RH in a Recession | Black Book
It’s time to go big or go home – and we’re prepared to do both. We’re going to issue a Black Book on Monday, January 25th at 1:00 pm ET.
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Today we're attending a lunch with former FL CEO, Ken Hicks. We'll be back with any insights.
WMT - $10 minimum wage bad for everyone. Especially KSS -- TGT a Close Second. We think you get paid on the short side of both names this year.
WMT is taking the next step up to the $10 minimum wage floor on 2/20. That's the culmination of the $2.7bn investment the company has made over the past two years to take its full-time average hourly wage up 4% to $13.38 from $12.85 in April of 2015, and the part-time hourly wage up 12% from $9.48 to $10.58.
That's flowed through to the bottom line and was the biggest culprit in WMT announcing at its Analyst Day back in mid-October that it wouldn’t see FY15 earnings again until at least FY19. When all is said, self mandated wage inflation will account for -4.5% to -9% of EPS change in FY17 or 75% of the aggregate earnings decrease. That type of deleverage for a company like WMT who in the US employs 1.4mm workers and accounts for 16.5% of workers in the Food & Beverage, Health/Personal Care, Clothing, and General Merch categories that’s a game changer.
We've already seen WMT announce its biggest store closure ever, in an attempt to offset the wage pressure dynamics. But, what about the rest of retail? Let's use KSS as an example, there are obvious wider implications across the space, but the company's predicament is illustrative.
KSS currently employs 137,000 people in the US, 77% of which are part-time. Now the biggest player in the Retail space (also the largest private sector employer in the US) takes wages up 12% for the workforce lowest on the totem pole. Add to that the fact that KSS already pays 8% below WMT for floor associates. If we extrapolate the $5400 cost per employee ($2.7bn/500k employees) WMT recognized as it raised the minimum wage of employees to $10, worst case that = 130bps of margin pressure at KSS.
There aren't any levers left to pull outside of store closures.
TIF - Tiffany's releases new watch collection with "New York state of mind" theme
TGT - Target CEO Brian Cornell hiring 1,000 IT employees to meet growing needs
ODP, SPLS - Staples to wait 3 more months before calling off its proposed $6.3 billion-acquisition of Office Depot
NKE - NIKE, INC. REVEALS DESIGN FOR WORLD HEADQUARTERS EXPANSION
Price Chopper owner, The Golub Corp, names Scott Grimmett as president and CEO to replace Jerry Golub
AMZN - Online seller that ship internationally seeing a big rate increase items
PVH - PVH Corp. gets license to use MagnaReady's "self-closing" shirt technology