By Michael Calia And Eric Morath
Wal-Mart Stores Inc. on Thursday said it plans to boost the pay
of its U.S. employees above the federal minimum wage in a push to
help entry-level workers and amid a national debate about income
inequality.
The retailer said it plans to pay its workers at least $9 an
hour by the first half of the year, or $1.75 above the federal
minimum wage, and $10 an hour by Feb. 1. The raises affect the
company's 500,000 full-time and part-time associates at U.S.
Wal-Mart stores and Sam's Clubs, or about a third of the company's
1.4 million U.S. workers.
Wal-Mart's move highlights larger debates over the pace of the
economic recovery and the compensation of people toward the bottom
of the wage scale. Last month, health insurer Aetna Inc. announced
plans to raise the incomes of its lowest-paid workers by as much as
a third to $16 an hour.
The news came as Wal-Mart posted its second straight quarter of
same-store sales growth in the U.S. on an increase in traffic;
however, the retailer also issued weaker-than-expected guidance for
the year, in part on the higher pay for associates.
"These changes will give our U.S. associates the opportunity to
earn higher pay and advance in their careers. We're pursuing a
comprehensive approach that is sustainable over the long term,"
said Doug McMillon, Wal-Mart president and chief executive.
Mr. McMillon said in a news release that its initiatives will
cost more than $1 billion in the fiscal year. The initiatives
include Wal-Mart and the Wal-Mart Foundation committing $100
million over five years to help increase the economic mobility for
entry-level workers.
"Beyond this commitment, Wal-Mart is also piloting a new,
comprehensive on-boarding and training program to create clear
career pathways for associates, so they can earn more and seek
promotions," McMillon explained. "We're encouraging our associates
to continue their education by providing no-cost access for them to
complete their high school diploma or GED, as well as free and
low-cost college credit to reduce the time and cost of earning a
college degree."
The plans for the wage increase come after a group including
some Wal-Mart workers had been pushing the retailer to institute a
$15 minimum wage. Wal-Mart, which has said that only a small
percentage of its U.S. employees are paid the minimum wage, said in
May that it wasn't opposed to a boost in the federal minimum
wage.
Mr. McMillon said in October that the company planned to end
minimum-wage pay for all its workers over time. At the time, the
average hourly Wal-Mart worker earned $11.83 an hour.
Congress hasn't voted to boost the federal pay floor since it
rose to $7.25 in 2009. President Barack Obama has pushed for
increases, while several states, including New York and California,
have set wage increases in the near future.
Wal-Mart joins a number of other large retailers in paying
workers more than the federal minimum.
Gap Inc. last year said the clothing retailer would raise
starting pay to $10 an hour. Other companies, including Costco
Wholesale, Hobby Lobby Stores Inc. and IKEA Group tout that all
their workers earn more than the minimum wage.
At the same time, many states and cities have set minimum wages
well above the federal level. Eight states, including California
and Massachusetts, already mandate that all employers pay workers
at least $9 an hour.
With states and companies raising pay floors, relatively few
workers earn the federal minimum wage or less per hour, according
to the Labor Department. In 2013, 3.3 million workers earned the
federal minimum, or 4.3% of hourly wage earners. Of those workers,
14% worked in retail jobs. Nearly half worked in food service.
Low-wage employers, broadly, have seen wage pressures increase
in the past year as the unemployment rate has fallen.
Mike Bufano, senior vice president for planning at Panera Bread
Co. told investors this month that the company is paying "higher
wages across-the-board" adding there is "war for talent" in the
sector.
For the new year, Wal-Mart said it expected to post earnings of
$4.70 to $5.05 a share. Analysts polled by Thomson Reuters had
projected earnings of $5.19 a share and $497.2 billion in revenue
for the year.
Wal-Mart also warned that its net sales could take a $10 billion
hit if foreign-exchange rates remain where they are. The company
said it now expects sales growth of 1% to 2%, down from its October
guidance of 2% to 4% growth.
For the current quarter, Wal-Mart said it expected to post 95
cents to $1.10 a share in earnings, short of $1.14 a share
predicted by analysts.
Shares of Wal-Mart, up 15% over the past year, fell more than 1%
in premarket trading.
The retailer also raised its quarterly dividend to 49 cents a
share, an increase of a penny. The boost brings the dividend yield
to 2.3%, versus the 2.7% at rival Target Corp.
The holiday quarter was the company's second-straight period of
growth in U.S. same-store sales, at 1.2%, including fuel, following
several quarters of declines or flat performance. The company had
expected same-store sales at U.S. locations to be flat or grow up
to 1%.
The company has responded to dwindling traffic numbers with
smaller store formats and investments in its online business.
Traffic at U.S. stores rose 1.4%, reversing a trend of weakening
traffic at the company's big-box locations.
For the quarter ended Jan. 31, Wal-Mart reported earnings of
$4.97 billion, or $1.53 a share, up from $4.43 billion, or $1.36 a
share, a year earlier. The company said in November that it
expected to post $1.46 to $1.56 a share in earnings for the
quarter, a range that fell below analysts' projections at the
time.
Total revenue, which includes membership fees and other income,
rose 1.4% to $131.6 billion, below analysts' recent projections of
$132.4 billion.
The recent drop in gasoline prices weighed on same-store sales
at Sam's Club, which sells the fuel along with bulk grocery and
other items. Factoring in fuel, Sam's Club posted a decline of
0.4%, but excluding fuel sales grew 2%. Overall, same-store sales
of Wal-Mart and Sam's Club combined rose 1.6% without fuel.
Write to Michael Calia at michael.calia@wsj.com and Eric Morath
at eric.morath@wsj.com
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