Wal-Mart names new CEO
World's largest retailer says international chief Mike Duke will succeed Lee Scott, who is retiring.
NEW YORK (CNNMoney.com) -- Wal-Mart Stores announced Friday that CEO Lee Scott will retire and the company's board has elected Mike Duke, vice chairman of Wal-Mart International, to succeed him.
The world's No. 1 retailer also said Eduardo Castro-Wright, CEO of Wal-Mart USA, would now also assume the additional role of vice chairman of Wal-Mart Stores.
Scott, who held various positions with Wal-Mart over 30 years before becoming CEO in 1998, will continue serving as chairman of the executive committee of the board.
Duke, 58, joined Wal-Mart in 1995. Prior to heading the retailer's international division, Duke also served as president and CEO of Wal-Mart USA.
Rob Walton, chairman of the Wal-Mart board of directors, said in a statement that the management change occurs "at a time of strength and momentum for Wal-Mart."
"We are confident that the strategy we have in place is the right one for future success and Mike has been actively involved in developing and executing this strategy," he said.
But one retail analyst said he was a little surprised by the timing of the announcement.
"It is a little unexpected because Lee Scott is leaving at a time when Wal-Mart is having its best year," said Burt Flickinger, consultant with Strategic Resources Group.
To his point, in a year that has decimated profits and sales of retailers across the board, Wal-Mart shares are up 6.6% so far.
Wal-Mart, which operates more than 4,100 U.S. stores and 3,100 international locations, is also the top performing stock in the Dow Jones industrial average, and the only Dow component whose shares are up for the year.
And many retail analysts expect Wal-Mart to emerge the biggest winner this holiday shopping season as its low prices and aggressive marketing resonate with budget-conscious shoppers across all income groups.
Still, Flickinger said there have been recent signs that the clock was ticking on Scott's tenure as CEO.
Among them was Scott's unexpectedly long one-month vacation in 2006. At the time, industry watchers said the unusual move perhaps was aimed at testing candidates for the top job during a difficult period when Wal-Mart faced mounting pressure from its critics on its employee benefits and its sales lagged that of rival Target (TGT, Fortune 500).
Over the past decade, Wal-Mart's U.S. sales at stores open at least a year, also known as same-store sales, have decelerated significantly from an 8.7% annual increase in 1998 to a 1.5% gain in 2007.
Same-store sales this year are averaging a 2.8% monthly increase, according to Thomson Reuters.
Since then, Flickinger said Wal-Mart's faced embarrassments such as having to exit from Germany and South Korea, and "Wal-Mart is still losing money in Japan with its Seiyu acquisition."
However, Flickinger did acknowledge that Wal-Mart has been logging some successes under the leadership of Scott, Castro-Wright and Duke.
"The company has fixed its fashion flaws. This is a category that it has failed in for 45 years," he said. "Duke is correcting international mistakes and Castro-Wright has got sales up in the U.S. stores."
Flickinger added that Wal-Mart's board made the right choice in picking Duke over Castro-Wright to succeed Scott.
"Duke's got greater depth and range of experience in running both the international and domestic businesses [for Wal-Mart]," he said.
Additionally, Duke's appointment possibly signals the company's focus going forward on growing its international business to compensate for slowing sales at home.
Joseph Beaulieu, analyst with Morningstar, said he too was surprised by the news.
"But now when I think about it, it's a great time for Scott to exit as CEO." Beaulieu said. "Many of the initiatives Scott out into place are bearing fruit."
He said Wal-Mart is now growing inventory at half the pace of sales growth, and the retailer has also allayed cannibalization concerns while slowing down domestic expansion.`
Where he does disagree with Flickinger's assessment is in the choice of Duke over Castro-Wright to replace Scott.
"I think both men were good choices," Beaulieu said. Having said that, he pointed out that Scott isn't completely out of the picture.