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Doug McMillon is ushering in a new era at Wal-Mart Stores Inc.
The 47-year-old executive today takes over as chief executive officer of the world’s largest retailer as it faces slowing growth in the U.S. and increasing competition worldwide — including from online players like Amazon. McMillon succeeds the 63-year-old Mike Duke, who is retiring today but will continue as chairman of the executive committee and, in the tradition of his predecessors, will become an adviser to McMillon for one year.
On Friday, Wal-Mart reduced its fourth-quarter and full-year sales and earnings guidance. For the fourth quarter, earnings per share will be at the low end or slightly below the prior range of $1.60 to $1.70. Same-store sales are now expected to be slightly negative versus previous guidance for slightly positive comps.
“While this change in guidance is really not that big, it does imply negative same-store sales in three of the past four quarters,” John Zolidis, a retail analyst at Buckingham Research, wrote in a note. “It also makes us concerned that the recent loss of unemployment benefits for 1.3 million Americans could be a material headwind in 2014.”
Other issues that could distract McMillon include vocal criticism from labor groups over its treatment of employees. The National Labor Relations Board earlier this month issued what is said to be the largest complaint against Wal-Mart Stores Inc. for breaking federal labor law by violating workers’ rights. Retail experts don’t believe McMillon will be any more amenable to unions than his predecessor was. “It remains to be seen, and it’s a situation that has to be watched,” said Carol Spieckerman, president of Newmarketbuilders. “I don’t know that anyone can expect a major change. The question is, because he’s so well-versed in Wal-Mart culture at a time that the retail landscape is changing, will he be willing to experiment or take some steps to really push things forward? How dynamic he’ll be remains to be seen.”
Then there are the challenges of online and global. At the recent World Economic Forum in Davos, Switzerland, McMillon, speaking on a panel, said Wal-Mart was “becoming more of a tech company,” using innovations to streamline its supply chain and create a better experience for customers. McMillon also said he’s still excited about India’s long-term potential. The retail giant clearly has its eye on India — last month it registered in India a new company, Wal-Mart India Private Ltd.
McMillon, who was previously president and ceo of Wal-Mart International, will bring his overseas experience to bear in his new role, which is key since Wal-Mart’s business is well developed in North America and the company’s growth will come from outside the U.S. in coming years. McMillon has had a bird’s-eye view of a diversity of formats and technology used overseas that could potentially be implemented in the U.S. “If you’re thinking of introducing new formats in the U.S., he has to be really well-versed in that,” said Matt Nemer, a retail analyst at Wells Fargo. “In the U.K., there’s all the grocery delivery they do,” he said, referring to consumers at Wal-Mart’s Asda who shop using their mobile phones and pick up their groceries at a drive-through.
McMillon brings the image of youth along with his global point of view. “Since he’s younger, he has an opportunity to embody a newer generation of leadership style,” said Spieckerman. “He can be less of a figurehead and lofty ceo than a ‘roll up the sleeves, get things done and be part of the action’ kind of guy. He really has an opportunity to come off as being a lot more hands-on on a number of fronts.”
McMillon rose through the Wal-Mart ranks from a summer job to ceo of Sam’s Club to head of the important International division, where results have been inconsistent of late. He has been involved with numerous acquisitions outside the U.S., including Massmart and Yihaodian, a Chinese e-commerce company.
McMillon marries his understanding of the international business with Wal-Mart’s strides and innovations in e-commerce, Spieckerman said. “No other retailer is talking about global e-commerce.”
“Wal-Mart as a company has become more in tune with digital,” said Robin Sherk, director of retail insights at Kantar Research. There are 10 Web sites in markets around the world; in the U.S., stores are Wi-Fi enabled and mapped, and Wal-Mart has a scan-and-go app. Wal-Mart’s global e-commerce unit @WalmartLabs in California’s Silicon Valley has been on a buying spree, acquiring Kosmix, Vudu, OneOps, Inkiru and Torbit.
A huge challenge for Wal-Mart is Amazon, which now delivers on Sundays. Wal-Mart has said it’s two years away from offering the types of services Amazon provides. Spieckerman believes Wal-Mart will get there. “The media have been comparing Wal-Mart and Target much longer than that comparison has been relevant,” she said. “The new comparison is Wal-Mart and Amazon. Amazon is the only retailer that dwarfs Wal-Mart’s numbers on a few fronts. It’s a positive statement for how far Wal-Mart has come.”
Wal-Mart is finding ways to bring omnichannel efficiency to its Supercenters. The retailer is reportedly running a test this year where Supercenters will act as distribution hubs to supply and deliver items to Neighborhood Markets and Wal-Mart Express stores. Supercenters already serve as fulfilment centers for consumers who buy online and pick up in store, with a high percentage of online sales — 40 percent — choosing the pickup option. Nemer said, “I would suspect pickup in other stores is around 10 percent or 20 percent.”