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Wal-Mart to Raise US Hourly Workers' Pay After Criticism

Thursday, 19 February 2015 02:22 PM


Wal-Mart Stores Inc. will begin paying all of its U.S. hourly workers at least $9 an hour by April and $10 an hour by next February, striking back at critics who say it underpays employees.

The plan will result in raises for about 500,000 full- and part-time workers in the first half of the current fiscal year, the Bentonville, Arkansas-based company said Thursday in a statement. The retailer also forecast profit for the current year that was less than analysts estimated.

Wal-Mart, the largest private employer in the U.S., has long been criticized for its labor practices. Workers have staged protests on Black Friday, one of the busiest shopping days of the year, seeking better working conditions and higher pay. The company also was ridiculed following a report that a store in Canton, Ohio, was holding a food drive that asked employees to donate items to fellow workers.

“These changes will give our U.S. associates the opportunity to earn higher pay and advance in their careers,” Chief Executive Officer Doug McMillon said in the statement. “We’re pursuing a comprehensive approach that is sustainable over the long term.”

The pay of $9 an hour is $1.75 higher than the federal minimum wage. Wal-Mart employs about 1.3 million workers in the U.S., where it has about 4,400 locations.

The wage boost and changes to the company’s hiring, training and scheduling programs will cost about $1 billion the current fiscal year. That would be about 0.2 percent of the $497 billion in sales analysts project Wal-Mart will generate this year.

Reduced Turnover

With the pay increase, Wal-Mart is looking to reduce its workforce’s turnover, cut training costs and improve stores, while also fending off negative publicity about its wages, said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis.

While the move likely wasn’t a response to pressure from the improving job market, it may ripple throughout the industry, including at rivals such as Target Corp., he said.

“This forces all retailers to take a look at their pay levels, but definitely Target,” he said. “They have to be competitive.”

Wal-Mart cited those costs of the move, as well as currency fluctuations, in its profit forecast, which trailed analysts’ estimates. Earnings this year will be $4.70 to $5.05 a share. Analysts estimated $5.19, on average. The retailer now expects sales growth of 1 percent to 2 percent this year, down from a previous forecast of as much as 4 percent.

Shares Fall

Wal-Mart fell 2.6 percent to $84.03 at 11:47 a.m. in New York. The shares had gained 0.5 percent this year through yesterday, compared with a 2 percent gain for the Standard & Poor’s 500 Index.

Profit in the quarter through Jan. 31 rose rose to $1.61 a share, excluding some items. Analysts had predicted $1.54 on average, according to data compiled by Bloomberg. Wal-Mart U.S. comparable-store sales -- a closely watched benchmark -- increased 1.5 percent.

McMillon, who took over as CEO a year ago, has added more fresh produce to U.S. stores, an effort that’s proving popular with shoppers. Falling unemployment and the plunge in fuel prices also are putting more money in consumers’ pockets.

“The precipitous drop in gas prices should translate into consumer spending as we progress throughout 2015,” Charles Grom, an analyst at Sterne, Agee & Leach Inc., said in a report before Wal-Mart’s earnings were released.

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Wal-Mart Stores Inc. will begin paying all of its U.S. hourly workers at least $9 an hour by April and $10 an hour by next February, striking back at critics who say it underpays employees.
wal-mart, pay, wages, workers
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2015-22-19
Thursday, 19 February 2015 02:22 PM
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