Changing of the guard as Wal-Mart faces challenges

Wal-Mart International President and CEO Doug McMillon faces challenges. Photo / AP

Wal-Mart Stores 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 chief executive and president Mike Duke, 63, when he steps down in February after five years in those roles. McMillon, a 23-year company veteran, will become the fifth chief executive 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 before holding several jobs, including a three-year stint as president and chief executive of the Sam's Club division.

But in February 2009, he succeeded Duke to head the international division, which accounted for 29 per cent of its US$466.1 billion ($565.6 billion) in annual net sales in Wal-Mart's latest fiscal year.

"This is a very natural progression," said Brian Sozzi, chief executive and chief equities strategist at Belus Capital Advisors. "Wal-Mart's engine of growth has been international."

McMillon faces challenges. Wal-Mart is seeing its low-income shoppers in the US struggling with stagnant wages and rising costs. At the same time, Wal-Mart faces fierce competition from online competitors and dollar chains. 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 around 1127 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 authorised millions of dollars in bribes in Mexico to speed up getting building permits and gain other favours.

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, said 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 on Saturday.

Duke became chief executive in February 2009 at a time when the retailer's strong performance made it the rare winner during the 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 US namesake business.

Duke named a new US 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.

But those gains have been reversed since early this year. Wal-Mart lowered its 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 adviser 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.

- AP