Walmart’s next pay hike will garner $63.7 million more for Arkansas workers

The second pay raise installment in the two-year $2.7 billion commitment by Walmart U.S. to its hourly workers is slated for February, with Arkansas employees of the retail giant capturing an estimated $63.7 million of the total.

The retail giant said roughly 39,000 of its hourly workers in Arkansas will see their pay raised to $12.80 per hour for full-time, and $10.37 hourly for part-time. The state payroll impact is $63.7 million, the company noted in a recent release.

Walmart has increased wages in three phases beginning in April by moving its starting rate to at least $9 an hour. In July, the company increased wages for more than 100,000 associates in specialized positions, like wireless or deli associate, and department managers. These set the stage for the February 2016, and final round of wage increases.

In this next phase, workers hired before Jan. 1, 2016 will earn at least $10 per hour, which is $2.75 above the state’s minimum wage, the company said. Managers who are hourly in service-oriented areas of the stores will earn a minimum of $15 an hour. For new hires after Jan. 1, the retailer said the starting wage is $9 hourly which will rise to $10 after the worker successfully completes the company’s training modules.

“This is an exciting time for our associates and our customers,” said Daniel Mosley, store manager at Walmart Store 5706 in Little Rock. “The investments made across the business have made the stores a better place to shop and to work.”

Walmart U.S. CEO Greg Foran said recently the company is already starting to see benefits from the wage increases which began in April. He said the retailer’s customer experience ratings are improving and the worker turnover rate in the front of stores began to diminish as soon as the raises were announced.

“You show me a store with a high turnover rate in the front-end and I will show you a store with soft sales. The opposite is true, the best performing stores have the lowest turnover rates and the highest customer experience ratings,” Foran told analysts earlier this year.

He said the day Wal-Mart announced the pay raises store worker turnover began to slow and applications from prospective employees rose. He said the raise was the right thing to do and is having a positive impact on store performance.The company also announced during its third quarter earnings that U.S. comp-store sales were positive for the fifth straight quarter and customer traffic was positive for the fourth straight quarter. That said, Foran said there remain many operational improvements if the retailer continues its growth trajectory, especially given they are opening fewer stores.

One of the best moves the retailer has made this past year according to CEO Doug McMillon is the return of more than 8,000 department managers. He said recently the department managers take ownership in the store and most of the time run their departments like a store within a store. He said this raises service levels, improves in-stock metrics which result in more sales and happier customers.

OTHER MOVES
The retailer is also pleased with the impact it’s seeing in the top-shelf stocking program which is rolling out in the coming weeks. Mark Ibbotson, senior vice president for the Walmart U.S. Central Division, said recently the retailer began adding a top shelf to its store modulars so products can be moved out of the backroom, unpacked and placed on to the top shelf by the restocking crew. This is a move away from the retailer’s efforts in recent years to have lower shelves and more clear overhead space.

Ibbotson said the “top shelf” approach ensure that merchandisers on the floor have all the products they need to restock the shelves during the day. He said it’s also a way to visibly see when there is too much inventory or when a particular product needs have its sales forecast readjusted. Ibbotson said the new model ensures there are more workers out in the store all the time, because they have everything they need to reset their shelves right in front of them.

“This should also help stores keep better tabs of the inventory needs of every item in the store. It also ensures a cleaner backroom which is absolutely critical for those stores providing online grocery pickup,” he said.

Talk Business & Politics recently asked a store employee in Bentonville how he liked the “top shelf” approach. He said it was new but so far it appears to be working well. The top shelf inventory approach also lets shoppers know the store does have a product that appears to be out of stock below. The employee said customers can ask any store worker to get product off the top shelf at any time.

WALL STREET REACTION
While analysts applaud Wal-Mart’s efforts to raise worker pay and improve store operations, Wall Street has taken a bearish view. Heavy spending in wages and e-commerce fulfillment efforts are a huge drag on Wal-Mart’s earnings as the retailer recently forecast between a 6% to 12% earnings dip this next year.

“Just a simple store is over. Changes ahead to benefit the customer; but, at the expense of shareholder earnings.”  said Cowen analyst Oliver Chen.

Moody’s analyst Charles O’Shea said Wal-Mart must invest in their people, seek competitive prices and push e-commerce if they are going to compete with Amazon.

“When you try to move multi-channel, it’s not free and it does not happen overnight. To compete with Amazon … they have to make these investments. It’s not bad for the long-term, but if you are in the stock for the short term it’s a problem,” he said.

Wal-Mart shares fell below $60 per share on Thursday (Dec. 17). Company shares (NYSE: WMT) were trading at $59.59 with normal volume. The stock price has declined 30.64% through this year. For the past 52-weeks the share price has ranged from a $90.97 high to a $56.30 low.