Retailers are finally getting shoppers to spend again, and soon
they are going to have to follow suit.
Target Corp., TJX Cos., Dollar Tree Inc., and Lowe's Cos.
reported solid sales growth Wednesday for the quarter, as an
improving job market and lower gas prices helped produce the
strongest holiday shopping season since 2011.
To maintain that pace, retailers plan to increase their
spending, both to do things like build out digital operations and
to pay for higher wages. Competition for lower-paid workers may
heat up after Wal-Mart Stores Inc. last week said it would increase
pay for all starting employees in April to $9 an hour.
TJX, the parent company of T.J. Maxx, Marshalls and HomeGoods,
followed that move Wednesday, announcing that by next June all of
its workers who have been employed for six months will be paid at
least $10 an hour. This June, TJX plans to start paying all U.S.
workers at least $9 an hour.
"We think it's absolutely imperative that we keep pace and that
we have the best talent," TJX Chief Executive Carol Meyrowitz said
on a conference call. The company, which has about 191,000
employees, needs to raise wages to help retain workers, she
said.
The pay increases tempered TJX's outlook for the year, which was
also weighed down by the stronger dollar, despite a 4% increase in
fourth-quarter sales, excluding newly opened or closed
locations.
Economists have been waiting for years for wage growth to kick
in, even as employers have added more jobs and the unemployment
rate has fallen.
Signs of wage growth are emerging as companies are having to
fight harder to attract and keep good employees. Starbucks Corp.
raised its starting pay last month, and Aetna Inc. said it would
begin paying its lowest-rung workers $16 an hour in April.
Wal-Mart's average part-time hourly wage is $9.48 and average
full-time wage is $12.85. Those rates are above the current federal
minimum hourly wage of $7.25, but below what the Labor Department
says is the retail industry average of $14.65.
Retailers are emerging from an extended stretch of consumer
malaise. Wal-Mart reported its second quarter of positive
same-store sales growth, ending a long stretch of declines or flat
growth. Target sales grew 3.8%, excluding newly opened and closed
stores, in its most-recent quarter, its best sales growth in nearly
three years.
Not all retailers are planning to raise pay. Dollar Tree, the
country's No. 3 dollar store chain, said it won't make sweeping
changes to its starting wages.
At Target Corp., Chief Financial Officer John Mulligan on
Wednesday said rivals' wage announcements wouldn't result in
material changes at the company. It said it pays more than the
federal minimum wage at all of its stores.
"We're all the time assessing the marketplace to determine
competitive wages," Mr. Mulligan said on a conference call. "We
feel very confident that we'll be paying the teams
appropriately."
Target is ramping up its spending plans, just not on the labor
line. Chief Executive Officer Brian Cornell is planning to boost
investment to help it compete better with other e-commerce rivals,
to build more smaller stores in cities and to come out with more
fashionable products that help it stand out.
Target the retailer will provide more details on those plans at
an investor event next week.
Target executives say they feel they will be able to cover the
higher spending by cutting costs and operating more
efficiently.
Target is hoping to build on momentum from its most-recent
quarter. Transactions also increased 3.2% for the period, though
traffic is still down over a two year period.
"There is a lot of investment to be done," Mr. Mulligan
said.
On Tuesday, Macy's Inc. said it plans to increase capital
spending by $100 million, with a focus on things such as new store
concepts to international expansion in an effort to reverse a
four-year slowdown in sales growth.
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