Home improvement retailer Home Depot (HD) is making a big change that will affect all of its U.S. and Canadian hourly employees in 2023.
The do-it-yourself warehouse has over 2,300 stores and employs over 500,000 "orange blooded associates," as it calls its workers. At half a million employees, it's also the world's largest home improvement retailer.
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Which is why its recent landmark decision to give all its hourly employees pay raises is going to cost it about $1 billion.
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Home Depot Announces Pay Raises for Everyone
Home Depot reported Q4 earnings on the morning of Feb. 21 and told analysts on the call that it intends to raise everybody's hourly rate to at least $15 per hour. Federal minimum wage, for background, is $7.25 per hour.
"The most important investment we can make is in our people, which is why we are announcing that we are increasing annualized compensation by approximately $1 billion for our front-line hourly associates," CEO Edward Decker said on the call. "We believe this investment will position us favorably in the market, allowing us not only to attract the most qualified talent but also retain the exceptional associate base that is already in place."
The $1 billion investment into its workforce comes following a good 2022, which Decker called "a record year for our business." Earnings-per-share came in better-than-expected at $3.30 and the board approved a dividend increase by 10%.
Home Depot Is Just One of Many Retailers Trying to Keep Talent
Despite its good year, Home Depot is forecasting relatively flat growth in 2023. It's not alone. Many companies, particularly retailers, have been bracing for what they expect will be a slower year at best. And with a flattened, constrained economy typically comes a tighter labor market.
Which is why it's so crucial for Home Depot to keep the talent it has happy. Attrition -- and attraction -- can be expensive. The company needs to keep the workers it has to survive and hunker down for the next several months ahead.
Approximately 92% of Home Depot workers are hourly, so its investment decision -- while pricey -- makes sense. Keeping its front line happy is crucial when its bottom line is tied so intrinsically to an old-fashioned brick-and-mortar retail model. Other retailers like Walmart (WMT) have also announced significant pay raises in recent months in similar efforts to retain a robust workforce.
