Backed by strong holiday sales, Walmart announced it would raise wages for roughly 425,000 of its employees, WSJ reports.
Why It Matters: The company has undoubtedly benefited during the pandemic, riding the exploding wave of e-commerce at a time where other retailers struggle. U.S. e-commerce sales are up 69% from a year earlier. It also reflects a rising trend among major retailers, like Amazon and Target, to improve base worker wages. The Biden Administration and Congress have discussed increasing the federal minimum wage up from $7.25 an hour.
Numbers To Consider:
- U.S. comparable sales, or those from stores and digital channels and stores running for at least a year, improved by 8.6% at the end of the January quarter. Sales rose 6.4% in the previous quarter.
- Walmart’s minimum wage will remain at $11 per hour, but it said it would raise pay for U.S. workers to an average greater than $15 per hour.
- Quarterly Revenue: $152.1 billion
- Quarterly Operating Profit: $5.5 billion
Walmart U.S. CEO John Furner said the pay bumps will focus on store workers in digital and stocking roles, which reflects targeting roles that have become even more important during the pandemic.
- “Starting March 13, pay for workers in those roles will move up to $13 to $19 an hour, based on a store’s location.”
Looking Ahead: Target and Amazon have $15 per house the base wage for all workers. Now we wait and see how the wage battle plays out amongst federal lawmakers.
- “Walmart CEO Doug McMillon has previously said the company believes the federal minimum wage should go up, but that $15 was too high for some regions and businesses.”
Walmart ($WMT) is trading down over 6% after earnings, combined with a slightly down day in the stock market.
Walmart has been generally too expensive for us since at least the fall last year. Last fall there was much optimism about Covid-19 related growth and Walmart+, but the company is still a slow-growing behemoth with DNA rooted in Arkansas (not Silicon Valley). It’s just been too hard for me to accept 20% higher valuations than in 2018-2020 just on hopes of Walmart+.
Walmart now trades at 12.3x forward EBITDA with a 4% free cash flow yield. Arguably fair valuation in this low interest rate environment, but I would treat $WMT stock more like cash than an equity for now.