Coverage: Wal-Mart U.S. chief out

Wal-Mart’s head of its U.S. division is leaving, and the company has tapped the head of Asian operations to run the business. The retailer is looking to put some life back into its business as sales continue to drop.

Bloomberg’s Renee Dudley wrote that Simon, who was once considered a contender for the top role, was shown the door:

Wal-Mart Stores Inc. (WMT)’s Greg Foran, a fast-rising executive at the retailer’s Asia operations, will take over as head of its U.S. division for Bill Simon, who is leaving the company.

Foran, a 53-year-old New Zealander, will replace Simon as U.S. chief executive officer on Aug. 9, the Bentonville, Arkansas-based company said today in a statement. Foran had only served in his current role as head of the Asia business since June, when he was elevated from CEO of Wal-Mart China.

Simon, 54, had been a contender to be CEO of the whole company before Wal-Mart picked Doug McMillon as its next leader. McMillon, who took the top job in February, was closer to the Walton family, which controls most of Wal-Mart’s shares, people familiar with the situation have said. Simon will remain available as a consultant for the next six months to help with the transition, Wal-Mart said today.

“This felt like the right time to move on and focus on my next opportunity,” Simon said in the statement.

Aaron Smith and Poppy Harlow wrote for CNN Money that the move comes as same-store sales continue to drop:

Foran takes charge at a tough time. Same-store sales have dropped for five consecutive quarters and inventories are piling up unsold, despite discounts, according to Brian Sozzi, retail analyst for Belus Capital Advisors.

“At least Wal-Mart will be able to blame Simon for its financial challenges for the remainder of 2014, with Foran looking to pitch a better story to investors in 2015 and at the hoopla-filled annual meeting,” he said.

Simon will stay with the company until Aug. 8 to help with the transition, according to a Wal-Mart (WMT) spokesman. The spokesman said that Simon has been planning to leave since February, when Doug McMillon was promoted to the parent company’s top job of CEO.

Shelly Banjo wrote for The Wall Street Journal about Foran’s background with the company:

Mr. Foran hasn’t run a company the size of Wal-Mart’s U.S. division, whose sales are bigger than the combined revenue of Kroger Co., Costco Wholesale Corp. and Target Corp.

Mr. Foran joined Wal-Mart in 2011 after being passed over for the top job at Woolworths Ltd. in Australia. He served as president of Wal-Mart China, where he presided over the company’s expansion as it tangled with compliance and government regulation. He was appointed head of Wal-Mart Asia in April.

Mr. Simon, a straight-talking outsider who joined Wal-Mart eight years ago, was among the favored candidates last year to succeed former chief executive Mike Duke, but he was passed over for the job, which went to longtime veteran Doug McMillon. The company said the two had discussed Mr. Simon’s next career move on and off for the past few months, knowing that his leaving was a strong possibility. A departure arrangement was reached last week.

USA Today’s Jayne O’Donnell said that Simon’s recent earnings guidance could have been part of the reason for his departure:

Retail analyst Brian Sozzi said that while the change might have been brewing since McMillon took on the CEO role in February, he believes the “last straw” was when Simon made what sounded like an earnings warning in the CNBC interview. Referring to unemployment numbers, Simon said it was “going to take a while for those numbers to balance out” and singled out low- and middle-income consumers as being “still pretty challenged.”

When he asked Wal-Mart about the comments, Sozzi says he was told they should be taken at “face value” and did not constitute a warning.

“When you’re at Wal-Mart, you’re not out there giving any interviews, especially ahead of back-to-school and holiday … (unless) you have something positive to say,” says Sozzi.

Whatever the reason for his departure, Nomura equity analyst Robert Drbul says Simon deserves credit for leading a turnaround at the company that re-emphasized low prices and product assortment. He also created more career opportunities for workers and launched a new plan to increase U.S. manufacturing.

Wal-Mart has a long way to go to win over customers, particularly as competition heats up before back-to-school shopping. The retailer has some work to do and is betting that Foran is the guy for the job. But it’s hard to go up when you’re the biggest and customers have fleeting loyalty.