Retail giant Wal-Mart Stores Inc. WMT has announced that it would hike minimum wages for more than 100,000 U.S. department managers and workers in its deli and other specialized departments in Jul 2015.
Wal-Mart told The Associated Press that it will raise wages of department managers of complex and service-oriented jobs in areas like produce, electronics and auto care, to $13 per hour and top out at $24.70 per hour, which will begin in July. Starting next February, they will be paid at least $15 per hour. Previously, the pay range was from $10.30 to $20.09. Meanwhile, managers of less-complicated departments like clothing, and consumer products like paper towels and luggage, will earn between $10.90 and $20.71 per hour. Previously, they earned from $9.90 to $19.31.
Wal-Mart will also pay its workers in specialized areas like the deli sections or the wireless areas, a wage range of $9.90 to $18.81 per hour. Previously, they started at around $9.20 and topped out at $18.53.
The move marks the second step by the company to raise minimum wages of its employees. In an open letter to employees in February, the company stated that it would spend around $1 billion to raise wages of approximately 500,000 full-time and part-time associates at Wal-Mart U.S. stores and Sam's Clubs in the first half of fiscal 2016. It would also train them and offer more responsibility of their work.
Wal-Mart has already raised its entry level wages to $9 per hour in April, which will be further raised to at least $10 an hour in Feb 2016. (Read: Wal-Mart Pay Raise to Put Pressure on Other Retailers).
The retailer announced its decision to strengthen the roles of its department managers in Feb 2015. Accordingly, in Apr 2015, the company decided to give more responsibility to front-line department managers instead of zone managers as front-line department managers better understand the needs of customers. Further, the company announced the addition of 7,000 to 8,000 department managers by mid-June. (Read: Wal-Mart to Remove Zone Managers in Store Overhaul).
We note that Wal-Mart is undergoing a turnaround plan in order to improve its sales, business operations and customer service. The initiative of paying higher wages and investing more on workers is expected to help reduce turnover and increase retention. It will also improve its customer service and ultimately that will encourage shoppers to spend more, helping to perk up sluggish sales at its U.S. division. The company also believes that assigning ownership of work to department managers will help to retain good employees in a restricted labor market.
Wal-Mart has a Zacks Rank #4 (Sell).
Other retailers and fast food chains including McDonald's Corp. MCD, Target Corp. TGT and The TJX Companies, Inc. TJX have also raised wages as they struggled to retain workers.
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