Wal-Mart CEO on pay hike: Employee morale will help business

Wal-Mart CEO on pay hike: Associates need to be happy
Wal-Mart CEO on pay hike: Associates need to be happy
Jerry Storch: Wal-Mart pay hike great
Jerry Storch: Wal-Mart pay hike great
Blodget: Let's salute Wal-Mart
Blodget: Let's salute Wal-Mart

Wal-Mart is raising wages for some 500,000 hourly employees because worker pride in the company is vital to running a good retail business, CEO Doug McMillon told CNBC on Thursday.

"We make wage adjustments all the time. We just decided this is a really good moment to be more bold," McMillon said in a "Squawk Alley" interview. "Right now we want to make sure everybody is crystal clear how vital our store experience is to our future."

McMillon spoke on CNBC after Wal-Mart announced that hourly workers will earn at least $1.75 above the the current federal minimum wage, or $9 per hour starting in April. By next February, they will earn at least $10 per hour.

McMillon said Wal-Mart is trying to position itself ahead of the market in order to retain the best talent available as the employment situation continues to improve.

"Today's cashier is tomorrow's store manager. Tomorrow's store manager may have my job, so we want to make sure that opportunity is there for people, as it has been for so many of us in the past," he said.

The National Employment Law Project's Tsedeye Gebreselassie called Wal-Mart's decision to raise wages a small step in the right direction.

"It's really not enough especially considering the company is so profitable, posting $16 billion in profit last year," she said in an interview with CNBC's "Power Lunch."

On top of that, she said, because Wal-Mart is the nation's largest private employer, it has a real obligation to do better.

Retail expert Jan Kniffen of J. Rogers Kniffen Worldwide applauded the move, and said it will cause other retailers to follow suit.

"Long term this is going to be a real positive for Wal-Mart. They're going to have better employees. They're going to have happier people. The federal government will be off their back. The state government is off their back. The local government is off their back," he said.

"Wal-Mart will no longer be the most hated retailer in America."

Wal-Mart to raise entry wage to at least $9/hour
Wal-Mart to raise entry wage to at least $9/hour

Wal-Mart's announcement should ease customer complaints, Deutsche Bank analyst Paul Trussell told CNBC.

"Frankly part of Wal-Mart's problem has been concerns around inventories being out of stock, been about bad customer service, long lines at the checkout counters. There's been a lot of disgruntled workers," he said.

The move appears to be an effort on the part of McMillon and Wal-Mart U.S. president and CEO Greg Foran to correct some of those past evils, he said.

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The retailer said spending on wage and training initiatives, as well as incremental investments in e-commerce, would cost the equivalent of 26 to 29 cents per share.

Wal-Mart also released quarterly results, reporting earnings that beat forecasts, though revenues fell short. Its stock price was down 3 percent Thursday afternoon. (Click here for the latest price.)

It reported adjusted earnings of $1.61 per share, compared with $1.60 a share last year. Revenue rose to $131.57 billion from $129.71 billion a year ago.

Sales at comparable U.S. stores rose 2.1 percent, marking a second quarter of growth in that category.

"That's the best sales growth we've had out of the U.S. business in a few years," Trussell said. "I think that does speak to a lot of the questions we've had about the consumer and are they benefiting from this environment that includes lower gas prices, so it's at least a step in the right direction."

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Comparable store sales were helped by lower fuel prices, McMillon said. The company estimates that the average U.S. household saved about $176 on gasoline in the fourth quarter and spent more than half of those savings on food as the cost of beef and other commodities rose.

Milder weather relative to last winter also provided a tailwind, he added.

While the quality of Wal-Mart's store experience has improved, McMillon said, the company still has a lot of work to do.

"I think as the months and the quarters go on, we can build a better store experience that will create sustainable and positive comp numbers, but I don't want to underestimate just how much help we got in the fourth quarter externally," he said.

—CNBC's Michelle Fox and Katie Little contributed to this report.