Pay hike at Costco for entry-level workers

Hey there, time traveller!
This article was published 04/03/2016 (3539 days ago), so information in it may no longer be current.

SEATTLE — Costco is raising the starting wage of its entry-level workers — the first time it’s done so in nine years.

The US$1.50 wage increase is starting this month, the Seattle-area company said during a conference call Thursday to discuss second-quarter financial results that fell below Wall Street expectations.

Since 2007, the company’s entry-level wage in the U.S. and Canada has been US$11.50 to US$12 an hour, said Richard Galanti, Costco’s chief financial officer.

The company is increasing that to US$13 to US$13.50.

“We thought it was time to do it,” Galanti said, saying other companies are raising pay at the bottom of the scale and “we want to be premium at all levels… We think this will help, and it’s important to do.”

Costco reviews its pay scales every three years and typically increases the wages of those making top-scale wages each year in March. About 60 to 65 per cent of Costco’s employees make top-scale wages, which are in the US$23 range, Galanti said.

The disappointing second-quarter results, which Costco attributed to a strong U.S. dollar and the transition to a new partner for its co-branded credit card, among other factors, pushed Costco stock down US$1.19, or 0.8 per cent, to close Thursday at US$151.60.

For Costco’s second quarter, ended Feb. 14, the warehouse giant reported net income of US$1.24 per share, down from US$1.35 in the same period a year ago. Wall Street analysts had expected US$1.28 a share.

Profit for the quarter was US$546 million, down 8.7 per cent from the year-ago quarter.

The weakness of foreign currencies hurt Costco. The currencies in all countries where Costco operates weakened against the dollar, but especially so in Canada, Mexico and South Korea, Galanti said.

That resulted in foreign earnings for the quarter, when converted into U.S. dollars, to be lower by US$32 million, or seven cents per share, compared with year-ago exchange rates, Galanti said.

Costco is also in the midst of transitioning from longtime credit card partner American Express to a new company — Citigroup — which will become the exclusive issuer of its co-branded credit cards. Visa will replace Amex as its credit card network.

Lower gas prices and costs associated with the company’s efforts to modernize its technology also impacted the bottom line, the company said.

Revenue for the second quarter also fell short of analysts’ estimates of US$28.42 billion. Costco reported total revenue, which includes both net sales and membership fees, of US$28.17 billion, an increase of 2.6 per cent from US$27.45 billion in the same period last year.

Excluding membership revenue, net sales rose 2.6 per cent to US$27.57 billion from US$26.87 billion in the same period last year.

— Seattle Times