Dive Brief:
- The Home Depot on Tuesday reported an increase in sales in Q4 2022 and announced it would increase pay for workers.
- The home improvement retailer said that, beginning in the first quarter, it will invest an additional $1 billion in annualized compensation for front-line, hourly associates.
- “The most important investment we can make is in our people,” CEO Ted Decker said in an announcement. “We believe this investment will position us favorably in the market, enabling us to attract and retain the level of talent needed to sustain the customer experience we strive to deliver.”
Dive Insight:
The tight labor market and rising wages may be pushing Home Depot to boost its hourly pay, but they also are helping to keep its customers coming through its doors.
“We have good jobs, job growth, growing wages, still-strong balance sheets, and most of our customers tend to own their home, which has seen a significant increase in value,” Decker told analysts during a conference call. “But as we’ve said, we do see a unique environment with many crosscurrents right now. Obviously there's heightened inflation and rising interest rates. A tight labor market and moderating equity in housing markets.”
Executives said they expect to take market share with the help of newly empowered associates. Along with the pay hike, the retailer has overhauled its store management program in an effort to improve both the customer service and employee experience and to simplify various systems, Ann-Marie Campbell, executive vice president of U.S. stores and international operations, said on the call.
Home Depot joins a number of retailers that have invested heavily in compensation over the past couple years. In January, Walmart announced it would increase its minimum wage to $14, for an average hourly pay of $17.50. About one year ago, Target also increased its starting hourly pay to as much as $24.
Some in the industry have noted early payoffs in such investments. Chipotle has expanded certain benefits, such as paid parental leave and mental health programs, and in late 2022 noted strong growth and exceptionally low turnover rates.
Home Depot released muted guidance for the year, anticipating sales and comp growth to be about flat to last year, with operating margin rate of about 14.5%, which reflects the $1 billion compensation investment, per the release.
“The cautious approach in this uncertain environment makes sense and could prove conservative,” Joseph Feldman of Telsey Advisory Group said in a Tuesday client note. “Overall, Home Depot should remain a winner in retail, given its best-in-class execution, digital prowess, and ongoing maintenance and repair activity.”
