Wal-Mart Stores Inc. has already gotten behind the Made in USA movement. Now the much-criticized retailer is joining the move toward a higher minimum wage.
In reporting a 12 percent increase in net income for the fourth quarter on a 1.4 percent rise in sales, Wal-Mart revealed that it will increase pay for all its full-time sales associates. The move by the world’s largest retailer — whose stores have been the site of many demonstrations by employees seeking better pay — is likely to give a major boost to demands by everyone from President Obama to retail unions to begin paying a higher minimum wage. Wal-Mart’s move is likely to put pressure on other retailers; the announcement follows the Gap’s decision a year ago to raise wages for employees.
The initiative aimed at full-time associates at Wal-Mart U.S. and Sam’s Clubs provides pay raises in the first half of the current fiscal year to ensure that workers earn at least $1.75 above the federal minimum wage, or $9 an hour. By next February, associates should earn at least $10 an hour. Doug McMillon, the company’s president and chief executive officer, said the initiatives will cost the retailer $1 billion this year.
Scheduling, another point of contention, is also being addressed, said Greg Foran, president and chief executive officer of Wal-Mart U.S. A pilot scheduling system will create stability for associates who want predictable hours and flexibility for those who prefer to select additional shifts. “Starting in 2016, we will be one of the first retailers to offer some associates fixed hours each week,” he said. “We’re realigning our store operational structure, adding back department managers to give associates a closer relationship with their supervisors.”
McMillon said Wal-Mart and the Wal-Mart Foundation also committed $100 million over five years to help increase the economic mobility for entry-level workers by advancing their careers.
The moves were unveiled as the company said revenue rose 1.4 percent to $130.6 billion in the company’s fiscal 2015 fourth quarter, from $128.8 billion in the prior year’s quarter. Revenues missed Wall Street consensus estimates by $600 million. Total revenue for the year rose 2 percent to $485.7 billion, from $476.3 billion in fiscal 2014.
Net sales in the quarter ended Jan. 30 grew by $3.1 billion or 4.1 percent to $79.57 billion, from $76.43 billion last year. Consolidated net income for the quarter was $5 billion, a 12 percent increase over last year’s $4.43 billion. Net income for the year rose 2.1 percent to $16.3 billion, from $16.02 billion in 2014.
Underlying earnings per share of $1.61 beat estimates by 7 cents, while comp store sales advanced 1.5 percent, the strongest showing in more than two years, with positive traffic recorded for the first time in nine quarters.
“We had a good fourth quarter to close out our fiscal year,” McMillon said. “Wal-Mart U.S. delivered better than expected comp sales. Sam’s Club had its best performance of the year and Wal-Mart International had solid sales and profitability.
“Overall e-commerce sales grew approximately 22 percent in fiscal year 2015; solid, but not quite as strong as we wanted,” McMillon said, adding that nearly 70 percent of traffic on walmart.com during the holiday period came from mobile devices, a trend that’s being seen all across retail.
Like other retailers, Wal-Mart faced significant headwinds from currency exchange fluctuations. “I’m pleased that we delivered fiscal year revenue of $486 billion, but we’re not satisfied,” McMillon said.
Total revenues at Wal-Mart International fell 3.8 percent in the fourth quarter to $36.5 billion, and declined 0.1 percent for the year to $137.4 billion. Of Wal-Mart’s five largest countries, Mexico, Canada and Brazil delivered positive comps in the quarter, but same-store sales declined in the U.K. and China. Wal-Mart International’s fourth-quarter results were negatively impacted by $148 million for the cost of closing stores in Japan.
McMillon said apparel, home, and health and wellness performed strongly in the quarter, while entertainment struggled with deflation in some categories and fewer new video titles.
Craig Johnson, president of Customer Growth Partners, said Wal-Mart’s SuperCenters are losing share of small basket trips because customers can’t shop quickly due to the format’s large size. In 2016, Wal-Mart will open 60 to 70 SuperCenters and 180 to 200 Neighborhood Markets, including 10 to 15 smaller-format locations, which are the last wave of a test. The retailer will also open 29 stores in Canada.
McMillon admitted that being the low-price leader isn’t enough in today’s hypercompetitive climate. The pay increase for associates should “raise the standard of customer experience in the U.S. business,” he said, adding that improved store operations will include better check-out staffing and improved inventory management and in-stock positions.
Wal-Mart forecast earnings per share for the full year of fiscal 2016 to range between $4.70 and $5.05. EPS for the first quarter, will be in the range of 95 cents to $1.10. Comps are expected to increase at Wal-Mart U.S. and Sam’s Club by 1 percent to 2 percent over last year. The currency exchange rate could have a negative impact of about $10 billion on net sales for fiscal year 2016 and a negative impact on operating income of about 10 cents per share.
McMillon, who marked his first-year anniversary at the helm of Wal-Mart Stores, said, “One of our most important priorities this year is improving the customer experience. We know what customers want, and we’re investing strategically to exceed their expectations.”
Wal-Mart stock on Thursday closed down $2.77 or 3.2 percent at $83.52 on the New York Stock Exchange.