January 31, 2007
Exec Changes Coming Fast and Furious at Wal-Mart
It’s getting to the point where a scorecard is going to be needed to keep track of who is moving up, over or out of the executive suites at Wal-Mart.
Soon to be announced changes, according to an Advertising Age report, involve Eduardo Castro-Wright, CEO of Wal-Mart Stores in the U.S., and Doug McMillon, CEO of Sam’s Club.
Mr. Castro-Wright is expected to be move to an international post while Mr. McMillon will take over at Wal-Mart Stores here. Pat Curran, executive VP-store operations of Wal-Mart Stores, is considered a likely candidate to replace Mr. McMillon at Sam’s.
According to Ad Age, “It’s not clear how high up the management changes will ultimately go. The level of Mr. Castro-Wright’s new post isn’t clear, and if it involves succeeding Mike Duke, vice chairman of Wal-Mart International, that could entail a bigger change among the company’s top three leaders, who also include CEO Lee Scott and John Menzer, vice chairman of the U.S. business.”
Discussion Questions: What do all the many changes at Wal-Mart say about the state of management at the company? Is the company scrambling to “fix things” or are the moves simply a case of putting the right people in place to more smoothly move the company to the next level of its development?
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Clearly, Wal-Mart had a tough year last year on many, many fronts. I assume these moves are an attempt to stabilize the ship before the water gets any choppier.
Some perspective on bad years.
Ford…had a bad year with a $12 billion loss slashing over 30,000 jobs.
I think Ford would trade Wal-Mart’s “we-could-have-done-better” year with theirs in a heartbeat.
A couple years of sluggish stock prices and experimenting with new ideas that don’t pan out is nothing new for the company and will not be the last. Same goes for changing up the management team.
Approximately a year ago WM engaged in a repositioning of its brand. The goal, as I understood it, was to increase sales in specific categories (primarily soft goods) with customers already shopping but only in limited ways (primarily high end electronics and hard goods). This has been erroneously labeled as “going after the Target customer.” Many initiatives were put in place to support this repositioning. Advertising messages changed, new brands (Metro 7) were created, in-store merchandising was changed, new trend positions created…etc. The immediate result was not an increase in comp store sales. In fact, many of these new lines of merchandise performed below expectation, and were specifically identified as contributors to poor overall performance. The CMO was fired, and the ad agency changed. WM will not be a part of Fashion Week this year, and there’s no Vogue spread I know of. 4th quarter saw a resurrection of the “low prices” message, and an abandonment of the brand lifestyle approach.
The question to ask is whether the executive changes are a retrenchment to core WM merchandising and brand positioning, or if some sort of mid point is going to be achieved. The concern, from my perspective, is that there is a great deal of evidence to support the tactics WM took over the past year. What seems to be out of balance is the expectation regarding how quickly these efforts were going to pay off.
Brand repositioning takes time. WM did it right: they invested in educating the public, they did high profile things to get attention, they made an impact. Along with that, they had merchandise on the floor which they thought supported that effort. All good. However, it takes time for all that advertising and PR to create a change in consumer behavior on a scale sufficient to make the new merchandise assortments “successful.” Success might have needed a new definition. If the average sell through in apparel was 80%, I’d have been happy with 50% for the new lines. Why? Because it takes time to lure that customer to a product area they are pre-programmed to avoid. Not just “not shop” but actively avoid. This type of consumer behavior shift is extraordinarily difficult to achieve, and takes time.
Perhaps in executing the strategy mistakes were made. Perhaps WM went too far in one direction. Perhaps they bought too much of the new stuff, and featured it too prominently.
My hope is that the executive changes will not represent a complete abandonment of the previous year’s strategy, but rather a blending of the old and the new.
John Fleming and Eduardo Castillo are extraordinary merchants, and very, very bright people. I sincerely hope that the internal culture and expectation set allow each of them the space and time to be successful…however that word gets defined.
The execs in charge at Wal-Mart now were not direct hires by Sam and do not have Sam’s same singleness of vision. That was evident in the problems last year. Hopefully, these management moves will result in a singleness of vision–whether it is Sam’s or not.
Wal-Mart is not a retailer, but a distribution company. This is the reason behind its success and now, its challenges. Many consumers who can pay more avoid Wal-Mart because of its chaotic environment; and consumers who cannot pay more have (in the recent past) had less money to spend at Wal-Mart because of rising prices (fuel, interest rates, etc.)
New thinking at the top is what is required in order for Wal-Mart to move beyond its current position in the marketplace. “Everyday low prices…” may not–in and of itself–be enough anymore.
Ummmm…years of a flat stock price and significantly diminishing same store sales growth will cause lots of things to happen in the exec suite.
I think some of the comments so far don’t seem to reflect the Wall Steet reality, and Wall Street reality drives executive decisions–almost exclusively these days.
If you have purchased Wal-Mart stock in the past 5 years or so, you are unhappy. You are even more unhappy of late, with same stores sales actually declining in a few monthly cases. In 2002, Wal-Mart’s stock went over $60. It has gone down and nowhere since, and is now at $47 and change. Large mutual and pension funds are not happy, as you would not be, losing 25% of your investment.
