Lowe's Spent Billions On Share Buybacks, Zero On Severance For Laid-Off Workers
- Lowe's is laying off thousands of workers after hiking quarterly dividends and spending billions to repurchase company shares.
- The home improvement chain isn't offering severance to laid-off workers, some of whom have been at Lowe's for a decade or more.
- Lowe's last December announced plans to buy back $10 billion worth of stock, according to TrimTabs Investment Research.
Lowe's roughly 300,000 employees are "without question" the home-improvement chain's "greatest asset," according to their boss, CEO Marvin Ellison. He offered the shout-out at the retailer's annual shareholder meeting in May, crediting a 15% boost in the company's quarterly dividends to his workers' efforts.
Yet when thousands of those workers recently got the boot, they received no notice and no severance. Instead, Lowe's -- a profitable company that spends billions buying back its own stock -- offered the equivalent of two weeks "transition" pay to full-time workers, some with the company more than a decade. Laid-off workers were also invited to re-apply for jobs at Lowe's, though not necessarily for the the same pay.
The sudden job losses are hitting some workers hard. "I'm behind in my house note and my property taxes," said Patricia Wilkerson, 59, of Dayton, Texas, who said she got no notice before losing her part-time, seasonal position at Lowe's and is receiving no severance. "Corporations are stretching people trying to get more with less."
Wilkerson was speaking from a hospital where she said she was accompanying her grandson for treatment for cystic fibrosis. Hurricane Harvey inundated her home with foot-high water for three days -- not having flood insurance, she's since spent her life savings on repairs.
Although major retailers from Walmart to Amazon have increased their minimum pay to attract and retain workers, Lowe's is seemingly bucking the trend. In Wilkerson's case, who has been laid off twice by Lowe's, she was most recently making less than she had more than a decade before as a seasonal worker in a company garden center. When she first joined Lowe's in a similar position in 2003, she made $13 per hour, rising to $23.58 when became a department manager -- a position she held for 15 years before being cut in early 2018.
Offering workers "transition pay"
"They hired me back in April at $12.22 an hour. I didn't expect to get $23.58, as I wasn't applying for a manager's position, but more than what I'd made in 2003," Wilkerson said. "So much of what they do is about depressing and keeping wages low, and so many companies do the same thing."
As first reported by the Wall Street Journal, Lowe's is product assembly and maintenance jobs previously handled by workers at its 1,800 U.S. stores.
Labor activists contend Lowe's executives are treating the rank-and-file poorly while lining their own and investors' pockets through share repurchases and cash dividends. The group United for Respect, which has made similar appeals for other retail workers, called on Lowe's to pay severance to those laid off and for it to not any outsource any more positions.
Asked for comment, Lowe's reiterated a previous statement that it is focused on improving customer service. It also said laid-off workers receive transition pay and can to apply for "tens of thousands" of open positions at Lowe's, as well as "apply to join the third-party providers" who will replace many of the laid-off workers.
"Totally unnecessary" share buybacks
Running a business didn't always work this way. In the past, it was common for corporations to use a chunk of their profits to increase pay for workers and invest in equipment or other capital expenditures. That ethos fueled the growth of the American middle class, according to William Lazonick, an economist and professor at the University of Massachusetts Lowell. Then things changed.
"In the 1980s, it became all about creating money for shareholders," he said. The practice of companies spending hundreds of millions or even billions of dollars to buy back their own stock -- artificially driving the price higher -- took off after a 1982 U.S. Securities and Exchange ruling that cut the risk of such repurchases arousing suspicion of market manipulation.
"In most ways, Lowe's is behaving like a typical corporation, but it's important to remember that companies didn't always behave this way," he said. "The buybacks are huge and totally unnecessary, but everyone does that."
Last year saw U.S. companies spend-- a record. For its part, Lowe's has announced buybacks worth $5 billion annually, or every other year, for the past decade, said Winston Chua, an analyst at TrimTabs Investment Research. "The last one, on December 2018, was for $10 billion – no doubt a result of Trump's tax cut," Chua said of the presidents signature 2017 Tax Cuts and Jobs Act, which slashed the corporate tax rate to 21% from 35%.
Where are workers' vested interests?
Lowe's isn't alone is announcing buybacks "during times in which they have laid off a good chunk of their workers," said Chua, citing Wells Fargo, General Motors, Pfizer, 3M, Caterpillar, Perrigo, Dow Chemical, SAP, AT&T and Verizon as only a few of the companies that have increased both layoffs and buybacks in recent years.
Viewed as a means of bolstering a company's market value, buybacks are often done when stock prices are high, according to Lazonick. "They are being done to keep up with the rest of the market when the market is booming," he said. "There's always some company that has a soaring stock price without doing buybacks, and everyone else has to keep up."
From former manager Wilkerson's point of view, the focus on investors rather than workers means Lowe's stores are increasingly staffed with people without a vested interest in the company.
Describing her young staff of part-timers during her years as a department manager, she said: "They'd work 10 hours at Lowe's, maybe 10 hours at Starbucks and then 10 hours at Olive Garden around the corner and go to school. They don't have an overpowering loyalty to any of these companies because they don't have any loyalty to them."
First published on August 12, 2019 / 12:46 PM
© 2019 CBS Interactive Inc.. All Rights Reserved.