Foran pick to lead Walmart U.S. scrutinized, other exec moves expected

by The City Wire staff ([email protected]) 174 views 

Wal-Mart’s decision to promote Greg Foran to CEO of Walmart U.S. was a surprising move to analysts given Foran does not have the U.S. retail experience that other execs within the company possess.

The retail giant passed over Duncan Mac Naughton, who has overseen U.S. merchandising for Walmart since 2010 and has more than three decades of experience in U.S. retail. Rosalind Brewer, CEO of Sam’s Club, also has U.S. retail experience dating back to 2006.

When a company chooses a successor for a top job, those who were deemed in the tournament running are apt to leave the company soon after a decision is made, according to Alan Ellstrand, professor at the University of Arkansas. Ellstrand’s expertise is in top management teams and corporate governance.

His comment was made last week following the resignation of Bill Simon as CEO of Walmart U.S., noting that Simon was passed over for the top CEO job going to Doug McMillon. Other Wal-Mart watchers and insiders now predict this could soon be the case for Mac Naughton.

"In our view, this choice presents a substantial learning curve and showcases a clear change in direction of the division, for him to successfully bypass all of Bill's lieutenants such as Chief Merchandising Officer, Duncan Mac Naughton,” Deutsche Bank analyst Paul Trussell wrote in a research note.

Given that Foran was just promoted to head of Asia less than three months ago, Faye Landes, analyst with Cowen & Co., said this implies that the most recent move was not in the works at that point.

“We will probably never know the backstory on this —  it seems likely that the company knew or at least strongly suspected that Simon would leave, but maybe they originally had someone else in mind as head of U.S," Landes added.

Ellstrand said when Jack Welch stepped down from General Electric in 2001 there were a number of well-qualified people in the running for the position. But soon after Jeffery Immelt was chosen, the others exited the company.

“It’s usually better for both parties, when this happens because that person passed over can’t help but feel that the company is going in a different direction,” Ellstrand said.

Not everyone believes there will be more changes at Wal-Mart under the direction of Foran. Budd Bugatch, analyst with Raymond James & Associates, notes that Wal-Mart’s mission under Doug McMillon’s leadership has been to right the ship.

“Wal-Mart’s prescription is pretty much the same across the world with their everyday low cost, low price policy. They really live that, and I think that’s one reason why they feel comfortable bringing Foran in to run the U.S. business,” Bugatch said.

Carol Spieckerman, CEO of NewMarketBuilders, said Wal-Mart is not the first U.S.-based retailer to tap a global executive to run its business.

“One of the more high-profile examples of a global executive taking the helm of a U.S.-based retailer is Hubert Joly, who at this point appears to be executing quite an impressive turnaround at Best Buy,” Spieckerman said.

She also notes that it hasn’t been that long ago that Wal-Mart was considered an end-of-career move, but more recently the retail giant has emerged as a talent incubator.

“I can’t remember when Walmart has had such a well-rounded stable of executive talent among its ranks and, although it’s a nice problem to have in retail, not all of those executives can count on enjoying a continual upward career trajectory within Walmart. Even those who may be in line for ongoing taps may get itchy, particularly given the number of high-visibility openings that exist in retail right now,” Spieckerman said.

Competitors Target and Dollar General are each in the market for a new CEO.

“Duncan Mac Naughton and others have a real shot at boosting their careers elsewhere and no doubt Walmart has anticipated a degree of executive attrition,” Spieckerman said.