Target (TGT) is raising its starting wage for the third time in three years as it looks to motivate and hang on to store workers at a time of more intense competition for quality employees.
The discount retailer on Monday said that starting next month, it would raise its minimum hourly wage to $11 per hour and also committed to raising it to $15 by the end of 2020, an large increase that would meet a union-led push for a $15 minimum wage across industries, the so-called “Fight for Fifteen” movement. Target had raised its wage to $10 in April 2016 and the year before that from $9, soon after Walmart (WMT) had announced its own raises.
The move comes at a time Target is trying to hang on to a fragile turnaround in its sales performance and is expecting more from its store workers. It also comes at a time of greater scarcity of available labor in retail and higher turnover. Walmart has credited the raises it has given its employees for improved customers service scores and the 12 quarters of U.S. sales increases they have spurred.
“Making this investment in our Target team will allow us to continue to recruit and retain strong team members to serve our guests,” Target CEO Brian Cornell told reporters on a media call last week. Target said the raises would affect “thousands” of workers but remained vague on specifics. The company employs some 323,000 people year round and this year, is ramping up its holiday period hiring with 100,000 seasonal staff for the run up to Christmas, a 43% increase over last year. The higher wages will apply to seasonal workers as well.
In its most recent quarter, Target said comparable sales rose 1.3%, better than expected, and shopper store visits rose 2.1% even as e-commerce grew 32%, suggesting its strategy of blending stores and digital sales is working. Target has invested heavily in new store areas for pickup of online orders, parts of the store that require dedicated staff, as does the section of the store that fills online orders with that store’s inventory. Target has also assigned dedicated staff for its apparel and beauty areas so they can give better informed advice to shoppers, part of its efforts to improve the shopping experience in its stores.
Earlier this year, Target announced a $7 billion plan to improve its e-commerce and open and remodel many stores over the next three years. A good chunk of that will go to sprucing up many of its stores, as well launching new brands and cutting prices.
Despite the higher wage increase this year, Target did not change its fiscal 2017 financial projections, suggesting that it had been planning for these raises for some time. Cornell said Target will address potential hits to profit from the $15 wage at the company’s next analyst day for Wall Street this winter.