Let’s all give a slow clap for Wal-Mart (WMT). The much hated company is attempting to repair its image by announcing a pay raise for 500,000 of its employees. They’ll get at least $9.00 an hour starting this April, and at least $10 an hour starting next February. Wal-Mart is also giving employees schedules with fixed hours or advance notice.

Wal-Mart Employees
Source: John Gress / REUTERS

 

I’ll admit, part of the reason I’ve never invested in Wal-Mart is due to moral conflict. Ever since the eighth grade, when I learned about Wal-Mart’s shady business practices, reliance on cheap overseas labor, and mistreatment of their employees, I’ve been wary. Not to mention, the one time I shopped there, the store felt dirty and disorganized.

However, this announcement by Wal-Mart’s CEO (fun fact, he started out as a store employee way back when) is a move towards the side of good. So, does this labor improvement make me willing to buy Wal-Mart stock now?

Not yet.

First of all, I can’t decide if Wal-Mart’s raise is actually all that great. Yes, if someone is making the federal minimum wage it represents an increase of $2.75 an hour by 2016. But keep in mind, at full time of 2,080 hours per year, $10 an hour is only $20,800 annually. And minimum wage is already at least $9 an hour, the April 2015 raise, in DC, Vermont, Washington, Oregon, Rhode Island, Massachusetts, Connecticut, and California.

Plus, Wal-Mart’s proposed wages pale in comparison to Costco’s (COST). Costco’s starting pay is $11.50 an hour, and the average employee wage is $21 per hour, not including overtime. Costco’s CEO has also publicly endorsed raising the federal minimum wage to $10.10 an hour. And by the way, he makes a lot less than many Fortune 500 CEOs. Costco: the land of free samples and happy employees.

Joe Biden Costco
VP Biden shopping Costco the right way (Source: Susan Walsh / AP)

 

The second issue keeping me away from Wal-Mart is its profits. The wage announcement was part of Wal-Mart’s earnings announcement this morning, which was an overall disappointment.

Wal-Mart beat net income estimates, with $1.61 earnings per share vs. an expected $1.53 per share, but missed revenue estimates at $131.6 billion vs. expected $132.2 billion. For all of 2014, Wal-Mart’s revenue was up 1.6% over 2013, but net income was down 3.2% from 2013. Wal-Mart is trading about 3% lower after the announcement.

I still believe industry growth is staying with higher end retailers. You can look no further than Wal-Mart’s net income decline to see that it’s lagging behind.

Wal-Mart has been slow to adopt mobile and web shopping experiences, and their website still looks like it’s stuck in 2005. Plus, low oil prices have left more money in consumers’ pockets to shop with, which gives them more choice to shop at places other than Wal-Mart.

It looks like Wal-Mart isn’t so optimistic either. The company estimates 2015 earnings per share to reported forward guidance, which was a little less optimistic than analysts were hoping for.  Wal-Mart expects fiscal 2015 between $4.70 and $5.05, flat with 2014 earnings and below 2015 analyst estimates of $5.19.

Bottom line: I don’t hate Wal-Mart as much, but I certainly don’t love it yet.

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