Target raises starting pay for 2nd time in less than a year

NEW YORK (AP) - Target is raising its minimum starting pay for workers for the second time in less than a year after seeing a bigger and better pool of candidates.

Target, which hiked starting pay to $11 an hour last fall, said all workers this spring will receive a minimum of $12 per hour.

CEO Brian Cornell said Tuesday that Target will offer workers $15 an hour by 2020. He says Target Corp. recorded a 30 percent increase in applicants when it boosted pay, and a better quality of applicant as well.

Target's ambitious plan to remake itself is driving more people to its stores and its website, where they are spending more for everything from fashion to towels. But the cost of such a massive overhaul is extensive, and it took some of the shine off a strong quarter of sales.

In the race to modernize, Target's profit margins are under significant pressure. The bottom lines of traditional retailers are getting bruised trying to hold Amazon.com at bay. Late last month, Walmart reported weak fourth-quarter profits as it stumbled with e-commerce sales during the crucial holiday season.

Where investors punished Walmart by selling off shares, the reaction to Target was more subdued Tuesday, suggesting that the traditionally irascible Wall Street may be giving the retailer what it needs most: more time to win over consumers.

Still, shares slipped close to 4 percent in early trading and a number of industry analysts seemed exasperated with the fickleness of Wall Street in what they believe is a turnaround story.

"While we understand the concern over increasing costs, we are critical of voices that see this as a weakness," wrote Neil Saunders, managing director of GlobalData. "We take the contrary view: if it is to grow, Target needs to invest— including in customer service, which affects wages. The alternative, which is to restrict or throttle investment, may deliver more profit in the short term, but it will be to the detriment of long-term performance. "

But traditional retailers face a moving target in Amazon.com.

Amazon has created fierce loyalty among shoppers who spend $99 for a membership that comes with free shipping, as well as streaming movies and music. Its acquisition of Whole Foods Market last year has raised the stakes for Target and Walmart, which also sell groceries. Amazon just introduced two-hour Whole Foods delivery for Prime members.

Target pledged last year to invest more than $7 billion in modernization efforts over the next three years. That includes remodeling old stores, opening small locations in cities and college towns and faster online delivery. Late last year, the company said it was accelerating plans to remodel more than half of its 1,800 stores by 2020.

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