Wal-Mart's Wage Hike Would Represent Just Five Hours of Sales

Wal-Mart to Increase Starting Wages to $11

Wal-Mart Stores Inc. jolted the retail industry Thursday by raising its U.S. starting pay to $11 an hour, a roughly 10 percent gain from the current level.

But what does that actually mean for the world’s largest retailer, which generates nearly $500 billion a year in global sales? About five hours.

At about $57 million in sales per hour, that’s how long it would take to ring up $300 million -- the amount Wal-Mart expects to spend on the wage increases, excluding the costs of separate one-time cash bonuses. The company is on track for about $12 billion in net income this year, so it will take about nine days of profit to recoup the extra spending.

Looked at another way, the $300 million payout is just slightly more than the $244 million that Wal-Mart U.S. e-commerce chief Marc Lore made in 2016, thanks to shares he received as part of the sale of his company, Jet.com, to the retail giant.

Wal-Mart's War Chest

Wal-Mart will likely spend its $2 billion tax benefit on wage hikes, price cuts and buybacks

Source: Gordon Haskett Research Advisors

The $300 million also is just a small fraction of the $2 billion to $3 billion windfall that analysts expect Wal-Mart to receive from the recent tax overhaul. Some of that may go to lowering prices of bananas and batteries, some will probably be earmarked to ramp up its e-commerce business, and some could be returned to shareholders as buybacks.

Finally, Wal-Mart has said that its employees usually spend a good chunk of their additional wages inside the retailer’s stores. The cashiers and shelf-stockers who now make $11 per hour can plow one hour’s worth of work (before taxes) into this stylish Hawaiian shirt.

That is, when it comes available -- it’s currently out of stock.

    Before it's here, it's on the Bloomberg Terminal.