Wal-Mart Names Michael Duke to Succeed Lee Scott as New CEO

November 21, 2008

michael-duke-walmart-CEO.jpgWal-Mart Stores Inc., the world’s largest retailer, unexpectedly
announced Friday that its chief executive will 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 U.S., and analysts say the decision to
tap an international executive serves as a testament that the company
sees its future growth oversees.

Bentonville, Ark.-based Wal-Mart said Mike Duke, 58, vice chairman
of its international division, will take the reins from Lee Scott, 59,
effective Feb. 1. Duke also becomes a member of the board of directors

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.

During his tenure, Scott faced increasing scrutiny from union-backed
groups over issues from environmental concerns to wages and health
care, 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.

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 2007, Wal-Mart’s shares
have made a remarkable comeback and its image has improved as the
company made changes in environmental sustainability and other areas.

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.”

“We think the right time is now, a time of strength and momentum for
the company,” Tovar told The Associated Press. “Our strategy is sound,
and Mike has been integrally involved in developing and executing the

He added, “with all of this in mind, Lee decided the time was right for him to retire and approached the board about doing so.”

Wal-Mart shares were flat at $50.66 as investors considered the news.

Some analysts found the timing puzzling, while others said the
change may be necessary to put a new face on the company to deal with a
new U.S. government.

“The thing is, Wal-Mart is doing well, so why change now, especially as
we head into a long recession?” said Gerard Roche, senior chairman of
executive recruiter Heidrick & Struggles International. “We are
facing a critical holiday season when maximum leadership is called

Burt P. Flickinger III, managing director of Strategic Resource
Group, said the shift doesn’t signal a no-confidence vote in Scott. But
he believes the company may need to make a change to work with
President-elect Barack Obama, who has pushed for the passage of the
Free Choice Act, which makes it easier to unionize workers.

Wal-Mart has lobbied hard against the legislation, which is expected
to be taken up by the new House as early as January and could be up for
a vote in the Senate by February. Scott told investors in October that
he believes 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 to find
solutions to the big economic challenges. Scott noted to investors
during a pre-recorded call on Nov. 13 that Obama is “already laying out
long-term steps that are designed to help the middle class,” moves that
would “put more money in the pockets of our customers.”

David Nassar, director of the union-backed group Wal-Mart Watch _
which has been pushing for Wal-Mart to make changes to its business
practices _ said he did not think the change could be divorced from the
broader political backdrop.

“Mike Duke as the new chief executive officer must be viewed in the
context of the recent election,” he added. “It represents an
opportunity for Wal-Mart to change from the low-wage, low-benefit
business model to one that will be more appealing to an Obama

The change is also a testament to the importance of Wal-Mart’s
international operations for the company’s growth. The international
business is its fastest-growing division, and profit rose 11 percent
during the quarter, while U.S. profit rose 7 percent. Last month, the
company announced that it’s shifting more of its focus over the next
five years away from mature markets and to emerging markets like Brazil
and India to drive sales.

Duke, who joined the company in 1995 and has served in posts including
president and chief executive of the Wal-Mart Stores division in the
U.S., “understands retail and appreciates the complex global
environment in which we operate,” said Rob Walton, Wal-Mart’s chairman.

Before joining Wal-Mart, Duke was an executive at Federated
Department Stores and May Department Stores, which are now known as
Macy’s Inc., for 23 years.

Wal-Mart also announced that Eduardo Castro-Wright, 53, was promoted
to vice chairman, and cited his international experience. He will take
over the company’s global procurement operation, adding to his current
titles of president and chief executive of Walmart U.S.

Source: Washington Post

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