The grocery strike in Southern California may be coming to an end, but that prospect didn't make the stocks of the leading supermarket chains any more attractive to investors.
each closed down Friday; all had stores affected by the strike. Safeway shares closed off the most, down 66 cents, or 2.8%, to $22.87.
The fall came despite a tentative agreement reached Thursday night between the United Food and Commercial Workers and the grocery chains. Some 70,000 grocery workers have been on strike since mid-October. The agreement, which still must be approved by union members, would end what has become one of the longest-running labor disputes in the history of the grocery industry.
A union representative declined to give details on the settlement. Representatives of the three grocery companies did not immediately return calls seeking comment. But a statement on a Web site representing them acknowledged the settlement.
"We are very pleased to have reached this agreement and at the prospect of seeing our employees return to work," the grocery companies said in a joint statement. "This labor dispute has been difficult for everyone involved -- our employees, our customers and our companies -- and we look forward to its conclusion."
Although the strike only affected workers in the greater Los Angeles area, it had a big effect on the grocery chains and their competitors -- at least in the short term. Safeway, for instance, took a $103 million
fourth-quarter charge related to its strike losses. Albertsons' third-quarter earnings per share fell 47%, even though the strike only covered a portion of that period.
Meanwhile, rivals including
( WFMI) and
( LDG) reported sales surges because of the strike.
Although the Southern California strike is coming to an end, the grocery chains face potential labor unrest in a number of other major markets around the country. At Safeway, for instance, stores representing about 39% of its base will see their labor contracts
expire this year.
On the surface, the labor dispute concerned health care issues. The grocery companies wanted to have workers pay a larger portion of their health insurance costs and wanted new workers to have a different, less generous set of benefits.
But below the surface, the strike involved fears about
. In the next few years, the retail behemoth plans to open dozens of its Supercenters in California. The Supercenters add fresh produce and other grocery items to Wal-Mart's selection of general merchandise.
The grocery chains have argued that they need to lower their expense rates in order to better compete with Wal-Mart, which has no unionized workers.
In their statement, the grocery companies said the settlement addressed their concerns about health care costs and competitive issues.
"These were complex and difficult negotiations, which required creativity and tough choices on both sides," the companies said in their joint statement.
Assuming that the grocery chains got some concessions from workers, they might be in better shape than they were before the strike, said Mark Hugh Sam, an analyst who covers the grocery industry for Morningstar. Meanwhile, the resolution of the strike in Southern California could actually make those negotiations easier, because both sides now should have a better idea of the other's bottom line.
"They did what they had do to make a point," Hugh Sam said. "I think both sides made their point."