1st year ends in applause for CEO

Wal-Mart head sees stock rising

Wal-Mart Stores Inc. President and CEO Doug McMillon
Wal-Mart Stores Inc. President and CEO Doug McMillon

With video cameras rolling and an audience of company insiders and outside partners looking on, new Wal-Mart Stores Inc. President and CEO Doug McMillon took center stage at a sustainability forum in February 2014.

"Give me a 'W!' Give me an 'A!,'" McMillon shouted, leading those who gathered at Wal-Mart's home office in the traditional Wal-Mart cheer. Founder Sam Walton often opened meetings with the enthusiastic call and response.

"Hopefully that got a little bit of energy going with you," McMillon said as he opened one of his first public appearances as head of the $473 billion company. "It's always risky to be in the job that I'm in and try to do the cheer. I'm always worried that I'm going to mess it up. I'm glad to have that over with."

McMillon's cheerleading attempt, like the actions taken in his first year at the helm of the world's largest retailer, seemed to be well-received. Today marks the one-year anniversary of McMillon as CEO and his efforts to focus on technology, customer experience and concerns of workers appeared to strike a chord with investors, employees, analysts and others.

Even some detractors seem willing to give McMillon the benefit of the doubt -- if not outright praise -- after his first year. McMillon's opening 365 days were largely spent evaluating operations home and abroad, making executive-level changes and steering the company toward innovation with what he described as a "merchant's" mentality.

McMillon, Wal-Mart's youngest CEO since Walton, was not available "at this time" for an interview to discuss his first year, the company said. Financial results inched up in the third quarter and Wal-Mart stock eclipsed $90 during the past year as the company continues to look for creative ways to blend its digital and physical assets.

"He's doing the right things," senior analyst Brian Yarbrough at financial services firm Edward Jones said. "He's bringing some momentum and excitement back. He's not just doing the status quo. That's good. Is it all enough to move the needle and really get things going? I feel like Wal-Mart is under siege from competitors across the board, whether it's online or in stores. Can they continue to grow? It will be interesting to see."

McMillon took over a company that had been struggling to grow same-store sales in the United States and continues to evaluate where its vast resources are best used internationally. Wal-Mart's fourth quarter ended on Saturday and the company is set to release its fiscal year 2015 financial results on Feb 19.

During its third-quarter earnings call in November the retailer reported its first same-store sales growth at U.S. stores in seven quarters. Net sales increased 2.8 percent domestically in the third quarter, while global eCommerce improved 21 percent. Sam's Club sales were up 2.3 percent and Wal-Mart International saw an increase of 1.7 percent.

McMillon's first year included surprise visits to some of the company's 11,000 stores worldwide. He was looking to get a better sense of where the company could improve at the store level, but also evaluated its executive ranks.

Greg Foran was named president and CEO of Wal-Mart U.S., the company's largest division, in August. Judith McKenna was named chief operating officer in December. David Cheesewright was named Wal-Mart International CEO, replacing McMillon, in December 2013. An internal memo from Foran detailed "Walmart U.S. leadership changes" at the senior vice-president level.

"Anytime you shake up the management structure, it's going to lead to some revival," said Randy Koontz, first vice president of investments for Pinnacle Wealth Management of Raymond James & Associates Inc. in Rogers. "It's not unusual for a new CEO to come in and put his people in place."

In addition to replacing executives McMillon also spent time refocusing the company's priorities.

Wal-Mart announced during an October meeting with investors that the company was scaling back some plans for physical store growth, while increasing the amount it was investing in e-commerce.

A plan that once called for up to 34 million additional square feet of worldwide retail space was scaled back to between 26 million and 30 million. Capital spending for e-commerce was increased to $1.5 billion and comes with the division expected to increase sales as much as 40 percent by 2018.

"Our responsibility is to connect customers with products," McMillon said during last year's World Economic Summit. "How we do that, the speed with which we do it, the price at which we do it, is all going to change a lot in the future."

A redesign of Walmart.com was rolled out in 2014 and included features like an increase in personalized content for shoppers. An online rebate program -- Savings Catcher -- was implemented and during the holiday retail season Wal-Mart made upgrades to its website and mobile offerings.

Wal-Mart continues to test grocery delivery and pick-up concepts and other innovations as it battles in-store competitors like Target or Costco and online retailers like Amazon.

Stephens retail analyst John R. Lawrence said the speed with which Wal-Mart can implement those innovations will be critical. Analyzing where money is being spent and some of the concepts unveiled in the United States make it clear, Lawrence said, that the company wants to be on the cutting edge.

"Whether those make money is hard to say, but the point you have to realize is that there is a lot in development," Lawrence said. "And he's talked about when things are successful, there is going to be speed to action. Speed is going to be part of the action plan."

Blending traditional customer service with online offerings will ultimately be McMillon's legacy, company observers said. McMillon and the company made enough strides there in 2014 that it is clear where the new CEO is focusing the most energy and increased capital.

"Doug has said that brick and mortar is critically important, but his legacy is going to be built on being successful online," said Field Agent co-founder Henry Ho. "He is going to be known for and judged on his ability to take Wal-Mart into this online and mobile space. As a fairly young CEO he's got a lot of room to make an impact and he's got the resources of the world's largest corporation behind him."

ASSOCIATE CEO

McMillon has an eye to the future, but as that Wal-Mart cheer showed last February, he has made no secret of his history with the company. He began his career with Wal-Mart in 1984 as a summer distribution center worker and has been described by board chairman Rob Walton as "an associate CEO."

During his first year McMillon talked about improving conditions for workers, including wages. Wal-Mart is expected to announce a plan during the first quarter of its upcoming fiscal year that will get the remaining 6,000 hourly workers at the federal minimum wage a higher salary. It is unclear how that expense will impact the company's bottom line, but analysts said if nothing else the move is a public-relations win.

McMillon earned additional goodwill with the rank and file when he appeared at his first Wal-Mart Shareholder's meeting in June when he held an impromptu Q&A with workers on the Bud Walton Arena concourse. McMillon asked "What could we do better?" and listened to feedback from employees, including members of OUR Walmart (Organization United for Respect at Wal-Mart), a group funded by the United Food and Commercial Workers Union.

OUR Walmart member Barbara Gertz, an overnight stocker in a Colorado store, was in Fayetteville for the annual meeting. Gertz has been with Wal-Mart for six years and says that the things she has heard in McMillon's first year have been encouraging.

"I think I speak for most of our members in saying we were very hopefully when McMillon came in," Gertz said. "We realize he had a hot mess to deal with. We'd have liked to see bigger changes come quicker. I don't think our execs and board members are at an income level that they understand the urgency of the changes that need to happen. We do hold out hope McMillon will put them at the top of his priority list."

McMillon's history with the company is helping build goodwill and also seems to be informing his decisions in a positive way, Koontz said.

"Doug's got some credibility with the hourly workers because he's viewed as one of them, albeit 30 years and $40 or $50 million ago," Koontz said. "He's got something you can't buy or get a degree in. He's got roots.

"Right now he looks like the total package of a manager who has credibility with workers, good public relations skills and ideas of how to make things better."

SundayMonday Business on 02/01/2015

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