Succession solved: Duke to take throne
BENTONVILLE, Ark. —There is nothing quite like the appointment of a new ceo at the world’s largest retailer to shift the focus of the retail industry, if only temporarily, away from a fast-approaching and difficult holiday season.
Wal-Mart did just that on the morning of Friday, Nov. 21, when it announced that vice chairman Mike Duke would become only the fourth person in the company’s nearly 50-year history to serve as president and ceo. Duke will replace Lee Scott, who will step down as president and ceo on Jan. 31, 2009, ending an often embattled nine-year run in which the company endured considerable criticism and unprecedented change.
“I am looking forward to leading this great company,” Duke said. “Wal-Mart is very well positioned in today’s economy, growing market share and returns, and is more relevant to its customers than ever. Our strategy is sound and our management team is extremely capable. I am confident we will continue to deliver value to our shareholders, increase opportunity for our over two million associates and help our 180 million customers around the world save money and live better.”
While Scott’s retirement has been anticipated, and in some circles encouraged, for several years, the timing of the announcement comes as Wal-Mart has never looked stronger. The company is on track to generate record sales of $400 billion and profits of roughly $13.6 billion this year, while many other retailers are expected to report declining sales and profits amid a worldwide slowdown in consumer spending.
And Lee Scott deserves the credit for that. His tenure was marred early on by investors who were dissatisfied with a deteriorating financial performance, organized opponents who effectively called attention to the company’s every flaw and a stagnant stock price. It has only been in the last two years, following a radical transformation of the company’s senior leadership and strategies, that an improved performance has begun to generate shareholder value.
Wal-Mart chairman Rob Walton sought to explain the executive changes in an e-mail distributed to employees that Friday morning. “This is a big day for us, and some of you might be wondering why we are making the change at this time,” Walton said in the e-mail. “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.’
“We think the right time is now, a time of strength and momentum for our company,” continued Walton. “As you know, our customers are relying on us more than ever in the current economic environment, and we are well-positioned to serve them now and in the future. Our management team is strong. Our strategy is sound and Mike has been actively involved in developing and executing this strategy.”
Scott may be stepping down, but he won’t be a stranger at Wal-Mart’s home office. He will continue to serve as a board member and as chairman of the board’s executive committee. He also will be employed by the company through Jan. 31, 2011.
In conjunction with Duke’s appointment, Wal-Mart elevated U.S. stores division president and ceo Eduardo Castro-Wright to the role of vice chairman and gave him added responsibility for global procurement.“ Eduardo Castro-Wright has a history of delivering results for our company,” Walton said. “As president of Walmart U.S., Eduardo has a vision for our brand and has built a strong team of senior leaders who have led the business to its current market-leading performance. We believe his international experience will also help drive success in our global procurement organization.”
These recent changes are certain to set off a series of additional personnel moves among other senior executives, with the most significant move coming in the international area. Duke was previously responsible for Wal-Mart’s $100 billion international division, and his successor will be named before the end of the fiscal year.
Although only 59, Scott’s retirement announcement can hardly be viewed as a surprise, given that he has telegraphed the move on several occasions and openly addressed the issue of retirement at the company’s 2006 shareholders meeting. In the spring of that year, Scott took an unusual one-month vacation and left then vice chairman Mike Duke and former vice chairman John Menzer in charge. News of the situation prompted retirement speculation that he sought to quell before shareholders.
“I hope to be here for a good long run,” Scott said in June 2006. “That was my deal with Mr. Walton. He would give me a month and I would give him several years.”
Two and half years, to be more precise.