Tags: Schiff | Wal-Mart | pay | hike

Euro Pacific's Schiff: Wal-Mart Pay Hike Might Cause Job Losses

By    |   Friday, 20 February 2015 05:54 PM


Many labor advocates rejoiced at the news that Wal-Mart is raising its wages for hourly workers to at least $9 in April and $10 by February 2016.

But Peter Schiff, CEO of Euro Pacific Capital, didn't join in the celebration.

"Ultimately, it's going to cause Wal-Mart to cut back on hiring," he tells CNBC and Yahoo Finance's Talking Numbers. "If it has to pay higher wages, it may decide just to have fewer job opportunities."

Wal-Mart might also end up passing some of the higher wage costs along to its customers, Schiff argues.

"It's not all going to be about lower profits at Wal-Mart. It also could be about higher prices for Wal-Mart customers. And, of course, many of those customers are low-income workers themselves.”

So Wal-Mart might lose some of its customers, "because they're going to end up going somewhere where the wages are lower and the prices are lower," Schiff notes. "So it might backfire, and Wal-Mart might end up having to cut back on its staff."

Morningstar analyst Ken Perkins offers an interesting take on the company's stock. He doesn't think the wage hike will have much impact.

"After reviewing Wal-Mart's fourth-quarter results and outlook, we don't expect a material change to our $83 fair value estimate, as the potential cash flow hit from increased wages should be neutralized by the time value of money," he writes on Morningstar.com.

Wal-Mart shares closed at $84.30 Friday.

"We still believe the wide-moat firm commands a cost advantage over its peers and can compete effectively in multiple channels," Perkins says.

"The shares trade roughly in line with our fair value estimate, but given our low fair value uncertainty rating and the fact that most other U.S. retailers trade at less attractive valuations, we suggest investors look to Wal-Mart if it continues to trade down."

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Many labor advocates rejoiced at the news that Wal-Mart is raising its wages for hourly workers to at least $9 in April and $10 by February 2016.
Schiff, Wal-Mart, pay, hike
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2015-54-20
Friday, 20 February 2015 05:54 PM
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