Confronting the gravest crisis in its 77-year history, Raley's has told its workers it's "losing millions of dollars" and needs wage concessions to remain viable.
Raley's Chief Executive Michael Teel, facing a possible strike later this week, has told workers that 40 of its stores are losing money, some as much as $2 million a year apiece.
Teel's disclosure, contained in a recent memo to employees, paints the most dire picture to date of the West Sacramento grocer's finances. The unprofitable stores represent 30 percent of the 130 stores owned by Raley's, one of the Sacramento region's largest homegrown companies and its largest supermarket chain.
Union leaders, who summoned workers to assemble picket signs in Sacramento and elsewhere Monday, said they still aren't convinced of Raley's plight. They said Raley's has refused their demand to see detailed financial records.
"Perhaps they just don't want us to see the full picture," said Jacques Loveall, president of Local 8 of the United Food and Commercial Workers, in a memo to members. Local 8 represents grocery workers in Sacramento and much of the Central Valley.Industry consultant Bob Reynolds said it isn't surprising Raley's is losing money, having lost market share to nonunion competitors such as Wal-Mart.
"They are losing a substantial amount of money and, more importantly, don't see a clear way out without substantially reducing costs," said Reynolds, head of Reynolds Economics in Moraga.
After more than a year of negotiations, Raley's pushed the UFCW to the brink of a strike last week. The company said it would unilaterally implement the terms of its final offer, effective this Thursday.
Unless something happens this week to ease the stand-off, Raley's has left the union with two main choices: Swallow the contract offer, which includes wage concessions, or walk off the job. The union's membership already voted last spring to authorize a strike.
"It's looking like we're going to strike, isn't it?" said Brian Pickens, one of about three dozen employees assembling picket signs Monday at the Sacramento Central Labor Council's offices in Natomas. Pickens has worked the past 18 years at a Folsom Raley's.
The company says it has never had a strike in its 77 years. The last grocery strike in Northern California, affecting Safeway, Lucky and Save Mart, lasted nine days in 1995.
A walkout could be devastating to Raley's. Although the company has said it would keep as many stores open as possible during a strike, using managers and replacement workers, many customers would probably shop elsewhere. In an increasingly crowded supermarket field, there would be no shortage of alternatives, including unionized chains such as Save Mart.
"It's going to put Raley's way out on a limb," Reynolds said.
It's no secret that Raley's has been struggling in recent years. According to Stores magazine, Raley's sales fell to $3.34 billion last year. That's a decline of nearly 9 percent since 2008.
Because it's privately held, Raley's has never released data about its profitability. In an interview last December, company labor negotiator Bob Tiernan said Raley's was still making money but that many of its individual stores weren't.
Teel's memo says the whole company is in the red. Raley's spokesman John Segale said the company lost millions of dollars in the fiscal year that ended June 30. He would not be more specific about exactly how much money Raley's is losing.
"Losses continue to mount four months into the 2012-13 fiscal year, and the losses in those stores have increased," he said.
In his memo, Teel said he shared financial data a month ago with Loveall and Ron Lind, president of UFCW Local 5 in San Jose. The disclosures "clearly showed that we were losing millions of dollars," the Raley's CEO said.
Both union officials looked at the information and said, "I understand," according to Teel.
Lind couldn't be reached for comment, but Loveall said Raley's still hasn't proved its case.
While Raley's has shared some financial data, company officials haven't agreed to the union's demand for a "comprehensive audit," Loveall said in his memo.
The union has said it's willing to make concessions once it's convinced of Raley's financial problems. The union agreed to concessions with Save Mart last month.
Raley's final offer includes a two-year wage freeze and the elimination of premium pay for Sunday shifts. The company also wants to make changes in the health plan, but those aren't part of the package scheduled to be implemented Thursday.
"What they're trying to do is more than people are willing to put up with," said Justin Hammond, a meat clerk in Loomis who came to assemble picket signs.