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Walmart Stock Crashes After Company Pays Workers Slightly More

Did you need more proof that Walmart’s business model is based on screwing their workers? Well, there was an example in real time on Wednesday.

Walmart’s stock plummeted 10% yesterday after the company announced that higher labor costs would severely cut into profits – yet more evidence that underpaying employees is integral to Walmart’s success as a business. The company itself even partly blamed the meager raising of the employee minimum wage to $9 an hour in 2015, and a planned increase to $10 in 2016, for the profit crunch.

The world’s largest retailer claimed that higher labor costs, along with e-commerce investments and price competition, would cut Walmart Inc.’s earnings per share – a key metric of corporate profitability – by 12% in the next fiscal year. The admission sent investors fleeing and led to Walmart’s stock taking its biggest one-day fall in 25 years.

The drop in the stock was, according to Bloomberg, enough to cost the Walmart heirs $11 billion. The Walton family members who inherited stock from Walmart founder Sam Walton were estimated to have a net worth of $169 billion in January when Walmart stock reached a 2015 high of $90.47. The family has spent a good deal of money to lobby for the elimination of any taxes on inheritance such as the estate tax.

Walmart CEO Doug McMillon told CNBC that investors overreacted because “People have known that $10 was coming for a while. This news today was just we quantified it for everybody.” McMillon tried to sell the $10 as a “wage investment” but investors apparently disagreed. McMillion also tried to stop the stock drop by announcing a $20 billion stock buyback, to no avail.

While Walmart and its (mostly paid) defenders have endlessly claimed that the company does not rely on chiseling workers to make its (previously) massive profits, Wall Street clearly thinks otherwise. If only the banksters were as gullible as the political class.

Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.