This is a very natural progression. Wal-Mart's engine of growth has been international. —Brian Sozzi, Belus Capital Advisors
BENTONVILLE, Arkansas — Wal-Mart Stores Inc. is ushering in a changing of the guard as the world's largest retailer confronts slower growth and challenges to its reputation.
Doug McMillon, head of Wal-Mart's international division, will succeed CEO and President Mike Duke, 63, when he steps down on Feb 1 after five years in those roles. McMillon, a 23-year company veteran, will become the fifth CEO since Wal-Mart's founder Sam Walton.
The change at the top is indicative of a recent shift in strategy at the company best known for its cutthroat pricing and big box stores. McMillon, 47, is expected to infuse a youthful spirit into Wal-Mart's culture at a time when the company is trying to reinvent itself to attract a generation of shoppers who gravitate toward tablets and mobile devices.
The move also is a testament to the company's continued focus on its international division. McMillon, who started at the company in 1984 as a summer intern, left and came back in 1990 to work at Wal-Mart store before holding several jobs, including a three-year stint as president and CEO of the Sam's Club division.
But in February 2009, he succeeded Duke to head the international division, which accounted for 29 percent of its $466.1 billion in annual net sales in Wal-Mart's latest fiscal year. In that role, McMillon has been expanding Wal-Mart's everyday low prices to Brazil and China, while trying to boost profitability by closing some stores in those countries.
"This is a very natural progression," said Brian Sozzi, CEO and chief equities strategist at Belus Capital Advisors. "Wal-Mart's engine of growth has been international."
Neither McMillon nor Duke were available for comment.
McMillon faces challenges, though. Wal-Mart is seeing its low-income shoppers in the U.S. struggling with stagnant wages and rising costs. At the same time, Wal-Mart faces fierce competition from online competitors and dollar chains that offer convenience and lower prices.
The company also has image problems. Wal-Mart is being pressured to further increase its oversight of factory conditions abroad following a building collapse in April in Bangladesh that killed more than 1,127 garment workers. And it continues to face criticism over its treatment of its hourly workers.
Additionally, allegations of bribery in Wal-Mart's Mexico operations that surfaced in April 2012 have slowed business overseas. Wal-Mart allegedly failed to notify law enforcement that company officials authorized millions of dollars in bribes in Mexico to speed up getting building permits and gains other favors.
The New York Times, which broke the story, reported that Wal-Mart officials, including Duke, were allegedly informed starting in 2005 about the bribes. McMillon was not linked to the incident because he wasn't working in the international division at the time.
Dave Tovar, a Wal-Mart spokesman, told The Associated Press that Duke's decision to leave Wal-Mart was "a personal one," and had nothing to do with the bribery allegations. "He decided it was time to retire," said Tovar, who added that Duke approached Walton and the board voted Friday.
Duke became CEO in February 2009 at a time when the retailer's strong performance made it the rare winner during the Great Recession. But that soon changed a few months after he took the helm.
As the economy slowly recovered, times got tough for Wal-Mart, resulting in a more than two-year slump in its U.S. namesake business. The company also made mistakes in pricing and merchandising that backfired.
During his tenure, Duke named a new U.S. executive team, which reversed the slump in the third quarter of 2011 by restocking thousands of items that had been ditched and pushing low prices across the store.1 comment on this story
But those gains have been reversed since early this year. The U.S. Wal-Mart business has posted three straight quarterly declines in a key revenue metric. Wal-Mart also lowered its annual profit outlook twice in three months.
Duke will remain as chairman of the executive committee of the board. In the tradition of his predecessors, he will stay on as an advisor to McMillon for one year.
Meanwhile, the company said it plans to name McMillon's successor by the end of its fiscal year in early 2014.
Shares of Wal-Mart rose 63 cents to $80.44 in mid-day trading.
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