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Walmart store
Gunnar Rathbun/AP Images for Walmart
Better service = crowded stores = increased sales
EARNING IT

Walmart’s big investment in workers is paying off

By Oliver Staley

Two years ago, facing moribund sales in its stores and stiff competition online, Walmart committed $2.7 billion to improving employee wages and training. Shares tumbled and analysts scratched their heads; it was not the kind of news Wall Street tends to embrace.

But Walmart’s decision to invest in workers is now paying off with increased sales both in stores and online, as the the world’s biggest retailer reported third-quarter earnings today (Nov. 16) that surpassed analyst estimates.

Revenue from stores open at least a year rose 2.7%, a substantial increase given the struggles most retailers are facing. And online sales jumped 50%, as the company is now counting results from Amazon competitor Jet.com, which Walmart purchased last year.

While Walmart’s newfound success online—and its challenge to Amazon’s e-commerce dominance—is the sexier story, the retailer’s lifeblood is its nearly 12,000 stores worldwide, including more than 5,000 in the US. Notably, the company reported growth in its grocery business, which is the biggest in the US, driven in part by offering curbside pickup to harried commuters.

Improving the shopping experience at Walmart stores was one of CEO Doug McMillon’s goals when he announced a plan in February 2015 to boost employee wages. At the same, after years of cutting staff and paying as little as possible, Walmart’s stores were disheveled and customer service virtually nonexistent. By raising wages by an average of 7% for full-time employees, Walmart reduced turnover and improved the caliber of its workers. Investing in training and technology made processes like shelving goods more efficient, freeing up employees to help shoppers.

Walmart still has a ways to go to outrun its history of questionable business practices and mistreatment of workers. Its earnings were impacted by a $283 million expense to settle overseas bribery accusations, and last week a group of female employees sued in federal court, alleging discrimination on the basis of gender, and are seeking class-action status. A Walmart spokesman told Bloomberg that a class-action suit isn’t appropriate because the various claims don’t represent how most women at the company were treated.

But there’s at least one place where the company is quickly regaining credibility. Wall Street scorned Walmart’s plans to invest in workers, and punished the stock for a long time afterward, keeping the shares down through most of 2015. But as the strategy took hold, and sales increased, investors have returned, and after today’s earnings report, the shares reached an all-time high.