FINANCE

Gap to raise minimum wage to $10 for U.S. employees

BY Dan Berthiaume

San Francisco – Gap Inc. will raise the minimum hourly wage for all U.S. employees to $9 in 2014, and then raise it again, to $10, in 2015. The move will affect about 65,000 store employees across the company’s brands, which include Gap, Banana Republic, Old Navy, Piperlime, Athleta, and Intermix. Gap’s announcement comes amid a nationwide debate about the minimum wage.

Gap chairman and CEO Glenn Murphy publicly announced the change in a brief blog post. He said employees had been notified in a company phone call early in the morning of Feb. 19.

“To us, this is not a political issue,” Murphy said in the blog post. “Our decision to invest in frontline employees will directly support our business, and is one that we expect to deliver a return many times over. The people in our company who engage directly with our customers carry an incredible responsibility. Our success is a result of their hard work, love of fashion and commitment. We hope this decision provides them with some additional support as they grow their careers with Gap Inc."

In explaining the wage increases, Murphy told employees: “We work for a company with a strong set of values, which can be directly linked to our founders, Doris and Don Fisher. They invented specialty apparel retail, but Don also challenged us to live up to our promise to ‘do more than sell clothes.’ ”

Gap is based in San Francisco, which has a $10.74 citywide minimum wage. California has passed a law that establishes a minimum wage of $10 an hour by 2016.

President Barack Obama publicly praised Gap for the move.

"I applaud Gap for announcing that they intend to raise wages for their employees beginning this year," said Obama.

He also urged Congress to pass a bill that would raise the nation’s minimum wage to $10.10 an hour from the current $7.25 an hour.

It’s time to pass that bill and give America a raise,” the president said.

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FINANCE

Facebook acquires m-messaging company WhatsApp for $16 billion

BY Dan Berthiaume

Menlo Park, Calif. — Facebook has reached an agreement to acquire WhatsApp, a cross-platform mobile messaging company, for a total of approximately $16 billion, including $4 billion in cash and approximately $12 billion worth of Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees that will vest during four years subsequent to closing.

WhatsApp has 450 million monthly users and adds about 1 million new users per day. WhatsApp’s brand will be maintained; its headquarters will remain in Mountain View, Calif.; co-founder and CEO Jan Koum will join Facebook’s board of directors; and WhatsApp’s core messaging product and Facebook’s existing Messenger app will continue to operate as standalone applications.

Facebook said in a statement that the acquisition supports Facebook and WhatsApp’s shared mission to deliver core Internet services efficiently and affordably, and that the combination will help accelerate growth and user engagement across both companies.

Facebook purchases WhatsApp following a failed effort to purchase visual messaging service Snapchat for $3 billion. However, WhatsApp has been around five years as opposed to two years for Snapchat, and added 100 million new users in fourth quarter 2013. The company sends text messages over WiFi Internet instead of cellular networks. The WhatsApp app is free to download and use for the first 12 months, then costs 99 cents.

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO. "I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open and connected."

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Wal-Mart doubles small-store expansion amid weak sales and lowered outlook

BY Staff Writer

Bentonville, Ark. – Wal-Mart Stores Inc. on Thursday doubled its projected growth of its small-store format as the retailer reported a disappointing fourth quarter and issued lower-than-expected fiscal 2015 guidance. Net income for the quarter, which ended Jan. 31, fell 21% to $4.4 billion. Total sales increased 1.4% to $128.8 billion, including a $1.8 billion negative impact related to foreign currency translation. Same-store sales in the United States fell 0.4%.

Just four months after announcing plans to open between 120 and 150 small format stores under the Walmart Neighborhood Market and Walmart Express banners, the retailer upped its growth target to 270 to 300 units. (Wal-Mart maintained its forecast of 115 new supercenters in 2014.)

To accelerate the rollout of small format stores, Walmart U.S. will increase capital expenditures for fiscal 2015 by $600 million to a range of $6.4 billion to $6.9 billion. A forecast provided last October called for spending between $5.8 billion and $6.3 billion on U.S. growth.

“Customers’ needs and expectations are changing,” said Bill Simon, Walmart U.S. president and CEO. “They want to shop when they want and how they want, and we are transforming our business to meet their expectations. By unlocking this growth opportunity and further combining our supercenters and small store formats with an unlimited selection available through ecommerce, we provide our customers with anytime, anywhere access to our brand.”

Walmart debuted its smaller format in the late 90’s. But with its announcement on Thursday, the company is entering an era of accelerated growth for a format viewed as a key element in its omnichannel approach to serving shoppers whose expectations are evolving rapidly.

“Our small store expansion, in addition to providing customers access to a wide variety of products, including fresh, pharmacy and fuel, will help us usher in the next generation of retail,” Simon said. “This will combine thousands of points of physical access with digital retail experiences that include initiatives such as Site to Store and Pay with Cash. Our small store expansion will also strengthen our market share and create greater efficiencies in our supply chain through a tethered approach that uses supercenters as a supply chain base, links our resources and provides a unique and connected customer experience.”

News of the small format expansion helped soften the blow of Wal-Mart’s worst financial performance in recent memory and an inauspicious beginning to Doug McMillon’s tenure as president and CEO of Wal-Mart Stores. McMillon assumed his current responsibilities on February 1 after former president and CEO Mike Duke stepped down.

For the full year, Wal-Mart’s sales increased $1.6 billion to $473.1 billion, including a $5.1 billion negative impact from foreign currency translation. Net income declined 5.7% to $16 billion.

"Comp sales improvement is a key priority, and we’ll focus on being even stronger item and category merchants, delivering value and improving our service level,” McMillon said. “We’ll remain focused on our expense structure, and innovate to improve productivity and aid our ability to deliver every day low prices. Our EDLP approach earns trust with customers and helps us keep our cost structure low “We’ll invest aggressively in e-commerce and increase our small store rollout in the U.S., as we’ve done in several other countries, to deliver value and convenience. The combination of supercenters and smaller formats closer to customers’ homes, along with e-commerce and mobile commerce, will enable us to increase our relevance for the Walmart brand around the world."

In the meantime, Walmart anticipates challenging market conditions in the first quarter and year ahead which could cause profits to fall below prior year levels. Same-store sales at the Walmart’s U.S. stores and Sam’s Club are expected to be flat as the new fiscal year got off to a rocky start with more bad weather.

"We expect economic factors to continue to weigh on our outlook," said Walmart CFO Charles Holley. "Some of the factors affecting our consumers include reductions in government benefits, higher taxes and tighter credit. Further, we have higher group health care costs in the U.S. These concerns, combined with investments in e-commerce, will make it difficult to achieve the goal we have of growing operating income at the same or faster rate than sales.”

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