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BENTONVILLE, Ark. — When Walmart released its fiscal year financial results in February, its surprisingly strong performance was overshadowed by the announcement that it would give raises to about 500,000 employees, increasing its base hourly pay rate above the federal minimum wage.
When Walmart released its fiscal year financial results in February, its surprisingly strong performance was overshadowed by the announcement that it would give raises to about 500,000 employees, increasing its base hourly pay rate above the federal minimum wage.
Since then, Wall Street analysts have been feverishly assessing the likelihood that other major retailers might feel compelled to follow suit, and calculating the possible impact on shareholder returns.
With the action, current and future Walmart associates will earn at least $9 per hour, or $1.75 above the federal minimum wage of $7.25 per hour. By February 1, 2016, all current associates will earn at least $10 per hour.
In addition, the company is testing a new training and education program to help employees upgrade their skills and prepare themselves for a career. In tandem with the Walmart Foundation, the company has committed $100 million over five years to examine how workers in retail and related industries can be better trained and prepared for advancement.
"For several months, our leadership teams have been developing and testing new ideas to reward associates for their service to our customers and give them clearer pathways for opportunity," said president and chief executive officer Doug McMillon. "We’re pursuing a comprehensive approach to our hiring, training, compensation, scheduling programs and store management structure that is sustainable over the long term.
"We’re also realigning our store operational structure to give associates a closer relationship with their supervisors. Associates will have more ownership over their schedules. In addition, we’ll provide them with more resources and training to enable merit-based career advancement and higher levels of pay."
Early responses varied widely. Chief financial officer Charles Holley pointed out that the new wage structure will reduce first quarter earnings by about two cents per share and trim full-year earnings for fiscal 2016 by about 20 cents per share.
Walmart’s stock price consequently fell 3.2% on the day the initiatives were unveiled. However, soon afterward a research note issued by Credit Suisse analysts compared the initiatives to two past moves by Walmart that have had huge impacts that spread well beyond the company: its introduction of $4 generic prescriptions and its drive for sustainability. According to Credit Suisse, the wage initiative will likely compel other retailers and service firms to respond.
And some did. A week after Walmart’s announcement, apparel retailer TJX Cos. announced that it would raise the base hourly pay of its full- and part-time employees to $9 beginning in June.
