November 25, 2013

Walmart turns to another insider for CEO

Doug McMillon, who first worked at the retailer as a summer employee in 1984, will grab the reins as the company tries to restore U.S. sales growth with Amazon.com and dollar stores luring away its customers.

By Renee Dudley And Matt Townsend
Bloomberg News

NEW YORK — Walmart Stores Inc. said Doug McMillon, head of its international business, will replace Mike Duke as chief executive officer when he retires as the world’s largest retailer struggles to ignite growth at home and abroad.

click image to enlarge

Doug McMillon speaks at the Walmart shareholders meeting in Fayetteville, Ark., in this June 7 photo. The discount chain has alienated some U.S. shoppers because it doesn’t have enough workers to keep shelves adequately stocked, leading some consumers to decamp to smaller-format stores that offer merchandise starting at $1.

The Associated Press

McMillon, 47, will take over for Duke, on Feb. 1, the Bentonville, Ark.-based company said Monday in a statement. Duke, 63, will stay on as chairman of the board’s executive committee, and McMillon also has been named to the board, effective immediately.

McMillon, who first worked at Walmart as a summer employee in 1984, will grab the reins as the retailer tries to restore U.S. sales growth with Amazon.com and dollar stores luring away its customers. Overseas, where McMillon was in charge, Walmart has been accelerating its expansion in China and other emerging markets while probing allegations of bribery in Mexico and possible violations of the Foreign Corrupt Practices Act.

“International had definitely run into its issues,” David Strasser, an analyst at Janney Montgomery Scott in New York, said in an interview. The move will maintain the “status quo” for investors.

Duke is the fourth CEO since Walmart became a publicly traded company in 1970. Founder Sam Walton was the first, and, ever since he stepped down in 1988, the company has looked internally for its CEO. Duke and his predecessors – Lee Scott and David Glass – all were insiders with years of experience at the company before taking over the top job. Duke was named in November 2008 and didn’t formally take the reins until Feb. 1, 2009.

Walmart’s shares gained 69 percent from Jan. 30, 2009, the last trading day before Duke became CEO, through Nov. 22 this year. The Standard & Poor’s 500 Index more than doubled in that time.

McMillon had been identified as a top candidate to take the CEO job earlier this year, people familiar with the matter said in May. Bill Simon, who runs Walmart’s U.S. operations, was the other leading candidate. McMillon was close to the Walton family, which owns about half of the retailer’s shares, said three of the people, who asked not to be identified because the matter is private.

In 1990, McMillon was hired at a store in Tulsa, Oklahoma, and went on to various positions in merchandising the U.S. division, according to Wal-Mart’s website. From 2006 to 2009, he was president and CEO of the Sam’s Club warehouse division.

“McMillon’s tenure at all three division – U.S., international and Sam’s Club – was a key to his hiring because in a sense it was training for the CEO job,” David Schick, an analyst for Stifel Financial Corp. in Baltimore, wrote Monday in a note to clients.

The company said it will announce McMillon’s replacement at the international business by the end of its fiscal year.

Walmart earlier this month cut its annual profit forecast for the second time since August. The retailer’s U.S. same-store sales have slid for three straight quarters as a 2 percentage point increase in Social Security taxes reduced spending among its shoppers, many of whom live paycheck to paycheck.

While the company’s low-income customers are among the hardest hit amid persistent unemployment and higher taxes, some of its troubles are self-inflicted. The discount chain has alienated some U.S. shoppers because it doesn’t have enough workers to keep shelves adequately stocked, leading some consumers to decamp to smaller-format stores that offer merchandise starting at $1.

Internationally, the company has been working to reintroduce its everyday low price strategy in Brazil and China after struggling to find strong sales growth in both markets. Walmart said last month that it plans to add as many as 110 stores over three years in China, while shutting some outlets and remodeling dozens more. The retailer also named two new managers, in business development and real estate, to its China team last month.

The U.S. Department of Justice and the U.S. Securities and Exchange Commission are investigating allegations that Walmart systematically bribed Mexican officials so it could more quickly open stores in the country. Federal and local government agencies in Mexico also are involved in investigations. Walmart has said that it also has started inquiries into potential violations of the FCPA at operations in Brazil, India and China.

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