Walmart & Target Plan to Do Very Different Things With Their Federal Tax Savings

UPDATE: Walmart Announces Closures of 63 Sam’s Club Stores

Hours after the company announced plans to boost its minimum wage using kickbacks from the new tax law, Walmart said it would close 63 Sam’s Club stores around the U.S.

The retailer said it would convert up to 12 of the impacted stores to e-commerce fulfillment centers “in a move that will speed delivery of online orders, with the balance of the facilities closing over the next few weeks.” Currently, Walmart and Sam’s Club operate more than 5,400 locations across the U.S.; after the closures the company will have 597 Sam’s Club outposts.

Walmart said it would provide support and resources to those associates who are affected, including the bonus announced on Thursday morning — as part of its larger announcement regarding how it planned to initially dole out cash savings from federal tax reform.

What We Reported Earlier

Citing kickbacks from the new federal tax law, America’s largest private employer is putting more resources behind its ginormous workforce.

Walmart today announced its plans to increase the starting wage rate for all hourly associates in the U.S. to $11, expand maternity and parental leave benefits and provide a one-time cash bonus of up to $1,000 to certain associates.

The firm’s initial post-tax-reform announcement differs from that of competitor Target Corp., which said Tuesday that it would deploy additional cash flow from the  tax law to “long-standing capital deployment priorities, including capital investments, dividends and additional share repurchase.”

Still, it’s worth noting that in September, Target announced plans to raise its minimum hourly wage for all team members to $11 starting the following month. The company also committed to increasing its minimum hourly wage to $15 by the end of 2020.

Walmart had faced new backlash about its employee compensation strategy since 2015. That year, it raised its minimum wage to $9 an hour but later blamed the investment for slipping profits. The company said its new wage hike will be effective for the Feb. 17 pay cycle.

The company said the change is in addition to wage increases already planned for many U.S. markets in the coming fiscal year. (The increase applies to all hourly associates in the U.S., including stores, Sam’s Clubs, e-commerce, logistics and Home Office. This is Walmart’s third wage hike since 2015.)

While this marks Walmart’s first major announcement of its plans for doling out its extra tax savings in light of the new tax law, president and CEO Doug McMillon said the company is “early in the process of assessing opportunities tax reform creates for us to invest in our customers and associates, and to further strengthen our business, all of which should benefit our shareholders.”

“However, some guiding themes are clear and consistent with how we’ve been investing — lower prices for customers, better wages and training for associates, and investments in the future of our company, including in technology,” he added. “Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.”

The firm will provide more details on its financial plans when it releases quarterly results on Feb. 20.

Walmart’s combined wage and benefit changes will benefit the company’s more than 1 million U.S. hourly associates. The company is also creating a new benefit to assist associates with adoption expenses. The benefit, available to both full-time hourly and salaried associates, will total $5,000 per child.

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