Wal-Mart investors get new CEO for the holidays

Wal-Mart shareholders and employees are getting a new head of the company for the holidays. The world’s largest retailer announced that its promoting Douglas McMillon to replace retiring chief executive Michael Duke.

The Wall Street Journal reported he will be the fifth person to head the company:

Wal-Mart Stores Inc. said company veteran Douglas McMillon will take over as the retailing giant’s chief executive, a rare leadership change at a company that brings in nearly half a trillion dollars in annual revenue but is struggling to book further growth.

The retail giant’s board met Friday in Bentonville, Ark., and named Mr. McMillon as the company’s fifth-ever CEO. The 47-year-old executive, currently president and CEO of Wal-Mart International, will take the top job on Feb. 1, after current CEO Michael Duke retires early next year.

Wal-Mart has a long history of grooming leaders from within and said it began planning for Mr. Duke’s succession years earlier.

The move will create a ripple effect throughout the world’s largest retailer at a time when it is grappling with sluggish sales in its international and U.S. businesses, a global investigation into allegations of bribery at its foreign operations, and worker protests over poor pay practices at its domestic stores.

Mr. McMillon and William Simon, president of Wal-Mart U.S., were among the favored candidates. Now, analysts are watching to see what happens with Mr. Simon and are waiting to see who will take over the international operations as it tries to retool its strategy at its 6,200 stores abroad.

The New York Times added this context around Wal-Mart’s recent performance and struggles to continue to grow:

In recent weeks, Walmart has been busily promoting its holiday deals, in one of the fiercest competitive sales seasons in recent memory, driven partly because there is a very short window this year between Thanksgiving and Christmas. The company’s executives have noted that Walmart’s core customer base remains very budget-conscious, hit by the end of the payroll tax holiday earlier this year and uneasiness over events like the federal budget shutdown. At the busiest time of the year, major retailers are already slashing prices and many are chipping away at the lure of Black Friday deals by offering them even earlier.

Mr. McMillon’s ascension is also occurring at a time when the company has announced major expansion plans in China.

Bloomberg Businessweek wrote a piece about the four things to know about McMillon, including that his division has had some troubles recently. Here are the first two:

1. McMillon’s part of Wal-Mart has had its share of troubles recently.The U.S. Department of Justice and the Securities and Exchange Commission are investigating allegations of corruption by Wal-Mart executives in its Mexican subsidiary, the company’s biggest, and a potential cover-up by executives at its headquarters in Bentonville, Ark. Wal-Mart is cooperating with the investigations and conducting its own internal investigation and review. The retailer also facedcriticism that it wasn’t doing enough to ensure safe working conditions in garment factories in Bangladesh, after several fires killed more than 1,000 people. And last month Wal-Mart had to break up with its Indian partner, delaying its ambitious plans to open hundreds of supercenters there.

2. His rival for the job faced worse problems. Bill Simon, the head of Wal-Mart’s U.S. operations, was the other executive frequently named as a potential successor to Duke. But Wal-Mart’s U.S. stores have been dealing with even bigger issues than its international ones. Bloomberg News has reported that the retailer alienated some shoppers on its home turf because the retailer doesn’t have enough workers to keep shelves adequately stocked. Some of those workers, meanwhile, have been protesting Wal-Mart’s low wages. And recently the company said it expects same-store sales over the all-important holiday season to be “relatively flat.”

The USA Today story chose to focus on McMillon’s qualifications, which helped him edge out other candidates for the top job:

“Unless you’re there, you don’t really understand it, and when you’re big, people may assume that you’ve got bad intentions,” McMillon said. “I learned more in the first six months at Wal-Mart than I learned in 5 1/2 years of post-secondary education.”

Originally from Jonesboro, Ark., McMillon, 47, started his career in 1984 as a summer associate at a Wal-Mart distribution center.

He got a B.S. in business administration from the University of Arkansas and an MBA from the University of Tulsa. While pursuing the MBA, he rejoined the company in a Tulsa Walmart store.

A lot of McMillon’s 22 years at the company were spent in merchandising in the Walmart U.S. division, giving him with experience with food, apparel and general goods. From 2006 to February 2009, he ran Sam’s Club and then took over Walmart International.

That deep Wal-Mart experience likely gave him leg up versus other candidates like Bill Simon, who runs Walmart U.S.

“Bill Simon was more of an outsider,” said Sucharita Mulpuru, a retail analyst at Forrester Research. “It was going to be one of them.”

McMillon also has a record of generating growth – both at Sam’s Club and the International business, which he ran from Arkansas.

Investors seemed to be indifferent to the news of an insider taking over since the stock only rose slightly on the news. It will remain to be seen how radically a nearly life-long Wal-Mart executive will change things. With all the pressure to keep costs low on one hand and to pay workers more on the other, McMillon will have his fair share of problems to solve.