The company was given some slack for a while, but with the recent much lower growth numbers, that patience is running out. CEO Lee Scott’s job is simply on the line. Before something happens there, as many think likely, he will makes some moves to buy some time and see if it works.
I think Wal-Mart is a great company and is mostly a victim of its own size. But don’t underestimate the dynamics there right now in terms of stock performance. There is great and growing pressure on the company to move the stock price.
This is what I would expect from Wal-Mart; taking quick and decisive action when there is a problem or opportunity. I have never known them to be timid or afraid to take whatever action they felt was required. And if this doesn’t correct things, I would expect more changes until things are on the right track again. As has been pointed out, they didn’t get to their present position with poor or indecisive management.
The long term success of Wal-Mart has come from opportunistic bold moves. True, they had some jolts in the last two years and have had to make some adjustments, but they can cope with uncertainty and ambiguity. They never check their brains at the door, so I’m inclined to believe that the moves mentioned are to put the right people in the right places to cope with the vicissitudes they face moving more smoothly.
For years, Wal-Mart appeared (to the outside world and the investment community) to enjoy remarkably stable management with clearly defined succession plans and opportunities for advancement. The changes that have happened during the last few months (and after the tough year by Wal-Mart standards) seem to be a crack in the facade. I imagine that the board and senior management of the company are scrutinizing the performance of everyone from the CEO down, to ensure a quick turnaround and to identify once and for all the next generation of leaders.
Short-term, the rapid changes at the senior levels of the company run the risk of adding a level of uncertainty to the middle-management “troops” as well as the ability to recruit from the outside…and “uncertainty” is not a word you usually associate with Wal-Mart.
Wal-Mart is driven to achieve, so why not change the lineup? Only time will tell whether the changes are a good fit. Wal-Mart should be praised for their willingness to be flexible.
Wal-Mart did not get to be a world power by having bad management. Obviously they have always been well managed. Despite the criticisms and weak stock price, Wal-Mart is growing at an annual rate that is almost the entire size of their biggest competitors. They are just putting the right people in the right spot. I think they will still put on a front for the public view as being diverse and politically correct, but in the boardroom it will be back to the hardball basics.
The thing that differentiates WM from the rest of their competitors is that they are singularly focused on Wal-Mart…period. It is a unique position to be in, whether one considers them as a distribution company or a retailer.
Why we read about them and talk about them every day isn’t simply because they are the leader. It is because they work more differently and more diligently than any other retailer or distributor in the marketplace, to expand the gap between them and anyone else.
They continue to work faster and without fear of failure than anyone to expand their share in the market and expand what they capture of each consumers wallet. They keenly realize that to achieve their growth they not only need to capture new consumers but also they absolutely must capture more dollars from the wallet of their existing customers.
We need to be careful at what can be interpreted as a “bad year” for Wal-Mart. We might keep in mind that no other retailer or distributor even comes close to half of $351.3 billion per year. (SuperMarketNews)
If any other retailer or distributor achieved half their diligence and singleness of focus on their vision as Wal-Mart, they might be amazed at the results.
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Clearly, Wal-Mart had a tough year last year on many, many fronts. I assume these moves are an attempt to stabilize the ship before the water gets any choppier.
Some perspective on bad years.
Ford…had a bad year with a $12 billion loss slashing over 30,000 jobs.
I think Ford would trade Wal-Mart’s “we-could-have-done-better” year with theirs in a heartbeat.
A couple years of sluggish stock prices and experimenting with new ideas that don’t pan out is nothing new for the company and will not be the last. Same goes for changing up the management team.
Approximately a year ago WM engaged in a repositioning of its brand. The goal, as I understood it, was to increase sales in specific categories (primarily soft goods) with customers already shopping but only in limited ways (primarily high end electronics and hard goods). This has been erroneously labeled as “going after the Target customer.” Many initiatives were put in place to support this repositioning. Advertising messages changed, new brands (Metro 7) were created, in-store merchandising was changed, new trend positions created…etc. The immediate result was not an increase in comp store sales. In fact, many of these new lines of merchandise performed below expectation, and were specifically identified as contributors to poor overall performance. The CMO was fired, and the ad agency changed. WM will not be a part of Fashion Week this year, and there’s no Vogue spread I know of. 4th quarter saw a resurrection of the “low prices” message, and an abandonment of the brand lifestyle approach.
The question to ask is whether the executive changes are a retrenchment to core WM merchandising and brand positioning, or if some sort of mid point is going to be achieved. The concern, from my perspective, is that there is a great deal of evidence to support the tactics WM took over the past year. What seems to be out of balance is the expectation regarding how quickly these efforts were going to pay off.
Brand repositioning takes time. WM did it right: they invested in educating the public, they did high profile things to get attention, they made an impact. Along with that, they had merchandise on the floor which they thought supported that effort. All good. However, it takes time for all that advertising and PR to create a change in consumer behavior on a scale sufficient to make the new merchandise assortments “successful.” Success might have needed a new definition. If the average sell through in apparel was 80%, I’d have been happy with 50% for the new lines. Why? Because it takes time to lure that customer to a product area they are pre-programmed to avoid. Not just “not shop” but actively avoid. This type of consumer behavior shift is extraordinarily difficult to achieve, and takes time.
