EVENTS TO WATCH
TGT- Target to lift minimum wage to $9 an hour, matching rivals
Takeaway: The average workforce in the retail trade during 2014 was 15.4mm workers according to the BLS. If we take that a step further and look at only those employees who work in stores who sell categories where TGT and WMT compete (the Food & Beverage, Health/Personal Care, Clothing, and General Merchandise sectors) we get to 8.5mm employees. That means that between the two retailers about 20% of the employees in that space will now be making a minimum of $9/hour (WMT employs 1.4mm people in the US, TGT just north of 300k). If retailers like KSS and JCP don't think that the changes enacted by two of the top three retailers in the US will have an effect, then they are flat out in denial.
Here is how we are doing the math on the cost per employee based on what WMT disclosed during its 4Q call. The total number of employees it affects equals 500,000 which translates to a $0.20 EPS hit. Gross that up and it comes to $934mm, just shy of the $1bil McMillon called out in the press release. Per employee cost of $1,869.
If we then extrapolate that to the respective US workforces we get to a $0.50 hit to TGT and a $0.62 hit to KSS. At $1000 per employee the math works out to $0.30 and $0.33 for TGT and KSS respectively. That's a big pill to swallow for a group of zero square footage growth retailers with few levers to pull in order to offset inflated workforce cost pressures.
WSM, RH - For our full note WSM/RH - The Only Chart That Matters CLICK HERE
GES - 4Q15 Earnings
JCP - Kent B. Foster to Retire from JCPenney Board of Directors
TGT - Target's Data Breach Settlement Could Pay Victims $10,000 Each
TGT - Target unveils one-year return policy for exclusive brands
JCP - J.C. Penney Promotes John Tighe and Siiri Dougherty
J. Crew Sets Out for ‘Women’s Fix’
KER - Roberto Vedovotto Joins Kering Executive Committee