story by Kim Souza and Michael Tilley
Editor's note: Story updated with opinions from Wal-Mart watchers and with other changes throughout.
Walmart U.S. CEO Bill Simon is stepping down after more than four years in the job and eight years with Wal-Mart. Greg Foran, 53, was named the new Walmart U.S. CEO and the transition is effective Aug. 9.
A company statement issued early Thursday (July 24) credited Simon with leading a turnaround that “reinvigorated the company’s focus on everyday low costs, everyday low prices and an increased product assortment.” Simon was also a leader in the effort by Wal-Mart to hire more veterans and to buy more goods made in America.
“During Bill’s eight years of service to Walmart, his passion for our mission, dedication to our associates and our customers, and innovative thinking pushed us forward,” Wal-Mart Stores CEO Doug McMillon said in the statement. “From the very beginning, his vision led us to lower the cost of health care through our $4 prescription offering. And, most recently, he put us on a path to future growth with small formats and efforts that integrate digital and physical retail.”
Simon and McMillon, 47, were the top choices for succession prior to Mike Duke stepping down as Wal-Mart CEO on Feb. 1. McMillon was eventually selected to lead the global retail operation based in Bentonville. Simon will remain as a consultant for six months to "ensure a seamless transition," according to Wal-Mart.
Wal-Mart spokesman David Tovar told the media on Thursday (July 24) that it was a mutual decision, and said Simon "is leaving on good terms."
“When someone else gets (the job) out of two candidates, it's not unexpected when the other person leaves to go do something else," said Tovar.
He said McMillon had "a number of conversations" with Simon about “the right time to leave," as he wanted to stay on through a transition period, which will give him time to "figure out his next challenge.”
“It’s been an honor to work for Walmart over the past eight years, and this felt like the right time to move on and focus on my next opportunity,” Simon said in the statement. “I look forward to helping the company as much as I can over the next six months.”
Simon leaves with a retirement package worth roughly $9 million in compensation and stock awards, including a $4.5 million payment to be paid in installments through July 2016. He will earn about $300,000 as a consultant through the holiday season. Wal-Mart has a strict noncompete agreement that should keep Simon from seeking work with a competitor for two years.
NOTES ON FORAN
Foran joined the company in October 2011 and became President and CEO of Walmart China in March 2012. Prior to Walmart, Foran held a number of roles with Woolworths, the leading retailer in Australia and New Zealand. He served as the managing director of supermarkets, liquor and petrol with responsibility for more than $40 billion in sales at that time. Foran also served as general manager of Big W, Woolworth’s industry leading discount store business and as general manager of Dick Smith Electronics. He has 35 years of retail experience.
“I’ve worked closely with Greg for the past few years and I’ve seen firsthand his passion for retail. I’m confident that Greg’s strong leadership skills and alignment with our culture will serve our customers and associates well,” McMillon said.
Foran said he is eager to address the changing nature of the retail business.
“Being asked to lead the Walmart U.S. business is a privilege that I don’t take lightly,” said Foran. “I am excited to get started. The needs of our customers are changing dramatically and we have an enormous opportunity to serve them in new and different ways. We must be fierce advocates for our customers, work meticulously to exceed their expectations and earn their trust every day.”
Foran will receive a salary of $950,000, along with a bonus incentive plan earning him as much as 300% of that pay, or about $2.9 million. He also is eligible for an annual equity award with a target value of about $4.9 million, plus $1.63 million in restricted shares, and a $500,000 one-time cash payment, according a contract filed with the Securities and Exchange Commission.
While it may not be a surprise Simon is leaving, the timing and the naming of Greg Foran as his replacement have some analysts scratching their heads. Belus Capital Advisors’ Brian Sozzi calls the timing of Wal-Mart’s move “odd.”
“The move to replace Bill Simon as Walmart U.S. President and CEO comes at a very, very odd time. However, if one is good at putting puzzles together, then the reasons why the change is happening two weeks before earnings are obvious,” Sozzi noted.
Sozzi said the recent earnings warning that Simon disclosed on July 9 in a Reuters interview may not have been a popular action within the company and with institutional investors.
“That is a no-no, perhaps a final straw in light of poor management of the business during his tenure,” he noted, adding that same-store sales have fallen for five consecutive quarters and inventories are building.
He said the decision to replace a high-ranking leader of a major retailer before back-to-school and ahead of the holidays is no laughing matter. Sozzi also said the timing “speaks volumes as to the current trends in the U.S. business.”
Simon is credited with the company’s small-store expansion which began late last year in an attempt to grow U.S. sales that had been lost Dollar General and other convenience formats. Analysts applauded the retailer’s focus on small formats but often questioned Wal-Mart about over-saturation possibilities, to which Wal-Mart said it is not concerned.
Gene Hoffman, president of of Corporate Strategies International, said Foran must now transform a stale operation.
“Walmart's U.S. operation's appeal has aged. Its pricing is no longer overwhelming. New ideas and breakthrough concepts are needed,” Hoffman wrote. “Greg Foran has been handed staleness, which I believe is the greatest challenge facing him as the new leader. And his greatest opportunities lie creating new beginnings just as Sam Walton did in 1962.”
Jason Long, CEO of Shift Marketing Group, said his initial thought on the transition was that Simon’s recent signal regarding next quarter’s earnings being soft may have sealed his fate.
“Doug McMillon’s on the clock to turn comp sales around and he can’t do it without a growing U.S. market. He needs to act with a sense of urgency and this could have been a step in that direction,” Long said.
David Stasser, a retail analyst with Janney Capital Markets, said Foran is “a strong leader with retail expertise to take control of this U.S. business,” but expressed concern about his lack of U.S. experience while at Walmart.
Other experts see no problem with the timing or change in leadership at Walmart U.S.
“It’s no shock Bill Simon is leaving after not getting the lead role when Mike Duke stepped down as Walmart CEO last year,” noted Sandy Skrovan, U.S. research director at Planet Retail. “This move demonstrates that Walmart will not rest on its laurels and is definitely open to bringing in fresh blood and new thinking.”
Carol Spieckerman, CEO of NewMarketBuilders, said the timing of the transition makes sense on a number of levels.
“Walmart’s lagging U.S. sales would seem to present an obvious justification for a changing of the guard, but I see it more as a positive, future-seeking move. Walmart is aggressively rolling out small formats and fine-tuning its next-stage, digitally-integrated supply chain efficiencies. Thanks to its aggressive approach to acquisitions, it is also in an exciting and continuous test-and-learn cycle on the digital side of the business,” Spieckerman told The City Wire.
She said the move also combines the global retail experiences of Foran and McMillon. McMillon was head of international operations at Wal-Mart prior to being named corporate CEO.
“Mr. Foran is a terrific choice at this point since so many of these new initiatives either borrow from international markets or are critical to the success of Walmart’s global omnichannel ecosystem. His understanding of global retail dynamics is right for the times and his ascension, along with Doug McMillon’s, speaks to the importance of having a global perspective in today’s retail world,” Spieckerman added.
Spieckerman also said Simon’s six-month consulting role at Walmart, paired with the non-compete agreement, ensures he won’t land at a competing retailer in the near future – an important factor consider the number of executive level openings in retail.
Spieckerman said given the pace of retail change, it will be fascinating to see where and if Simon resurfaces, or if he will parlay his experience into a non-retail opportunity in the meantime.
Long, with Shift Marketing, also said Walmart may not be the end of Simon’s retail career.
“He’s only 54 years old and leaves with his reputation largely intact. He’ll get a nice severance package, and after his reported two-year non-compete is up, can resurface for the next chapter in his retail career,” Long said.