Dollar General said on Thursday it would hike compensation and provide more training for its store managers, a move that it hopes will improve service quality in stores over time but will pressure earnings this year.
Wal-Mart in 2015 had said it would spend $2.7 billion on wages, benefits and training, a move that it said had improved service quality and boosted sales last year.
Other retailers have also hiked manager salaries in the past year in response to a tight labor market and also to comply with a rule change that extended mandatory overtime pay to more
Dollar General said it had earmarked about $70 million in 2017, mainly for the pay hikes.
The company said sales rose 13.7 percent to $6.01 billion in the fourth quarter ended Feb. 3, helped by higher average spending at its stores, even as store traffic declined slightly.
Analysts had expected sales of $5.97 billion, according to Thomson Reuters I/B/E/S.
Dollar General and larger rival Dollar Tree face stiff competition from Wal-Mart and Target Corp, which have been discounting aggressively, even amid falling grocery prices, to boost store traffic.
Goodlettsville, Tennessee-based Dollar General forecast earnings of $4.25 to $4.50 per share for the year ending February 2018, largely below the average analyst estimate of $4.39.
Net income rose to $414.2 million or $1.49 per share in the fourth quarter, from $376.2 million or $1.30 per share a year earlier. Analysts on average had expected earnings of $1.41 per share.
Dollar General’s shares were slightly lower before the bell after rising 6 percent earlier.