Perhaps in executing the strategy mistakes were made. Perhaps WM went too far in one direction. Perhaps they bought too much of the new stuff, and featured it too prominently.
My hope is that the executive changes will not represent a complete abandonment of the previous year’s strategy, but rather a blending of the old and the new.
John Fleming and Eduardo Castillo are extraordinary merchants, and very, very bright people. I sincerely hope that the internal culture and expectation set allow each of them the space and time to be successful…however that word gets defined.
The execs in charge at Wal-Mart now were not direct hires by Sam and do not have Sam’s same singleness of vision. That was evident in the problems last year. Hopefully, these management moves will result in a singleness of vision–whether it is Sam’s or not.
Wal-Mart is not a retailer, but a distribution company. This is the reason behind its success and now, its challenges. Many consumers who can pay more avoid Wal-Mart because of its chaotic environment; and consumers who cannot pay more have (in the recent past) had less money to spend at Wal-Mart because of rising prices (fuel, interest rates, etc.)
New thinking at the top is what is required in order for Wal-Mart to move beyond its current position in the marketplace. “Everyday low prices…” may not–in and of itself–be enough anymore.
Ummmm…years of a flat stock price and significantly diminishing same store sales growth will cause lots of things to happen in the exec suite.
I think some of the comments so far don’t seem to reflect the Wall Steet reality, and Wall Street reality drives executive decisions–almost exclusively these days.
If you have purchased Wal-Mart stock in the past 5 years or so, you are unhappy. You are even more unhappy of late, with same stores sales actually declining in a few monthly cases. In 2002, Wal-Mart’s stock went over $60. It has gone down and nowhere since, and is now at $47 and change. Large mutual and pension funds are not happy, as you would not be, losing 25% of your investment.
The company was given some slack for a while, but with the recent much lower growth numbers, that patience is running out. CEO Lee Scott’s job is simply on the line. Before something happens there, as many think likely, he will makes some moves to buy some time and see if it works.
I think Wal-Mart is a great company and is mostly a victim of its own size. But don’t underestimate the dynamics there right now in terms of stock performance. There is great and growing pressure on the company to move the stock price.
This is what I would expect from Wal-Mart; taking quick and decisive action when there is a problem or opportunity. I have never known them to be timid or afraid to take whatever action they felt was required. And if this doesn’t correct things, I would expect more changes until things are on the right track again. As has been pointed out, they didn’t get to their present position with poor or indecisive management.
The long term success of Wal-Mart has come from opportunistic bold moves. True, they had some jolts in the last two years and have had to make some adjustments, but they can cope with uncertainty and ambiguity. They never check their brains at the door, so I’m inclined to believe that the moves mentioned are to put the right people in the right places to cope with the vicissitudes they face moving more smoothly.
For years, Wal-Mart appeared (to the outside world and the investment community) to enjoy remarkably stable management with clearly defined succession plans and opportunities for advancement. The changes that have happened during the last few months (and after the tough year by Wal-Mart standards) seem to be a crack in the facade. I imagine that the board and senior management of the company are scrutinizing the performance of everyone from the CEO down, to ensure a quick turnaround and to identify once and for all the next generation of leaders.
Short-term, the rapid changes at the senior levels of the company run the risk of adding a level of uncertainty to the middle-management “troops” as well as the ability to recruit from the outside…and “uncertainty” is not a word you usually associate with Wal-Mart.
Wal-Mart is driven to achieve, so why not change the lineup? Only time will tell whether the changes are a good fit. Wal-Mart should be praised for their willingness to be flexible.
Wal-Mart did not get to be a world power by having bad management. Obviously they have always been well managed. Despite the criticisms and weak stock price, Wal-Mart is growing at an annual rate that is almost the entire size of their biggest competitors. They are just putting the right people in the right spot. I think they will still put on a front for the public view as being diverse and politically correct, but in the boardroom it will be back to the hardball basics.
The thing that differentiates WM from the rest of their competitors is that they are singularly focused on Wal-Mart…period. It is a unique position to be in, whether one considers them as a distribution company or a retailer.
Why we read about them and talk about them every day isn’t simply because they are the leader. It is because they work more differently and more diligently than any other retailer or distributor in the marketplace, to expand the gap between them and anyone else.
They continue to work faster and without fear of failure than anyone to expand their share in the market and expand what they capture of each consumers wallet. They keenly realize that to achieve their growth they not only need to capture new consumers but also they absolutely must capture more dollars from the wallet of their existing customers.
We need to be careful at what can be interpreted as a “bad year” for Wal-Mart. We might keep in mind that no other retailer or distributor even comes close to half of $351.3 billion per year. (SuperMarketNews)
If any other retailer or distributor achieved half their diligence and singleness of focus on their vision as Wal-Mart, they might be amazed at the results.