Target is increasing its minimum hourly pay to $12 starting this spring, the second increase in a matter of months.
However, the raise weighed on profit margins during the fourth quarter. The retailer fell short of earnings estimates, sending shares down 4.5 percent.
The retailer’s reinventions of more open layouts and the launch of several exclusive home furnishing and apparel brands are driving more people to its stores and website.
Targets’ same-store sales during the holiday season rose 3.6 percent and ahead of analysts’ expectations.
Revenue climbed 10 percent to $22.8 billion, slightly topping analysts forecast of $22.5 billion.
Target also announced other initiatives to help it speed up deliveries and make shopping in its stores easier.
The company is rolling out free two-day shipping for hundreds of thousands of items on Target.com