New York (CNN) Home Depot said it will grow wages and benefits for hourly front-line staff by $1 billion this year, another sign of a tighter labor market and rising wages across the U.S. economy.
The home improvement retail chain did not detail how much of a raise the average hourly employee will receive. It pays at least $15 an hour as a starting wage in every market, with many markets paying a higher starting wage, according to CEO Edward Decker. And he said the company raised wages for every front-line employee, both entry-level salaries and more senior employees, as it sought to increase the average tenure of its staff.
“We hope to improve retention through this. That’s why we call it an investment,” Decker said in remarks to investors. “It will improve the customer experience. If we take care of our associates, they take care of the customer and everything takes care of itself.”
The company said that in addition to the change in wages and benefits, it is creating new management positions on the shop floors.
The wage increase “is only one component of the associate investment story,” Ann-Marie Campbell, Home Depot’s executive vice president, said on the investor call. “The net result of all this [new management positions] it’s both an improved customer and associate experience, while also creating new career paths for our associates.”
The company had 491,000 employees worldwide a year ago, according to the most recent figure disclosed in a company filing. About 92% of the staff are hourly workers, with 437,000 of them in the United States. But due to turnover and seasonal staffing needs, it had to hire 200,000 workers during the fiscal year.
The company revealed the plan to increase compensation on Tuesday when it reported record earnings for the fiscal year that ended in January. Profits for the year totaled $17.1 billion, up 4% from a year earlier, while net sales also rose 4% to $157 billion. Quarterly earnings per share of $3.30 were 2 cents better than forecasts from analysts polled by Refinitiv.
The company’s shareholders will also benefit from its successful year after it announced it will increase its dividend by 10%, or about $780 million. The company also said it will use excess cash to increase share repurchases, though it did not set a target for how much it would spend on those buybacks.
But the company provided guidance for next year that was somewhat disappointing for investors. He said he is waiting revenue will be little changed next year and earnings per share will decline by a mid-single digit percentage. Analysts had forecast a narrow increase in earnings per share for the year.
The company said it is not taking a hit from the weakness in the home sales market that comes from higher mortgage rates. In fact, CFO Richard McPhail said the company could benefit from the current state of the housing market, as homeowners have more incentive to fix up their current homes rather than move.
“As you know, over 90% of U.S. homeowners either own their homes outright or have fixed-rate mortgages below 5%,” McPhail said. “And so the incentive to sell and move to a higher rate mortgage just isn’t there. And in fact, the incentive is really there to improve in place.”
Shares of Home depot (large) slipped 5% in morning trading on the report.
