Wal-Mart is celebrating a surprisingly strong U.S. Holiday season by spreading the wealth a bit.
The world’s largest retailer and the nation’s largest private employer is spending $1 billion to increase hourly wages for its current U.S. Store associates to more than $9 per hour, or higher, beginning in April. That increase is at least $1.75 above the federally mandated minimum wage. The decision will impact thousands of full and part-time U.S. Employees.
Here are some other key points from Wal-Mart’s latest earnings report.
What you need to know: Wal-Mart (WMT), often maligned by labor advocates that have long argued the retailer can pay its employees more, is seemingly heeding that call. Even Coins2Day’s Stephen Gandel has argued Wal-Mart could afford to pay its employees up to 50% more without disappointing Wall Street.
Wal-Mart isn’t aiming as high as Gandel suggested, but it is certainly making a notable move with the increase. Wal-Mart said by February of next year, all current U.S. Associates would make $10 an hour or more. The company is also piloting a training program to help employees move out of entry-level positions and potentially make $15 an hour and more with increased responsibilities. Wal-Mart employees about 500,000 full-time and part-time associates at its’ U.S. Wal-Mart and Sam’s Club stores.
The pay hike comes as Wal-Mart reported a strong 1.7% increase in U.S. Same-store sales, a key metric for retailers. That was better than the 0.7% jump that analysts had anticipated, according to a poll conducted by Consensus Metrix.
“Our fourth quarter was the first positive traffic comp we’ve had since the third quarter of fiscal year 2013,” said Greg Foran, Wal-Mart U.S. President and CEO. Wal-Mart booted traffic during the critical six-week holiday season, resulting in strong sales of toys, home, seasonal and apparel goods. Wal-Mart completed almost 1 billion total transactions during the holiday season, including a particularly strong Cyber Monday.
The big number: Wal-Mart’s overall total revenue climbed 1.4% to $131.57 billion for the fiscal quarter ended January 31. That wasn’t as strong as the $132.28 billion projected by analysts surveyed by Bloomberg. Wal-Mart’s top line results have frequently missed Wall Street’s expectations the past few years. Per-share adjusted earnings, meanwhile, totaled $1.61 versus the $1.54 predicted by analysts.
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What you might have missed: While Wal-Mart ended the year on a high note, President and CEO Doug McMillion said “we’re not satisfied.” He and the leadership team says they want to continue to improve the customer experience, in part by better integrating physical stores with the company’s e-commerce and mobile commerce business.
“We have work to do to grow the business,” McMillion said. “We know what customers want from a shopping experience, and we’re investing strategically to exceed their expectations.”
Because of the higher wages and investments in training and e-commerce, Wal-Mart expects current-year operating profit to be pressured. Wal-Mart is spending about 20 cents per share for the full year on the higher wages and associate training and educational programs. As a result, Wal-Mart sees 2016 fiscal-year profit between $4.70 to $5.05 per share with sales expected to rise between 1% to 2%, hurt by some pressure from the stronger U.S. Dollar.
