Fashion’s hourly wage race has a new runner.
“Following an extensive evaluation of our wage rates by market, we are making investments in our workforce by increasing wage rates and benefits, principally for hourly associates,” said Stuart Burgdoerfer, executive vice president and chief financial officer, on a conference call with analysts Thursday. “These investments will help us continue to attract and retain high-quality talent and be an employer of choice.”
The wage increases are helped along by the new tax laws, which gave the retailer a $92.2 million benefit in the fiscal fourth quarter, even though the changes were only in effect for January, the last month of the fiscal year.
But the pressure to start raising wages predates the tax changes.
“We looked at where we stacked up competitively, we made an evaluation market by market to increase wage levels and enhance maternity and big time-off benefits, focused on our hourly rate,” Burgdoerfer said.
“Labor markets are tightening up,” he said. “Major retailers have recently announced increases in wage rates, and we want to make sure that we’re very competitive in terms of how we play and the benefits provided to our workers. As to productivity, our hourly workforce is critical in the success of our business, and we look at productivity in lots of ways. And that starts with having a very talented, stable workforce, and we think these changes will contribute to them.”
Higher wages in general have also been a source of concern to investors, who are keeping a close watch to see if inflation across the economy leads the Federal Reserve to raise interest rates.
The spending on wages and benefits comes in just as the company is looking continue its Victoria’s Secret turnaround, which started with the axing of the swim and apparel categories and led to a more targeted promotional stance.
Jan Singer, chief executive officer of Victoria’s Secret Lingerie, noted that the business’ overall results were down last year, but sales and margins moved from down in the high-single digits in the first quarter to down mid-single digits in the fourth quarter.
“Based on continued engagement with the customer, we continue to rebalance the bra mix, offering our choices of bras with benefits, balanced with high fashion and constructed and unconstructed,” Singer said.
This year, the brand is focused on strengthening its core bra and panty business and building key adjacent categories.
Last year, L Brands’ sales increased 0.5 to $12.63 billion as net income slipped 15.1 percent to $983 million, or 3.42 a share. Adjusted earnings per share fell to $3.20 from $3.74.