WMT’s revenues have been declining. In 2015, WMT’s 2.2 million employees schlepped to and toiled in 12,000 stores to produce $484 billion in revenues. WMT earned $14.7 billion last year, but management expects lower earnings for 2016.
So WMT’s employees earned their company $6,700 each last year. WMT’s average employee earns $9 an hour. If employees got a $1-an-hour raise this year ($2,000 for the year), they’d produce $4,700 in profits for WMT. Then management’s priority to reduce costs would shift into warp drive. WMT would close additional stores, lay off more employees, raise prices and have the remaining employees cover the workload of those who were canned. And new technology will be slick and quick to replace human labor. If management raised wages by $5 an hour, WMT shares would plummet like a Steinway from the roof of the Chrysler Building and be worthless. Then, on behalf of shareholders and creditors, a gaggle of barristers would sue management and the directors for gross stupidity.
Early last year, management gave employees raises, bringing the average pay to a whit above $9 an hour.
Last October, management announced that WMT would post a 10 to 12 percent decline in share earnings, and despite a $20 billion share buyback, the shares suffered their worst one-day decline in 25 years, crashing from $68 to $60. This year, WMT will strive to pay employees a politically correct $10 an hour. When management announces that goal has been achieved, it will also announce that earnings will fall again.
And it will be another bad hair day for WMT’s shareholders.
Apple could absorb $5-an-hour wage increases because its employees produce big profits for their company. But the picture is far different for retailers for which an increase of 50 or 75 cents an hour would be catastrophic. If retailers such as Target, Best Buy, McDonald’s, Sears and Macy’s paid $13 an hour, their profitability would vanish unless they raised prices by 30 percent. Then who would shop there?
DS, you could increase your earnings by learning skills that would make you attractive to employ. Wise unions should give all members that advice — and then teach those skills to help them create value for their employers. But that would be counterproductive to unionism.
Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 or mjberko@yahoo.com.