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Do Walmart's Low-Paid Workers Hurt the Bottom Line?

WMT strike Black Friday 2012
courtesy Making Change at Walmart and UFCW
Without giving any details, Wal-Mart Stores Inc. (NYSE: WMT) said Thursday morning that it is cutting its earnings guidance for the 2015 fiscal year as a result of “incremental investments in e-commerce and higher U.S. health-care costs than previously anticipated.” In other words, business is lousy because we fouled up our e-commerce strategy and those darned employees are too expensive.

Why are Walmart’s health care costs rising? It’s true that the Affordable Care Act (aka, Obamacare) might be costing Walmart more than it expected. Reporting requirements and other administrative burdens have increased, but by enough to cut earnings per share guidance from a prior range of $5.10 to $5.45 to a new range of $4.90 to $5.15?

Walmart has 3.22 billion shares outstanding and the company’s vice-president of investor relations is cited at CNN Money as saying that health care costs will be $500 million higher this year than they were last year. That works out to about $0.15 a share.

The company also said it plans to spend about $160 million on boosting its e-commerce business, adding another $0.05 per share to the earnings cut. That’s a total of $0.20 a share. But the company cut the top end of its guidance by $0.30 a share. Where is the other $0.10 coming from? Our guess is declining sales.

It’s worth remembering that Walmart has cut its worker headcount and also switched many workers from full-time to part-time status in order to avoid having to pay health care and other benefits.

The Walmart employee group OUR Walmart, which has organized pickets and walkouts at Walmart stores across the country and has been agitating for Walmart to pay a minimum salary of $25,000 a year, cited a part-time worker at a Maryland Walmart store:

Walmart’s weak sales once again confirm what experts and thousands of shoppers and workers like me have been saying for years: the Walmart model of poverty jobs and under-staffed stores doesn’t just hurt workers, it hurts the company’s bottom line. … If Walmart truly invested in us and raised wages, we’d not only be able to make ends meet, it would boost sales and the economy. Our new CEO should use these disappointing numbers as a wake-up call to change course and publicly commit to pay us a minimum of $25,000 a year and improve access to full-time work, which will be good for sales, profits and strengthening the middle class.

A survey by Lake Research Partners in June of this year found that “Walmart’s record of treating workers poorly is harming the company’s reputation. … Though popular Walmart has the highest negative ratings of any big retailer in the United States.” The research team also noted, “Twenty-nine percent of all consumers and 29% of people who rarely or never shop at Walmart say they would shop there more if the company treated its employees better.”

Of course, what people say in answers to a survey and how they really behave can be quite different, but what does Walmart have to lose by being more worker-friendly? It’s tried everything else.

ALSO READ: The 4 States Killing Walmart

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