WASHINGTON, D.C.— Costco announced they are spending in bulk on up to $120 million in increased wages for 130,000 hourly employees thanks to the savings the company is seeing from the Tax Cuts and Jobs Act. As their CFO Richard Galanti said, Costco, like many other major U.S. companies, have “a desire to use some of this (tax windfall) to help employees, to share that wealth if you will, to drive their business.”
Costco is the latest giant to join the club of more than 500 companies increasing wages, handing out bonuses, improving benefits, or hiring new workers because of tax reform.
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The Seattle Times: Costco boosting wages for 130,000 U.S. employees
By Bemjamin Romano
May 31, 2018
Costco’s hourly employees are the latest U.S. retail workers to get a boost from the Trump tax cuts.
On June 11, Costco will increase the starting wage for its U.S. employees by $1 to as much as $14.50 an hour, while other hourly wage rates will increase 25 to 50 cents an hour.
The raise, to be paid for with part of Costco’s savings from U.S. federal corporate tax cuts that took effect this year, will go to upwards of 130,000 U.S. employees, costing the company about $110 million to $120 million a year before taxes, Costco chief financial officer Richard Galanti said during the company’s fiscal third quarter earnings report Thursday.
The warehouse club retailer hauled in $32.36 billion in sales and membership revenue in the 12-weeks ended May 13, a 12.1 percent increase over the same period in 2017. It was the company’s fourth consecutive quarter of double-digit sales growth.
Costco profit jumped about 7 percent in its fiscal third quarter to $750 million or $1.70 a share, matching analyst expectations. But investors bid down Costco shares 2 percent in after-hours trading, where they finished at $194.23. The company’s profit margins were slightly slimmer than expected as rising freight costs took a toll.
The wage increases will help Costco keep to its strategy of offering employees total compensation that executive say leads the retail industry. Costco competitors including Target and Walmart announced wage increases and bonuses for their employees tied to the tax cuts earlier this year.
Galanti said that many companies, not just retailers, have “a desire to use some of this (tax windfall) to help employees, to share that wealth if you will, to drive their business.”
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