Retailers’ Wage Increases to Attract Workers Aren’t Yet Denting Profits

Target wants to be “a wage leader in every market where it operates,” the company said Monday. A spokeswoman declined to share how many workers are likely to start at the high end of the range.

Many national retailers set pay ranges for roles that adjust for the cost of living in certain markets, and warehouse workers tend to earn more than employees that work in physical stores. Over the past year, retail and warehouse worker wages have risen as competition for workers climbs in a tight labor market.

Overall, employers spent around 4% more on labor expenses in the fourth quarter, compared with the same period the previous year, according to data from the Labor Department. Economists expect workers to benefit from annual wage increases for much of the next two years.

Costco Wholesale Corp.

plans to raise its starting hourly wage for store workers to $17.50 in March. The starting wage for some hourly workers could be as high as $28.50, which includes supply chain employees, said the company’s chief financial officer,

Richard Galanti.

Walmart Inc.,

the country’s largest retailer by revenue, said last September it would raise workers’ pay to at least $12 per hour. Hourly wages at Walmart stores start between $12 and $26, while supply-chain roles can start at up to $28, a company spokeswoman said.

Amazon.com Inc.

starts all workers at least $15 per hour, with average hourly wages at around $18, the company said.

Large retailers are raising wages because they want stores to be fully staffed to keep shoppers happy as prices rise due to inflation, and to make labor costs more predictable, said Andrew Gadomski, a managing director at Aspen Analytics who works with employers hiring high volumes of workers. “I think what companies are trying really hard to do is stabilize how much they are paying per box for labor so they can meet the needs of [Wall Street],” he said.

Profits for these companies are also increasing, supported by strong sales growth and efforts to control costs in other parts of their operations.

Net earnings for Target rose more than 33.1% in the year ended Jan. 31, 2021, compared with the prior year. Profits rose year-over-year through the first three quarters of Target’s most recent fiscal year. The retailer reports earnings for its latest quarter on Tuesday.

Target also said this April, roughly 20%—or tens of thousands—of its staff will be newly eligible for the company’s healthcare benefits. It is permitting store employees who work at least 25 hours a week to enroll in a Target medical plan, down from at least 30 hours a week.

Walmart said in February that Covid-19-related paid-leave costs were more than $400 million due to the Omicron variant, $300 million more than expected. The company swung to a fourth-quarter profit of $3.56 billion, or $1.28 a share. For the year-earlier quarter, losses tied to the then-pending sales of its U.K. and Japanese operations hurt its results.

At

Home Depot Inc.

labor expenses are up, but so are profits and sales. Home Depot is moving wages higher, said company Chief Executive

Craig Menear

on a call to discuss earnings last week. The home-improvement retailer looks at its wages market-by-market each month, he said, adding that “we’re going to make sure that we’re competitive in the marketplace so that we can attract folks.” The company’s profit rose more than 17% to $3.4 billion in the quarter ended Jan. 30, compared with the same period last year.

Employers in the service industry and smaller retailers that hire hourly workers are also increasing pay.

Starbucks Corp.

last year said efforts to lift the average U.S. employee pay to $17 an hour, combined with two other recent wage increases, would cost roughly $1 billion. The chain in its fiscal first quarter reported a profit of $816 million, up 31% from a year earlier. Price increases in Starbucks’s North American stores helped its margins during the quarter, the chain said, while supply-chain costs and increasing wages dragged on profit.

Write to Sarah Nassauer at [email protected]