Retailing

Wal-Mart's New Chief Faces Old Woes


The incoming chief executive officer of Wal-Mart Stores (WMT), 47-year-old Doug McMillon, is a company man and a native of Arkansas—the retailer’s home base. By most accounts he’s well-liked, engaging, and accessible. The $470 billion empire he’ll be running come February, when Mike Duke retires, could use a good dose of all that. But it also needs a lot more: The world’s biggest retailer must contend with slowing sales in the U.S. and abroad, an underwhelming digital presence, allegations of corruption at its Mexican subsidiary, and worker protests over low wages. “Wal-Mart, and all of retail, is at a crossroads,” says Carol Spieckerman, the founder of Newmarketbuilders, a retail strategy firm. “Wal-Mart’s sheer size makes it difficult to drive growth. Most retailers are happy if they’re not going backward.”

McMillon first worked at Wal-Mart as a warehouse employee during the summer of 1984. He graduated from the University of Arkansas, and in 1990, while earning an MBA from the University of Tulsa, he returned to the retailer—and never left. After holding various merchandising positions, McMillon was named CEO of Sam’s Club in 2006. He replaced Duke as head of Wal-Mart’s international operations three years later. “He’s really been a CEO in training,” says David Schick, a Stifel Nicolaus analyst.

That’s McMillon’s official bio. Then there’s his cultural pedigree. “He’s probably one of the few most senior executives who knew Sam Walton. That’s a huge thing for Wal-Mart,” says Joe Feldman, senior managing director of researcher Telsey Advisory Group. The Walton family owns slightly more than half of Wal-Mart’s stock, and Walton’s eldest son, Rob, is chairman.

In the U.S., Wal-Mart’s lower-income customers are struggling amid persistent unemployment and higher payroll taxes. Many seem to have fled to dollar stores in search of even lower everyday prices. Other shoppers are frustrated, because Wal-Mart doesn’t always have enough workers to keep its shelves well-stocked. And Amazon.com (AMZN) has lured away customers with its low prices and quick shipping. In November, Wal-Mart reported its third quarter of declining sales at U.S. stores open for more than a year—a key measure of a retailer’s well-being. And though Wal-Mart began offering Black Friday deals a week early, it also said it expects same-store sales during the holiday season to be “relatively flat.”

Under McMillon, Wal-Mart’s international business—29 percent of the company’s sales last fiscal year—hasn’t been faring too well, either. In China, Wal-Mart faces competition from increasingly savvy local companies even as more shoppers migrate online. The giant retailer plans in the next three years to close as many as 30 poorly performing stores in the mainland and open about 100 in smaller cities.

Wal-Mart this year broke with its venture partner in India, delaying its ambitious plans to build hundreds of supercenters there. And the retailer is cooperating with a federal investigation into allegations that employees in Mexico used bribes to secure building permits—allegations that predate McMillon’s tenure.

McMillon just got the job he’s been groomed for. Now everyone is waiting to see if all that experience pays off.

The bottom line: Wal-Mart has seen sales at U.S. stores open for at least a year fall for three straight quarters.

Susan-berfield-photo-200x200
Berfield is a writer for Bloomberg Businessweek in New York. Follow her on Twitter @susanberfield.

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Companies Mentioned

  • WMT
    (Wal-Mart Stores Inc)
    • $76.84 USD
    • 0.62
    • 0.81%
  • AMZN
    (Amazon.com Inc)
    • $331.32 USD
    • 6.32
    • 1.91%
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