Wal-Mart Stores Inc. (NYSE: WMT) announced minimum pay and other benefits for its more than 1 million U.S. employees. The world’s largest retailer is raising its minimum wage by $1 an hour to $11, expanding maternity and parental leave benefits and paying eligible employees a one-time $1,000 cash bonus.
The minimum wage increase takes effect next month and represents an incremental increase of $300 million to the company’s plan for the next fiscal year. The one-time bonus payment increases planned spending by an additional $400 million.
Without saying exactly how recent changes in U.S. tax law will affect the company, Walmart acknowledges that the new law “will create some financial benefit for the company.” The company said it would share more details when it reports quarterly results on February 20.
Walmart CEO Doug McMillon said:
We are early in the stages of assessing the opportunities tax reform creates for us to invest in our customers and associates and to further strengthen our business, all of which should benefit our shareholders. However, some guiding themes are clear and consistent with how we’ve been investing — lower prices for customers, better wages and training for associates and investments in the future of our company, including in technology. Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.
The increased hourly wage takes effect for the February 17 pay period and the raise adds to already planned increases. This is the third minimum wage increase the company has implemented since 2015.
The one-time bonus payment will be based on length of service, with the full $1,000 payment going to employees with at least 20 years of service. According to Carl Quintanilla of CNBC, nearly 85,000 employees have 20 plus years of service and will qualify for the full $1,000, while another 200,000 or so will get $750. More than 600,000 will directly benefit from the minimum wage increase.
In addition to increased maternity and parental leave benefits, Walmart said it will provide up to $5,000 to both hourly and salaried employees to assist with adoption expenses.
While it’s not entirely clear how large an impact the new tax law will have, Walmart should see a significant benefit. The company’s effective tax rate over the past three years has been around 32%. Pretax income for the company’s 2017 fiscal year ended last January was $22.76 billion. At the new 21% corporate rate, Walmart’s tax bill could shrink by at least $2 billion.
Walmart stock traded down about 0.5% in early trading Thursday morning, at $99.12 in a 52-week range of $65.28 to $102.35. The 12-month consensus price target on the stock is $102.30.
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