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Walmart's hourly wages for employees 'will go beyond [$15] probably over time': CEO Doug McMillon

Brian Sozzi
Editor-at-Large

Walmart (WMT) and many other large retailers have embraced the reality that hourly wages for its employees are likely to be on a sustained uptrend.

The reason for that reality — which could crimp profits if retailers aren’t looking for cost savings throughout their businesses — is simple.

Retail workers are in increasingly short supply as many opt for gig economy jobs at the likes of Uber (UBER) and Lyft (LYFT). Who wants to work in a sweat-inducing Amazon (AMZN) warehouse in the summer? And secondarily, workers inside stores are doing more tasks than ever before — from picking items off shelves to service online orders to checking people out in the middle of an aisle with a handheld device.

It’s a tireless gig nowadays.

“Oh, it'll go beyond that probably over time,” Walmart CEO Doug McMillon told Yahoo Finance when asked if a $15 an hour minimum wage was the new normal in retail.

One of the first things McMillon — who started working n a Walmart warehouse as a teenager — did when he took over as CEO in 2014 was to study the impact of raising hourly wages for workers. By February 2015, Walmart made a decision to hike its minimum hourly wage to $10 an hour by 2016.

The company is now offering a starting wage of $11 an hour.

“Around the country this year, we've continued to take our starting wage rate up depending on the market,” McMillon said.

Walmart also has 200 training academies (also opened on McMillon’s watch) that give workers new skills in areas such as merchandise planning and technology. The company pays out cash bonuses to workers, too. In the fourth quarter, it shelled out $207 million to its 912,000 U.S. store associates.

“We're going to offer the wage rate that enables us to attract and retain the talent that we need, and think about this thing holistically including health care and all the other benefits,” added McMillon. “The cash bonus that we have, the matching that we do as it relates to owning Walmart shares, all those things are important. We're listening to our associates as it relates to where they want us to invest.”

The efforts to keep employees happy appear to be paying dividends.

Walmart said Thursday its first quarter U.S. same-store sales rose 3.4%, its best result in nine years. Same-store sales at Walmart U.S. have increased by 3% or more in four straight quarters.

The U.S. division’s operating profits rose 5.5% in the quarter, a faster pace than the 3.3% total sales increase for the business despite the investments in worker compensation. Good sign indeed.

Fellow retailers follow Walmart’s lead

Others have since followed Walmart into the land of higher hourly wages.

Target (TGT) CEO Brian Cornell told Yahoo Finance earlier this year it would lift hourly wages to $15 an hour in 2020 from about $12 currently.

“$15 an hour makes us an employer of choice. While we have made a number of big investments in stores, technology, fulfillment and brands the most important investment we have made in the past couple of years was in our team,” Cornell said.

Meanwhile, Amazon hiked hourly wages to $15 an hour in October 2018 amid criticism it was underpaying workers.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi

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