Wal-Mart Stores Inc. is increasing the pay of nearly 500,000 U.S. employees as part of an effort to improve customer experience.
CEO Doug McMillon announced a $1 billion earnings and training initiative on Thursday. Company executives are looking to improved morale among workers as a key to improving customer interest in shopping at Wal-Mart.
Average wages for part-time workers will increase from $9.48 to $10 under the plan. Full-time employees will see an increase from $12.85 to $13. All employees will make at least $9 an hour by April. An increase to $10 is expected next year.
"We want associates that care about the company and are highly engaged in our business and are leaning in," McMillon said during a conference call with reporters. "Those feelings generate a customer experience that drives growth."
Wal-Mart reported its fourth-quarter earnings for fiscal year 2015 Thursday and saw same-store sales up for a second consecutive quarter and an increase in foot traffic for the first time in more than two years. McMillon said he was willing to be patient with results. It could take a year or more to see changes in the company's financial performance, he said.
Wal-Mart also is working on revamping its scheduling process for workers and upgrading employee training. McMillon described the changes as "comprehensive."
Shares of Wal-Mart stock closed Thursday at $83.52, down $2.77. Edward Jones retail analyst Brian Yarbrough was among those who viewed the market decline as temporary in light of the wage-increase news.
"I do think most investors would tell you it will take more than a year to see results," Yarbrough said. "It will take time for people to see a difference, and the reality is some customers who left might never come back. I think Doug is doing the right thing."
About 500,000 people, or 40 percent of Wal-Mart's overall workforce, will be affected by the increase. McMillon announced in December that the company was finalizing a plan to improve wages aimed largely at 6,000 employees making the federal minimum wage of $7.25 per hour.
Arkansas is among 29 states that exceed the federal minimum wage. Gov. Asa Hutchinson praised the wage increase in a statement, saying founder Sam Walton would "be proud of the forward-thinking plan."
"Walmart understands that a company is only as strong as its employees," Hutchinson said. "And its visionary new plan makes the company an even stronger, better place to work and advance in a career. I often talk about individuals having the opportunity to climb the economic ladder. Most of us hunger for that chance to earn our success. Walmart provides it."
Not all outside observers were as high on the plan.
OUR Walmart, an organization aimed at unionizing the retailer's employees, has been calling for a $15 hourly wage. Emily Wells, an employee at a Florida store the past three years and a member of OUR Walmart, questioned the impact without additional hours for workers.
"Especially without a guarantee of getting regular hours, this announcement still falls short of what American workers need to support our families," Wells said.
Christine L. Owens, executive director of the National Employment Law Project, described the increase as "meager."
Considering Wal-Mart's profit is $16 billion, a $1 billion commitment "isn't insignificant," said Brian Gilmartin, portfolio manager at Trinity Asset Management Inc. in Chicago.
"It is material," Gilmartin said. "That's a big deal for a business that essentially has a 3 percent net operating margin. Ultimately, I think it's an investment in the business, but it's not one they can put under capital expenditures. They have to expense it, so it's a direct hit to earnings."
Business on 02/20/2015