On Thursday, Wal-Mart announced that it will raise hourly wages for 500,000 employees.
And in a note to clients on Friday following the news, analysts at Credit Suisse say this move shows Wal-Mart is taking back its leadership role in the retail space.
The firm writes:
Over the past decade, there have arguably only been two examples where WMT used its scale and industry leadership position to “set the rules”: first, by rolling out $US4 prescriptions, and second, through its drive for sustainability. With this unprecedented wage hike, WMT appears to be taking a more active role and re-establishing its leadership position in the retail industry.
Wal-Mart said Thursday that all hourly wage employees would see wages increased to a minimum of $US9 by April and $US10 by February 2016. Wages for some managers will also be increased.
In its earnings release, Wal-Mart said this initiative will cost the company about $US1 billion, or about $US0.20 per share in earnings this year.
Wal-Mart’s decision, of course, is not just altruistic. The firm is clearly responding to business conditions, and Credit Suisse notes that there could be political motivations at play here, too.
From Credit Suisse:
We think this is a reasonable business strategy to compete for and retain associates and raise store productivity. Clearly, WMT has also come under more scrutiny in the political debate over minimum wages and a more inclusive recovery. The company appears to be taking a proactive approach to these issues.
Credit Suisse wrote in its note that, “As WMT is the largest private employer in the US, its high profile move is likely to force other retailers and the service sector as a whole to react.”
Specifically, Target could see some pressure following Wal-Mart’s move, and the firm adds that a number of retailers will indirectly feel pressure from Wal-Mart’s move.
On Thursday, we highlighted the following chart showing the increase in workers quitting jobs in the retail sector. This of course matters to Wal-Mart, but it matters to all the company’s peers, too.
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