* Doug McMillon, 47, to become CEO on Feb. 1
* Currently heads Wal-Mart's international division
* Outgoing CEO Mike Duke to remain as adviser for one year
* Shares rise 0.8 percent, hit record high
(Adds analyst comment, link to Breaking Views)
By Phil Wahba
Nov 25 Wal-Mart Stores Inc has named
company veteran Doug McMillon to be its next chief executive, in
a bet that his experience running its international unit will
bolster growth at the retailer, the world's largest.
He will take the reins at a time sales growth in the United
States is tepid and the company is trying to improve
profitability at its international stores.
McMillon, 47, who has spent his whole career at Wal-Mart,
was widely considered by Wall Street investors to be the front
runner to succeed CEO Mike Duke, 63.
Since January 2009, he has headed Walmart International, the
company's second-largest operating unit. Prior to that, he was
CEO of the company's retail warehouse chain, Sam's Club.
"McMillon has done just about every job there is (at
Wal-Mart)," said Joe Feldman, analyst with Telsey Advisory
Group. "He's a good fit culturally and, as a young 47-year-old,
there's an opportunity to be there for a long time," he said.
The retailer's shares closed up 0.8 percent to $80.43, an
all time high.
McMillon, who has also worked at Walmart U.S., the company's
biggest division, has long been believed to have the support of
the Walton family, which controls almost half of the company's
shares, according to Cowen & Co analyst Faye Landes.
"This was McMillon's to lose," said Telsey's Feldman.
Landes said the move will likely lead to some changes in
Wal-Mart's top echelons. Among those who may be affected is
Bill Simon, CEO of Walmart U.S. and also a top candidate for the
During Duke's time as CEO, Wal-Mart shares have risen 69.3
percent, underperforming both the S&P 500, which rose
118.5 percent during that period, and the S&P Retail Index
, which gained 253 percent.
McMillon will start in his new role on Feb. 1, while Duke
will continue as chairman of the executive committee of the
board and stay on as an adviser to McMillon for a year.
Originally from Jonesboro, Arkansas, McMillon joined
Wal-Mart in 1984 as a summer employee at a distribution center.
After studying for an MBA degree, he rejoined the company in a
Tulsa, Oklahoma store in 1990.
A retailer of Wal-Mart's size and reach - its U.S. sales are
equivalent to about 1.7 percent of gross domestic product - can
only grow so much. But Stifel Nicolaus & Co analyst David Schick
said Wal-Mart can increase sales by opening more of its
successful smaller format stores to spur U.S. sales and doing
more to integrate e-commerce and its physical stores to offer
shoppers conveniences that Amazon.com Inc and others
In McMillon's first three years as head of Walmart
International, sales rose about 35 percent, compared with 6.4
percent at the U.S. unit. But much of that gain came from its
2012 acquisition of Massmart, a South Africa-based retailer.
Elsewhere, Walmart International has struggled to grow more
recently, with comparable sales down last quarter in key markets
such as Britain, Canada, China and Mexico, and an operating
profit that declined in the first nine months of the fiscal
year. McMillon has said in recent quarters the retailer must do
more to control costs in international markets.
Still, international sales have outpaced those in the United
"McMillon was responsible for the growth area for Wal-Mart -
international sales - and that's why he got the nod," said
Walter Loeb, president of retail consultancy Loeb Associates.
The company became embroiled in a bribery scandal on
McMillon's watch. In 2011, Wal-Mart began an internal probe into
alleged violations of the U.S. Foreign Corrupt Practices Act and
whether the company had handled such matters appropriately. U.S.
authorities are also investigating.
A Wal-Mart spokeswoman said the CEO change was not related
to the FCPA probe.
Wal-Mart has spent hundreds of millions on the probe.
At the same time, Walmart U.S. has faced slow growth, hurt
by consumers' curbing spending and the growth of dollar store
chains. Wal-Mart has reported declining U.S. comparable sales
for three quarters in a row. Comparable sales include sales at
stores open at least one year, as well as online sales.
The company was slow to react to the threat from Amazon.com,
which has in recent years vastly increased its assortment of
products that shoppers can buy online, selling items such as
toys at low prices. It also shortened delivery times.
Wal-Mart has invested heavily in e-commerce in the last few
years but still only generates about 2 percent of sales online.
Wal-Mart said it would announce a new head for its
international division before Jan. 31, the end of its fiscal
year, and Landes predicted it would be Cathy Smith, the
division's second in command
Despite the company's modest growth, analysts said,
McMillon's deep understanding of the company will be more
beneficial than a radical overhaul.
"This is a tank - I would get nervous if there a big change
in direction," said Shawn Kravetz, president of Esplanade
Capital, an investment firm.
(Additional reporting by Aditi Shrivastava and additional
writing by Robin Paxton; Editing by Joyjeet Das, Ted Kerr and