Walmart to bump worker pay; Q4 sales up.

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Wal-Mart Stores on Thursday announced details of a plan to overhaul its approach to hiring, training, scheduling and compensation, including a plan that would raise its entry level pay to $9 an hour and increase wages for current associates to at least $10 per hour by next year.

The program will help Walmart keep pace with a wave of state legislation advocating increases in wages and a concurrent call to raise the federal minimum wage above its current level of $7.25 per hour, while also addressing challenges in productivity and longstanding criticisms of its employee relations, sources said.

Doug McMillon, Walmart’s CEO, in a message to employees said the plan would address the negative effects of efficiency plans that “undermined the feeling of ownership some of you have for your business.

Doug McMillon

Doug McMillon

“When we take a step back, it’s clear to me that one of our highest priorities must be to invest more in our people this year,” McMillon said.

The pay increase to $9 for entry-level workers is to begin in April, officials said. Workers will move to $10 per hour following completion of a six-month skills-based training program. The pay raises will affect around 500,000 full-time and part-time workers.

Greg Foran

Greg Foran

In addition, the Bentonville, Ark., company said it would introduce a scheduling system that would create stability for workers seeking a fixed schedule, and would realign store operational structure, adding back department managers “to give associates a closer relationship with their supervisors to help improve communication, direction and recognition,” Greg Foran, CEO of Walmart U.S., said.

Burt P. Flickinger III, managing director of Strategic Resource Group, said the changes would help to address high turnover and low worker productivity that has contributed to Walmart’s underperforming rivals like Costco, whose hourly workers can earn $19.91 per hour.

“It should take some heat off them in terms of criticisms that they pay their workers too little,” Flickinger told SN, “but the issue they still have to address is that many of their hourly workers are still under 30 hours a week and a lot of their hires are temporary. They would do well to move to a more full-time model like Costco has.”

Other observers said the investment in the workforce could lead to higher sales, but timing was hard to predict.

“In theory, if the impact is great enough, the sales should follow, but investors will have to be patient,” financial analyst Daniel Binder of Jefferies said in a note to clients Thursday.

The announcement came as Walmart reviewed financial results for the fourth quarter and fiscal year ended Jan. 30. For the 13-week period U.S. comparable-store sales were up 1.5%, which exceeded company guidance, reflecting a 1.4% improvement in store traffic — the company’s first quarter of positive traffic since the third quarter of fiscal 2013. Comps were down by 0.4% in the same period last year.

Foran said the traffic improvement came as the result of increased purchasing power from lower gas prices, and by lapping the reduction of SNAP benefits and inclement weather that negatively affected sales a year ago. E-commerce contributed approximately 30 basis points to the comp performance.

He said “urgent agenda” items — including produce rotation to improve fresh presentation — had a positive effect in the quarter but added “we still have a long way to go to improve our fresh business and we remain focused on that goal.”

Comps increased by 2% at Sam’s Club and by 7.7% at Neighborhood Market stores. Foran said “traditional” Neighborhood Market stores — as opposed to the small-format Walmart Express stores now rebranded under the Neighborhood Market banner — were outperforming supercenters and discount stores due to customer convenience. He said Walmart would build 180 to 200 new Neighborhood Market stores this fiscal year, including 10 to 15 of the smaller units which remain a “test” officials said. “We’ll continue to monitor the progress of these test locations before making any further commitments to this format,” Foran said.

Walmart said it expects U.S. comps in the current first quarter to increase between 1% and 2%.

Total revenues for the quarter totaled $131.6 billion, up by 1.4%; and $79.6 billion in the U.S., a 4.1% increase. Total net income was $7.9 billion, up by 8.2%.

For the year, Walmart posted consolidated revenue of $485.7 billion, up by 2%. U.S. revenues totaled $288 billion, up by 3.1%.

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