Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Instant Analysis: Wal-Mart Stores, Inc. Set to Raise Wages for 1.2 Million Employees

By Jeremy Bowman - Jan 22, 2016 at 2:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Wal-Mart is making a huge bet on its employees. Will it pay off?

What happened? 
Elaborating on its earlier announcement that it would raise its minimum wage to $10 an hour in February, Wal-Mart Stores ( WMT 1.51% ) released a slew of other employee raises and benefits earlier this week.

  • In all, 1.2 million Wal-Mart employees will receive raises next month. This includes those earning less than $10 an hour.
  • Associates earning more than $10 an hour will receive their annual raise in February, instead of waiting for their work anniversary.
  • Associates above their pay band will receive a one-time lump-sum payment of 2% of their salary. For someone making $10 an hour, that's about $400.

After the raises go into effect, average full-time wages at Wal-Mart will be $13.38 an hour. 

Wal-Mart is also improving its Paid Time Off policy, allowing workers to use it as soon as they receive it, and letting them to carry up to 80 hours from year to year or otherwise receive payouts for it. 

Does it matter?
Wal-Mart is investing $2.7 billion over this year and last into improving wages and training for its employees. It's the most important initiative CEO Doug McMillion has announced since taking over two years ago.

The move should help to spruce up service and appearance at stores, fix inventory problems, and reduce long lines at the checkout. Store performance has been improving, the company claims, and comparable sales are up modestly, having increased for five quarters in a row.

However, those increases in wages have taken their toll on company profits. The stock tumbled in October after the company reduced its guidance for fiscal 2016, and warned of wage pressure in fiscal 2017. Analysts now expect its EPS to fall from $5.07 in fiscal 2015 to $4.53 in fiscal 2016, and then to $4.17 in fiscal 2017.

Improving customer satisfaction is a must for Wal-Mart, but it's losing its status as the low-price leader, its core competitive advantage. Forced to play to catch up, the company will struggle to regain those lost profits.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
WMT
$137.51 (1.51%) $2.04

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.