Costco is hiking up entry-level wages for its employees in the United States and Canada starting this month. This is the first time since 2007 that the warehouse retailer has increased starting payments to associates.
Richard Galanti, Costco’s Chief Financial Officer and Executive Vice President, told investors during a conference call that the company will increase its starting wages by a dollar and a half – from $11.50 and $12.00 to $13.00 and $13.50 an hour.
“You’re on your feet, you’re lifting cases, you’re pushing carts at these entry-level jobs,” Galanti said on the call. “And so we thought it was time to do it.”
The move echoes a similar initiative from retail competitor Walmart, which, in February 2015, said that nearly half of its workforce at its U.S. stores and Sam’s Club locations would now be paid at least $9.00 an hour as part of a $2.7 billion investment. Today, that number has now been increased to $10.00 an hour. While the decision has paid off in terms of customer experience and comparative store sales, Walmart has seen an impact on its profit in previous fiscal quarters since the implementation of the pay raise.
Galanti said that he expects that the financial impact would cost the company about $0.01 a share in its third quarter year-over-year, and about $0.02 a share in each of the next three fiscal quarters.
Costco’s second quarter sales increased three percent, to $27.57 billion from $26.87 billion last year. Net income for the quarter was $546 million, or $1.24 per share, compared to $598 million in the previous year, or $1.35 per share. Revenue increased to $28.2 billion, compared to $27.5 billion in fiscal 2015.
Costco currently operates 698 warehouses worldwide, including 488 in the United States and Puerto Rico, 90 in Canada, 36 in Mexico, 27 in the United Kingdom, 24 in Japan, 12 in Korea, 11 in Taiwan, eight in Australia, and two in Spain.