Wal-Mart Stores, Inc.
) recently announced the appointment of Doug McMillon as its new
chief executive officer (CEO). McMillon, currently serving as the
head of Walmart International division, will succeed president
and CEO Mike Duke, after he steps down on Feb 1, 2014.
McMillon will join the company's board effective immediately,
whereas Duke will continue to serve as the chairman of the
executive committee of the board and will stay as an advisor to
McMillon for one year. Walmart also plans to announce McMillon's
successor as CEO of Walmart International by the end of the
McMillon, 47, has been associated with the company since 1984
and therefore has an in-depth understanding of the company's
business segments. He also has leadership experience in the
company as he has served as the president and CEO of Walmart's
Sam's Club division for three years.
McMillon, as a CEO, is expected to employ better strategies
according to the changing demand scenario in order to revive the
company, which has been currently struggling with decelerated
growth. Walmart also needs to improve performance in some
overseas markets where it has stumbled.
Walmart has been witnessing sluggish growth in the past few
quarters owing to difficult economic environment and changing
consumer behavior. Weak spending from lower- and middle-income
segment consumers is hurting the company's U.S. comps.
Middle-class consumers are struggling to cope with rising gas
prices, delayed income tax refunds and higher payroll taxes. The
economic strains in the U.S. and abroad are likely to pressurize
its low-income shoppers for the rest of fiscal 2014.
The gloomy consumer spending environment has resulted in weak
quarterly results in all the three quarters of fiscal 2014.
Walmart also lowered its earnings guidance twice for fiscal 2014.
At the same time, Walmart faces fierce competition from online
competitors and dollar chains that offer convenience and lower
In addition, Walmart remains under media scrutiny due to its
size and scale of operations. It faces pressure to further
increase its oversight of factory conditions abroad following a
building collapse in Bangladesh in April and has also been
criticized for its improper treatment of its hourly workers.
Walmart also faces bribery allegations and lobbying charges for
its operations in Mexico, India and Brazil, which has slowed down
its overseas businesses.
Nevertheless, we believe the appointment of a new CEO, its
strong international presence, solid e-commerce business and
company's initiatives to drive holiday season will drive
Walmart's stock going forward.
Walmart carries a Zacks Rank #3 (Hold). Better ranked
Harris Teeter Supermarkets Inc
Big Lots Inc
), all with a Zacks Rank #2 (Buy).
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WAL-MART STORES (WMT): Free Stock Analysis
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