Costco Will Raise Minimum Wage as Competition for Workers Grows

The Pressure Is on for Retailers to Ramp Up Pay

Costco Wholesale Corp. will lift its minimum wage for the first time in nine years, by a $1.50 an hour, as the labor market tightens and competitors start giving workers a raise. 

The second-largest U.S. retailer will start paying at least $13-to-$13.50 an hour, up from $11.50-to-$12 an hour, the company said Thursday in a conference call with analysts. The increase will cut its earnings per share in the next three months by 1 cent, and by 2 cents in the following three quarters, the Issaquah, Washington-based company said.

Retailers are under pressure to boost wages as unemployment falls below 5 percent and 14 states have raised their minimum wage this year. Wal-Mart Stores Inc., which operates the Sam’s Club warehouse-style chain, a Costco competitor, lifted its pay floor to $10 an hour this year and gave an increase to more than 1 million workers. Costco didn’t say how many of its 117,000 employees would get a raise. 

“It will help, and it is important to do,” said Richard Galanti, Costco’s chief financial officer. “This is a physically challenging job. You’re on your feet, lifting cases, moving carts, and we thought it was time to do it.”

Costco’s highest hourly pay is about $22.50, and the company plans to give those workers about a 2.5 percent raise this year, Galanti said. It takes a full-time Costco employee about four years to reach the top of the pay scale, he said.

Costco reported earnings yesterday that fell 8.7 percent to $546 million, or $1.24 a share. Analysts had estimated $1.28 a share, on average. Same-store sales in the U.S., a closely watched measure by investors, increased 4 percent, excluding the negative impact of lower gasoline prices and foreign-exchange rates. That compared with an estimate of 4.9 percent.

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