Investors are punishing Walmart for raising workers’ pay

February 19, 2021, 11:18 AM UTC

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Good morning.

Walmart announced it was raising pay for 425,000 of its lowest-paid workers yesterday, and investors knocked its stock price down more than 6%. The market has its own logic, and there may have been other things in the company’s earnings release that investors didn’t like; but the pay raise seemed to be the driver. Worth remembering that when the company announced a big hike in wages in 2015, shares fell 10%—their biggest single day decline ever.

Walmart founder Sam Walton famously paid the lowest price the market would bear for everything—labor included. Current CEO Douglas McMillon has taken a different approach. It’s a real-life demonstration of the stakeholder capitalism that he advocates as current chairman of the Business Roundtable. And it’s an investment he believes will pay off for the company in the long run—even if investors reject it in the short run.

“We completed a strong year and a strong Q4 thanks to our amazing associates,” McMillon said yesterday. “They stepped up to serve our customers and members exceptionally well during a busy holiday period in the midst of a pandemic.” He credited frontline associates with “driving the customer experience.” 

There’s also, of course, political context. President Biden is proposing a national minimum wage of $15 an hour. McMillon’s move still leaves some Walmart workers starting at $13; the $15 was an “average.” He has opposed a $15 minimum wage, arguing it should vary to meet local market conditions. Others like Target and Amazon already have raised their internal minimums to $15. You can read Phil Wahba’s analysis here

Separately, David McCormick, CEO of investment giant Bridgewater, has written an essay for Fortune arguing that immigration reform is critical to “innovation, technological leadership, and American strength.”  He notes that 45% of the Fortune 500 were founded by immigrants and their children, and that the two American firms who produced vaccines in record times last year—Pfizer and Moderna—were both founded by immigrants. You can read his piece here. More news below.

Alan Murray


Uber blow

Uber will have to treat its U.K. drivers as workers, meaning it will have to pay them minimum wage and give them paid leave, following a Supreme Court ruling that also said drivers are working whenever they're logged into the app, not just when they're driving passengers. The ruling will likely have major implications for the gig economy in the U.K. Uber's share price fell 3.6% on the news. Fortune

G7 and vaccines

The G7 is meeting today (virtually, of course) and a big topic of discussion will be how to divert vaccines to poorer countries that need them. To summarize the stances ahead of the chat: France wants Europe and the U.S. to allocate up to 5% of their current vaccine supplies to developing countries (and claims Germany is on board with this); the U.K. says it will share the majority of its future surplus with the COVAX procurement pool (set up for the same purpose); and the U.S. is instead planning to throw $4 billion at COVAX.

GameStop hearing

Robinhood, Citadel Securities and other players in the GameStop frenzy testified before Congress yesterday. The hearing was largely notable for how little new information actually came out, but Robinhood CEO Vlad Tenev also apologized to the family of a young user who died by suicide after thinking he had lost $730,000. Business Insider

IBM Watson Health

IBM may sell its Watson Health A.I. division, as part of new CEO Arvind Krishna's drive to streamline the company and focus on the cloud. According to the Wall Street Journal, options include "a sale to a private-equity firm or industry player or a merger with a blank-check company." WSJ


Renault loss

Renault lost a whopping €8 billion ($9.7 billion) last year—slightly worse than analysts expected. The company accurately described 2020 as a "year of contrasts", in which the first half saw the big losses and the second half saw operating margins back up to 3.5%. Overall, revenues were down 22%. CEO Luca de Meo: "2021 is set to be difficult given the unknowns regarding the health crisis as well as electronic components supply shortages." Financial Times

Retail plunge

In the U.S., retail sales shot up by 5.3% last month, thanks to consumers spending their stimulus checks. A very different story in the U.K., though, with retail sales tumbling 8.2% in January due to the continued closure of non-essential shops. Online sales hit a record 35.2% of spending. Guardian


NASA's Perseverance rover landed flawlessly on Mars yesterday, sending back images from the surface. The mission aims to look for signs of ancient life on the Red Planet, fly a helicopter (called Ingenuity) and record sound on Mars for the first time. CNN

Yeti plans

Yeti, the outdoors-stuff brand, is pushing into bags and luggage. CEO Matt Reintjes: "There are certain things you need to get from here to there, and there are things you use once you’re there…We’re going to be a premium player, and what you get for the premium is durability and design." Fortune

This edition of CEO Daily was edited by David Meyer.

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