the wealth of the Walton family, who own over half of Walmart stock, increased by $45 billion since the pandemic, and Jeff Bezos of Amazon is now $70 billion richer.

The breakdown

Here are statistics on the 13 analyzed companies regarding the profit they made and how they compensated employees, ranked in order from most to least generous company:

1. (tie) Best Buy

  • COVID-19 compensation of employees: 28% raise to $15/hour
  • Company profit: $591 million, up 17% from last year

2. (tie) Target

  • COVID-19 compensation of employees: 17% raise to $15/hour
  • Company profit: $3 billion, up 22% from last year

3. Home Depot

  • COVID-19 compensation of employees: 21% raise to $11/hour
  • Company profit: $10 billion, up 14% from last year

4. Lowe's

  • COVID-19 compensation of employees: 12% raise to $12/hour
  • Company profit: $4.9 billion, up 29% from last year

5. Costco

  • COVID-19 compensation of employees: 5% raise to $15/hour
  • Company profit: $2.2 billion, up 11% from last year

6. Albertsons

  • COVID-19 compensation of employees: 8% raise to $11/hour
  • Company profit: $871 million, up 153% from last year

7. Kroger

  • COVID-19 compensation of employees: 9% raise to $10/hour
  • Company profit: $2 billion, up 90% from last year

8. Ahold Delhaize (U.S.)

  • COVID-19 compensation of employees: 7% raise to $10/hour
  • Company profit: $1.6 billion, up 15% from last year

9. Walgreens (U.S.)

  • COVID-19 compensation of employees: 2% raise to $10/hour
  • Company profit: $885 million, down 48% from last year

10. Amazon (including Whole Foods)

  • COVID-19 compensation of employees: 6% raise to $15/hour
  • Company profit: $14.1 billion, up 70% from last year

11. CVS Health

  • COVID-19 compensation of employees: 2% raise to $11/hour
  • Company profit: $6.2 billion, up 27% from last year

12. Walmart

  • COVID-19 compensation of employees: 6% raise to $11/hour
  • Company profit: $15.6 billion, up 45% from last year

13. Dollar General

  • COVID-19 compensation of employees: 3% raise to $8/hour
  • Company profit: $1.4 billion, up 77% from last year

What's noteworthy

The CEOs of Walmart, CVS, Amazon, Walgreens, Home Depot, Target, and Best Buy signed a Business Roundtable pledge to invest in employees by supporting them and compensating them fairly rather than only serving the interest of shareholders. While Best Buy, Target, and Home Depot honored the pledge, Amazon, CVS, Walgreens, and Walmart have not.

The Millionacres bottom line

During COVID-19, some businesses were winners -- the ones deemed "essential" -- and some were losers -- the ones forced to lock down. Some of the winners, including big-box stores, pharmacies, and grocery stores, weren't always too appreciative of their frontline workers, the ones who were taking risks showing up to work during a pandemic.

There's no doubt that profits are essential, but so are workers who make operations possible -- something to keep in mind when deciding where to put your real estate investing dollars.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. LauraAgadoni has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Costco Wholesale, and Home Depot. The Motley Fool recommends CVS Health and Lowe's and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. The Motley Fool has a disclosure policy.