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Finance

Walmart’s Key Challenges In Its Business Environment

Most of Walmart’s ~1.4 million employees in the US earn wages above the legal minimum wage requirement. In recent years, there’s been more activism by politicians and labor unions in the retail (XRT) (XLP) and restaurant industries. They want to increase the federal minimum wage. The last proposal sought to increase the minimum wage rate from $7.25 per hour to $10.10 per hour. The proposal was for the wage to increase in phases. It was defeated in the US Senate in April 2014.

However, another version of the bill may be reintroduced in the future. If such legislation comes to pass, it would have positive and negative impacts for Walmart. On one hand, Walmart would need to pay higher wages to part of its workforce. On the other hand, the increase in incomes among lower income households would benefit sales and earnings for the retailer.

Rising wage costs in China would also affect Walmart’s margins. China has long been the source of low-cost products for Walmart and other firms around the world. Walmart is able to maintain its price advantage in part due to cheap Chinese products. This factor would continue to put pressure on the retailer’s margins.

To read more sector updates, visit Market Realist’s Consumer and Retail page.

View more information: https://marketrealist.com/2015/02/walmarts-key-challenges-business-environment/

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