The world’s largest retailer, Wal-Mart (WMT), will begin to offer a broader, and more expensive, set of health benefits packages to its US employees. The new programs give WMT workers the option of paying fairly little for insurance if they feel they will not need it. Employees concerned about high healthcare costs can get more costly packages.
According to The Wall Street Journal "the changes will boost the costs Wal-Mart incurs on a per-employee basis for health-care coverage."
While the plan may be good for employee morale and retention, it will not be music to Wall St.’s ears. WMT same-store sales in the US are running a little better than 1% year-over-year. The lack of growth is bringing down margins as costs move up. The company may be doing better overseas, but the US market is such a large part of its revenue that there has to be some real improvement here to get the stock price to move North again.
In an environment where companies are cutting health costs to employees and troubled industries like the auto sector are changing the way that they handle benefits to sharply drop their cost per employee, it is unlike that investors will warm to Wal-Mart’s move.
Douglas A. McIntyre