Walgreens is raising wages and it's all because of Trump's tax cuts

  • Walgreens Boots Alliance announced that it will make investments around $US150 million to boost mainly its in-store wages in fiscal 2019 in the light of favourable tax reforms.
  • Walgreens CFO said Thursday that the increase in store wages was “in light of the favourable tax reforms in the US.”
  • Watch Walgreens trade here in real time here.

The pharmacy-chain owner Walgreens Boots Alliance announced Thursday that it will make investments of about $US150 million to boost mainly its in-store wages in fiscal 2019 in wake of President Donald Trump’s tax reforms.

The announcement marks a 50% increase in company’s investment towards wages which was announced in March. At the time, Walgreens said it would invest around $US100 million per annum to increase wages beginning later this calendar year.

“We will be making select incremental investments of around $US150 million in fiscal 2019, mainly in store wages, but also to fuel our new community health care initiatives, and you can view these in light of the favourable tax reforms in the US,” Walgreens CFO James Kehoe said Thursday, on the company’s fourth-quarter earnings call.

In December 2017, the Trump administration slashed the federal corporate tax rate from 35% to 21% and allowed a one-time repatriation of overseas cash. The bill also allows companies to bring overseas profits back home to invest in domestic projects or repurchase of shares.

Kehoe said the investments will result in a headwind of approximately $US0.12 a share, or two percentage points of earnings-per-share growth for the coming fiscal year.

US retailers are scrambling to keep workers as they look for opportunities with higher pay and attractive benefits. The US unemployment rate fell to a 48-year low of 3.7% in September. According to the Bureau of Labour statistics, there were 757,000 retail-job openings across the United States in July, which is about 100,000 more than a year ago.

The surge in the number of retail jobs has allowed workers the opportunity to move around within the industry. As a result, companies are raising wages to try and retain workers. Earlier this month, Amazon hiked its minimum wage to $US15 per hour, effective November 1. That followed wage hikes from places like Target and Costco.

On Thursday, the company said sales jumped 10.9% year-over-year to $US33.4 billion, just missing the Wall Street estimate of $US33.77 billion. It earned $US1.48 a share, or $US1.4 billion, beating analysts’ estimates of $US1.45.

Alongside those fourth-quarter results, the company issued fiscal-year 2019 adjusted earnings-per-share guidance of between $US6.40 and $US6.70. After dropping as much as 5% in the morning, the stock was up 1%.

Walgreens stock is down 2.6% this year.

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