Wal-Mart Stores Inc, the world’s largest retailer, unexpectedly announced on Friday that its chief executive would retire in February and be replaced by the head of its international division.
The surprise change in leadership right before the crucial holiday season comes as Wal-Mart has roared back to success as people looking for bargains shop more at discounters. Still, the company faces hurdles ahead amid slowing growth in the US, and analysts say the decision to tap an international executive serves as a testament that the company is looking oversees.
Bentonville, Arkansas-based Wal-Mart said Mike Duke, 58, vice chairman of its international division, will take the reins from Lee Scott, 59, effective on Feb. 1. Duke also becomes a member of the board of directors immediately.
Scott, who joined Wal-Mart in 1979 and became president and CEO in 2000, will continue as chairman of the executive committee of the board until January 2011, according to Wal-Mart spokesman Dave Tovar. He will also serve as an adviser to Duke until 2011.
Scott faced increasing scrutiny particularly from union-backed groups over issues from environmental concerns to wages and healthcare, which critics say have been too skimpy. The negative publicity had depressed the company’s stock price for two-and-a-half years and made the company the poster child for bad corporate behavior.
COMEBACK
But Wal-Mart’s overhaul of its stores and merchandise and its re-emphasis on low prices came together at a time when the economy began to turn sour last year. Since September last year, Wal-Mart’s shares have made a remarkable comeback and its image has improved as the company, under Scott’s leadership, implemented environmental sustainability efforts, a discount drug program for customers and other initiatives.
“The absence of [Scott’s] steady hand, leadership and political clout will be a minus for the company as his strategic decisions ultimately brought the company back to its roots and raised its public relations profile,” wrote Adrianne Shapira, a retail analyst at Goldman Sachs in a note released on Friday.
But she praised Duke’s abilities, noting that Wal-Mart’s strong fundamentals should ensure a smooth leadership transition as Duke inherits a company in “its sweet spot.”
Even in recent weeks, the stock has held up as most company’s shares have plunged. Last week, the retailer said third-quarter profit rose 10 percent as shoppers snapped up early Christmas promotions.
Tovar said the decision to name Duke was part of an “ongoing rigorous succession planning process.”
Wal-Mart shares rose US$2.26, or 4.5 percent, to close at US$52.92 after the news on Friday.
CHALLENGES
Wal-Mart faces some challenges ahead with the administration of US president-elect Barack Obama, who has pushed for the passage of the Free Choice Act, legislation that makes it easier to unionize workers. Scott told investors last month that he believed unionization could harm corporate America’s competitiveness, but had said that he was looking forward to working with a new president and Congress, regardless of party.
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