Inside This Issue - Opinion
Itís difficult to ignore McMillon
October 3rd, 2011
by David Pinto, Editor
With Walmart’s domestic business continuing to struggle while its international business flourishes, Doug McMillon is emerging as the logical successor to Mike Duke when he eventually decides to step down as the chief executive officer of the world’s largest retailer.
This is not to imply that Bill Simon, head of Walmart’s domestic business, or Brian Cornell, the man who has brilliantly and imaginatively transformed the retailer’s warehouse club unit into a worthy competitor to Costco, are not viable candidates to succeed Duke. But it’s difficult to ignore McMillon’s contributions to Walmart’s global business.
When McMillon was named to follow Duke as head of Walmart’s international unit in 2009, that business consisted of 3,121 stores in 15 countries that combined to record $98.84 billion in sales. In the fiscal year that ends in less than four months the international unit, now numbering 5,261 stores (as of August 31) of various types, sizes and formats in 27 countries, is projected to chalk up $127 billion in sales. If the international unit were broken out as a separate retailer today, it would rank third among all the world’s retail companies.
Compare that performance with the recent results turned in by Walmart’s domestic unit. Over the last two years sales at the retailer’s U.S. Walmart stores have advanced only marginally, from $255.8 billion to $260.3 billion, while same-store sales have actually declined by 1.8%. Indeed, only the international division, along with the surprisingly strong performance turned in by the impressively rejuvenated Sam’s wholesale club unit, has kept the corporation healthy.
True, there are reasons for the decline in domestic sales that transcend and eclipse any real or perceived deficiencies in management or execution of the U.S. business. Foremost among them is the dismal state of the U.S. economy, and, more specifically, the dire financial situation of many of Walmart’s core customers. Specifically, the core Walmart shopper has less money to spend and, consequently, is making fewer trips to the local Walmart Supercenter or discount store. Then, too, Walmart’s legendary and legendarily successful everyday-low price claim no longer resonates with its core customer with the intensity it once did.
The validity of the EDLP claim has been eroded by both the success of the dollar-store retailers and by the easy access to the Internet that has enabled consumers to quickly and easily compare prices.
Additionally, there are those observers who believe that Walmart did itself no favor by offering to meet, rather than beat, any lower price consumers might find at competing retailers.
Truth is, Walmart’s struggles transcend these issues. The larger truth is that retailing has changed, as it inevitably does over time. Competitors are smarter and more diverse. And, after three decades of trying, many of the better ones have finally learned how to compete with Walmart.
This is not meant to denigrate, downplay or write off the most successful retailer the world has known.
Even now, Walmart’s U.S. stores add more sales in a month than most retailers record in a year — or a lifetime. But decades of unprecedented success have set the bar unrealistically high, higher than even the most ardent Walmart supporters have a right to demand or expect.
So the company has been criticized, often unfairly, for upgrading stores, deleting SKUs, downsizing departments, moving merchandise and doing all manner of tinkering that the customer has never really noticed — much less taken issue with. No, the more tangible issue here is that the customer, offered new opportunities, new choices and a variety of new shopping experiences, has chosen to try them. And Walmart, simply by virtue of its size, has been hurt more dramatically than its competitors.
Which brings us back to Doug McMillon. Impressive as his performance and those of the other individuals who might one day succeed Duke have been, the truth is Walmart’s current chief executive officer has done a good job guiding the company. During a very difficult time for the U.S. economy the retailer has remained very much a viable option for its customers — if no longer the only viable option — because of the job Duke has done in leading it.
However, whenever Duke does decide to step aside, McMillon, based on the success he’s had in effectively handling a variety of difficult assignments at Walmart, and the respect he’s won at all levels and in all corners of the organization, has clearly earned the chance to run the world’s largest company.