Wal-Mart touts next phase of pay raise as largest in the private sector (Updated)

Editor’s note: Story updated to include statement from the activist group Making Change at Walmart.

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Just five days after Wal-Mart Stores announced it was exiting the small store business, the company called attention to the second phase of its $2.7 billion “investment” in employees. Pay raises and other benefits are set to begin Feb. 20, with Wal-Mart hailing it as the “largest single-day, private-sector pay increases ever.”

The Bentonville-based retail giant also announced Wednesday (Jan. 20) new short-term disability and paid time off benefits. Overall, the company said the average hourly full-time pay following the raise will be $13.38, with more than 1.2 million workers estimated by the retailer to see higher pay.

“The combined changes will expand support for associates dealing with extended health issues and provide associates greater control over their paid time away from work,” the company noted in a statement.

On Jan. 15, the company said it would close 269 stores in the U.S. and globally with Walmart Express being on the chopping board by the end of the January. The retailer is closing 11 stores in Arkansas. The retailer also  is pulling the plug on its small store experiment and 102 of the 154 locations to be shuttered in the U.S. will be the Walmart Express which largely operate in small towns. An estimated 10,000 Walmart jobs are being cut as a result of the store closures.

Also, Sam’s Club is losing about 400 operational jobs, and 150 corporate office workers were given pink slips on Jan. 11.

Wal-Mart previously reported that this second phase of the $2.7 billion pay and benefit boost would result in an overall Arkansas payroll gain of $63.7 million. About 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.

Pay raise details made available Wednesday by the company include:
• All associates hired before Jan. 1, 2016 will earn at least $10 and hour;
• New entry-level workers will continue to start at $9 an hour and move to at least $10 an hour after completing the company’s retail skills and training program;
• Employees already earning more than $10 an hour will receive an annual pay increase in February rather than waiting until their anniversary date; and
• With the changes, the average full-time hourly wage for Walmart U.S. employees will be $13.38 an hour, and the average part-time hourly wage will be $10.58 an hour.

BENEFIT CHANGES
As to the benefits change, the retailer said the move will “streamline paid vacation, sick time, personal time and holiday time into one category.” The short-term disability plan is new, and is geared to provide “financial protection” to employees who are away from work because of illness, injury, having a baby, or other medical needs. Details of the benefit changes include:

Paid time off (PTO) is available to use as soon as it’s earned and can be used for almost any reason;
• Full-time hourly employees may carry over up to 80 hours (48 hours for part time) of PTO from year to year;
• Any unused hours at the end of the year above the 80 hour and 48 hour limits will automatically be paid to hourly employees in the first paycheck every February;
• Employees will also keep any existing and accrued sick and personal time to be used for certain circumstances once all available PTO is used;
• The basic short-term disability plan will pay 50% of a worker’s average weekly wage, up to $200, for up to 26 weeks;
• Walmart is also offering a disability enhanced plan, which costs less than the company’s prior voluntary plan and provides more coverage. Employees would receive up to 60% of their average weekly wage with no weekly maximum for up to 26 weeks.

“We are committed to investing in our associates and to continuing to simplify our business. When we do so, there is no limit to what our associates can accomplish,” Judith McKenna, chief operating officer for Walmart U.S., said in the statement. “Our customers and associates are noticing a difference. We’re seeing strong increases in both customer experience and associate engagement scores. Five straight quarters of positive comps in our U.S. business is just one example of how helping our associates grow and succeed helps the company do the same.”

Making Change at Walmart (MCAW), the national campaign to change Walmart, released the following statement to Talk Business & Politics about the raise and benefit changes.

“Walmart greed knows no bounds. They just closed hundreds of stores, destroyed thousands of jobs, and devastated countless small communities, but now they are trying to convince America they’re giving our workers a raise? After Walmart’s last wage increase stunt, many workers almost immediately saw their hours cut and take-home pay go down. It’s easier to find a unicorn than a Walmart worker who has received a meaningful raise, or hasn’t had their hours cut. You want to know the real impact of Walmart? Ask the communities and workers whose stores are closing. Or even better, ask the workers who are still waiting for the last raise. America’s hard-working families expect better from a company that makes billions in profit a year, and that is owned by one of the wealthiest families in the world. Make no mistake: We will not stop our campaign to change Walmart, until they change for the better.”

THE FINANCIAL HIT
While retail market watchers have applauded Wal-Mart’s efforts to raise worker pay and improve store operations, investors have not been kind. 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.

“Fiscal year 2017 will represent our heaviest investment period. Operating income is expected to be impacted by approximately $1.5 billion from the second phase of our previously announced investments in wages and training as well as our commitment to further developing a seamless customer experience,” Chief Financial Officer Charles Holley said in early October during the retailer’s annual investor conference in New York City.

Holley, who is set to retire Jan. 31,  said despite the lower earnings growth in fiscal 2017, the company expects it will grow sales 3%-4% annually over the next three year period and add between $45 billion and $60 billion in revenue.

By fiscal 2019, Wal-Mart expects earnings will rebound by 5% to 10% from the investment in prior years as the investments in people and its supply chain begin to pay off.

The publicly held company is set to issue quarterly earnings on Feb. 18. The consensus estimate among the 25 analysts who cover the company is $1.44 per share on total revenue of $130.91 billion. That is below the $1.61 per share for the same period in the previous fiscal year.

Wal-Mart Stores’ shares (NYSE: WMT) closed Wednesday at $60.84, down $1.72 on a broad market selloff that saw the Dow Jones Industrial Average fall 1.56%, and the S&P close down 1.17%. During the past 52 weeks the share price has ranged from a $89.26 high to a $56.30 low.