Cramer and Mohr: Target Making the Right Move on Raising Wages

NEW YORK (TheStreet) -- Target (TGT) - Get Report announced Wednesday it is raising its minimum wage paid to $9 per hour starting next month in a move that is a clear response to recent increases at peers Wal-Mart (WMT) - Get Report and TJX's (TJX) - Get Report TJMaxx.

The announcement comes less than a month after Wal-Mart announced it was giving half a million U.S. workers a raise, bringing its minimum pay to $9 in 2015 and $10 next year, and several weeks after T.J. Maxx said it would do the exact same.

Everyone in large-box retail is compelled to follow Wal-Mart's lead, and Target is no exception. We believe the company is making the right move, and forecast the EPS impact to be minimal.

Of course, we would need more information on the current number of employees (out of its 366,000 full-time, part-time and seasonal "team members") currently being paid minimum wage in order to make a more specific cost impact determination, but assuming it is a small portion (less than 1% of Wal-Mart's employees were being paid minimum wage), the cost impact should be under $10 million annually.

Of course, if the number of minimum-wage employees is high (10% or above), the cost impact would well exceed $50 million annually, but we believe the likelihood of this scenario is low. We will look to next quarter's conference call to hear more, unless management is willing to provide further information in the meantime. Target has more than enough room to raise wages amid its massive $2 billion cost-saving program. We reiterate our strong bullish view on shares.

Editor's Note: This article was originally published at 5:01 p.m. EDT on Action Alerts PLUS on March 18.

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At the time of publication, Jim Cramer's charitable trust Action Alerts PLUS held TGT.