Trump: Walgreens raising wages because of tax cuts

Reuters

The pharmacy-chain owner Walgreens
Boots Alliance announced Thursday that it will make
investments of about $150 million to boost mainly its in-store
wages in fiscal 2019 in wake of  President
Donald Trump’s tax reforms.

The announcement marks a 50% increase in company’s investment
towards wages which was announced in March. At the time,
Walgreens said it would invest around
$100 million per annum to increase wages beginning later this
calendar year.

“We will be making select incremental investments of around $150
million in fiscal 2019, mainly in store wages, but also to fuel
our new community health care initiatives, and you can view these
in light of the favorable tax reforms in the US,” Walgreens
CFO James Kehoe said Thursday, on the company’s fourth-quarter
earnings call. 

In December 2017,  the Trump administration slashed
the federal
corporate tax rate from 35% to 21% and allowed a one-time
repatriation of overseas cash. The bill also allows companies to
bring
overseas
profits back home to invest in domestic projects or
repurchase of shares.

Kehoe said the investments will result in a headwind of
approximately $0.12 a share, or two percentage points of
earnings-per-share growth for the coming fiscal year. 

US retailers are scrambling to keep workers as they look for
opportunities with higher pay and attractive benefits. The
US unemployment rate fell to
a 48-year low of 3.7% in September. According to the
Bureau of Labour statistics, there were 757,000
retail-job openings across the United States in July, which is
about 100,000 more than a year ago.

The surge in the number of retail jobs has allowed workers the
opportunity to move around within the industry. As a result,
companies are raising wages to try and retain workers. Earlier
this month,
Amazon hiked its minimum wage to $15 per hour,
effective November 1. That followed wage hikes from
places like
Target and
Costco. 

On Thursday, the company said sales jumped 10.9%
year-over-year to $33.4 billion, just missing the Wall Street
estimate of $33.77 billion. It earned $1.48 a share, or $1.4
billion, beating analysts’ estimates of $1.45.

Alongside those fourth-quarter results, the company issued
fiscal-year 2019 adjusted earnings-per-share guidance of between
$6.40 and $6.70. After dropping as much as 5% in the
morning, the stock was up 1%.

Walgreens stock is down 2.6% this year.

Markets Insider