* Lee Scott to retire as CEO Feb. 1
* Wal-Mart international head Mike Duke named CEO
* Shares rise 1.5 percent
(Adds comments from Walton memo; updates stock price)
By Nicole Maestri
NEW YORK, Nov 21 Wal-Mart Stores Inc (WMT.N),
which is gaining market share amid a global economic downturn,
said Lee Scott will retire as chief executive early next year
and will be succeeded by Mike Duke, who heads its international
The world's largest retailer also promoted Eduardo Castro-
Wright, 53, a rising star at the helm of its U.S. operation, to
vice chairman, effective immediately.
The surprise announcement on Friday, landing one week
before the crucial Thanksgiving holiday shopping weekend, comes
as Wal-Mart builds on its strength as a discount retailer in a
contracting U.S. economy. [ID:nN13360393]
Duke, 58, who will become Wal-Mart's fourth chief executive
officer, also takes over as the retailer increasingly looks
overseas to fuel expansion as U.S. growth slows.
"Some of you might be wondering why we are making the
change at this time," Chairman Rob Walton said in a memo to
employees. "I think Lee said it best when he told me, 'This is
a great job, but you can't do it forever and at that point you
have an obligation to find the right time for a transition'."
Walton, son of Wal-Mart founder Sam Walton, said he was
"confident that the strategy we have in place is the right one
for future success and Mike has been actively involved in
developing and executing this strategy.
The CEO change is effective Feb. 1, 2009, Wal-Mart said.
Analysts said the succession plan is being outlined as
Wal-Mart gets back on track, boosting profits by persistently
focusing on low prices.
"I think it's good. I'm happy to see it," said Joseph
Feldman, an analyst with Telsey Advisory Group, of Duke.
Feldman said the timing of the announcement was "a little
strange," but recalled that, at Wal-Mart's analyst meeting in
October, there was almost a sense that Scott was saying
farewell and "finally had the upper hand over Wall Street."
He said Castro-Wright's promotion could also signal the
executive as a future CEO candidate.
"Wal-Mart is pushing well over $400 billion in sales," said
Thomas Nyheim, portfolio manager at Christiana Bank & Trust.
"Their business model is probably the only one that's
Wal-Mart shares rose 2.3 percent to $51.81 in afternoon
Scott, 59, has served as CEO since January of 2000, with
much of his tenure marked by struggles and a stagnating stock
price. From 2000 through 2007, the company's stock fell 31
percent, with most of the drop coming shortly after his
promotion. The stock is up 6.7 percent year-to-date and has
outperformed a nearly 49 percent slide in the Standard & Poor's
When the U.S. economy was roaring along, Wal-Mart found
itself losing out to trendier stores such as Target Corp
(TGT.N) and constantly under attack from groups that accused it
of mistreating employees and driving competitors out of
business with its massive expansion plans.
"Lee Scott has made life harder for Wal-Mart workers," said
David Nassar, executive director of Wal-Mart Watch, a union-
backed group critical of the retailer. Scott's policies have
"diminished Wal-Mart's reputation and hampered its ability to
grow," he said on Friday.
A foray into fashion and higher-end merchandise failed to
draw wealthier shoppers and its profit took a hit last year
when it cut prices to clear out poor-selling merchandise. Some
company-watchers thought at the time that the missteps could
cost Scott his job.
But Wal-Mart has returned to its low-cost roots and reined
in U.S. expansion, which has paid off as the economy soured and
cost-conscious consumers come back to its stores.
Scott, who joined the company in 1979 as an assistant
director of logistics, has also tried to portray Wal-Mart as a
world leader committed to tackling tough issues like soaring
health-care costs and cleaning up the environment.
Scott will remain chairman of the executive committee of
the board, receiving an annual salary of $1.1 million, and will
be employed through Jan. 31, 2011.
MAJOR IN THE MAJORS
Duke has overseen Wal-Mart's international operations since
2005 and is fond of saying the retailer should "major in the
majors" -- focus expansion on global markets where it can
become a big player instead of simply planting a flag.
Under that strategy, the retailer exited its business in
Germany and South Korea in 2006 and has pursued growth in
countries such as China, Mexico and Canada. Its international
operations accounted for almost 25 percent of its $374.5
billion in total sales last year.
Before overseeing Wal-Mart's international unit, Duke was
the head of Wal-Mart's U.S. operations. He joined the company
in 1995 as senior vice president of logistics.
Wal-Mart will announce a new head of international
operations by the end of January, when its fiscal year
(See here for
"Shop Talk" -- Reuters' retail and consumer blog)
(Additional reporting by Deepa Seetharaman, editing by Matthew
Lewis, Andre Grenon and Bernard Orr)