More reports on: Retail

Walmart offers mixed bag: hikes minimum wages, but shuts 63 stores

12 January 2018

Walmart on Thursday said it will raise entry-level wages for US hourly employees to $11 an hour in February as it benefits from last month's major corporate tax cut, and on the same day said it will shut stores and lay off thousands of workers.

Walmart confirmed on Thursday that it is closing 10 per cent of its Sam's Club warehouse stores - a move that a union-backed group estimated could cost thousands of jobs - on the same day the company announced that it was boosting its starting salary for US workers and handing out bonuses.

The world's largest retailer and private employer, officially called Wal-Mart Stores Inc, will shutter 63 of its 660 Sam's Club discount warehouses. Around 50 of those stores will be shut permanently after a review of profitability and up to 12 more will be shut and reopened as ecommerce warehouses.

Every Sam's Club store employs about 150 workers, bringing the total number of affected jobs to about 7,500. Many of them will be accommodated in new jobs at the newly opened warehouses and other stores, reports said.

Earlier on Thursday, Walmart announced the wage hike, saying it would also offer a one-time cash bonus, based on length of service, of up to $1,000, and expand maternity and parental leave benefits.

Lauren Fitz, 22, told The Associated Press she was at her other job as a church secretary when a colleague texted to say that the Sam's Club where they both worked in Loveland, Ohio, had closed. Fitz had been pleased earlier to read the news that Walmart was boosting starting salaries and offering bonuses.

''I thought, 'This is really cool.' And then to find out that my store is closing,'' said Fitz.

On Twitter, Sam's Club responded to people's queries by saying, ''After a thorough review of our existing portfolio, we've decided to close a series of clubs and better align our locations with our strategy.'' Local news reports said Sam's Clubs stores were closing in Texas, California, New Jersey, Ohio, Indiana and Alaska, among other states.

The layoffs went unaddressed but the wage increase attracted praise from the White House.

''Walmart is the largest employer in the country and to see them make that kind of effort to over a million workers is a big deal ... and I think further evidence that the tax reform and tax cut package are having the impact that we had hoped,'' White House press secretary Sarah Sanders told reporters on Thursday.

US Treasury Secretary Steven Mnuchin also praised Walmart's decision to raise wages.

News of the store closures, hours after the wage hike announcement, drew some criticism.

The pay increase, Walmart's third minimum wage increase since 2015, and bonus will benefit more than 1 million US hourly workers, the company said.

The Walmart wage hike, taking minimum pay up from the current $10 an hour after in-house training, is aimed at helping the company attract workers at a time when the US unemployment rate is at 4.1 per cent, a 17-year low, making it harder to attract and retain minimum wage employees, according to Reuters.

Walmart is likely to save billions of dollars from the new tax law, which slashed the corporate tax rate to 21 per cent from 35 per cent, and the wage hikes will cost the retailer only a fraction of those gains, analysts said.

Rival retailer Target Corp raised its minimum wage to $11 in September, and said it would raise its minimum wage to $15 by 2020.

Walmart and Target's new minimum wage levels exceed the state minimum wage in all but three states, according to a research note from financial services firm BTIG. Walmart must pay employees slightly more to meet minimum levels in those three states. Eighteen US states increased their minimum wage on 1 January but the federal minimum wage has been $7.25 since 2009.

Walmart's announcement follows companies like AT&T Inc, Wells Fargo & Co and Boeing Co, which have all promised more pay for workers since the Republican-controlled US Congress passed the biggest overhaul to the US tax code in 30 years.

Retailers, in general, have one of the highest average effective tax rates because a majority of their operations are in the United States.

Walmart said the new tax law will create ''some financial benefit for the company'' and that is it is looking at additional investments.

''We are in the early stages of assessing the opportunities tax reform creates for us,'' president and chief executive Doug McMillon said in a statement, adding the law is an opportunity to be more competitive globally and to accelerate investment plans for the United States.

Walmart employs about 2.2 million people globally, with more than 1.5 million in the United States, and had total global revenue of nearly $500 billion last year. Ninety percent of Americans live within 10 miles of Walmart's 4,700 US stores, which sell everything from food and clothes to electronics and sports gear.

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