Wal-Mart’s Grocery Division Undergoes Another Management Shift

Grocery is a business of thin margins but it is about 56% of Wal-Mart’s total annual U.S. sales. Getting it right is of the upmost importance to Walmart U.S. CEO Greg Foran who continues to shift his grocery management team.

Jack Sinclair, 54, who has run the grocery division for Walmart U.S. since he joined the retailer in 2007, will exit the company March 20 in what is reported as a retirement.

The retailer also created a new California-based position for 46-year-old Tony Airoso, a senior vice president, who was responsible for managing dairy and fresh-food strategy since 2013. Airoso will now assume the role of senior vice president of global food sourcing. He is fluent in Spanish and formerly lived and worked in South America.

Airoso joined Walmart U.S. in 2006 from Albertsons. For seven years Airoso was a divisional merchandising manager in the fresh and dairy categories. He takes credit for growing market share and margin between 2009 and 2011. His other accomplishments include reducing milk and eggs costs by more than $560 million by leveraging scale and supply chain efficiencies, according to a personal background on Airoso’s LinkedIn page.

Wal-Mart declined to provide comment regarding Sinclair’s retirement or Airoso’s promotion that was announced privately to employees March 13 in an internal corporate memo recently obtained by The City Wire.

Sinclair marks the fourth senior level departure since CEO Doug McMillon took the helm in February 2014. Roughly a dozen other merchandising management changes have been announced recently via promotions or reassignments under Foran who was handpicked by McMillon to drive more sales in the U.S. division.

Sinclair takes with him 33 years of experience in the grocery business having come up through the ranks at Tesco and Safeway PLC as well as Shoppers Paradise in the United Kingdom. During his tenure at Walmart U.S. his responsibility as executive vice president for grocery was handing all aspects of grocery merchandising for more than 4,000 U.S. stores. Under his watch Walmart’s U.S. grocery sales rose 39% from $112.56 billion in 2008 to $156.46 billion in 2014.

Chuck Tilmon, now a vice president in global food sourcing, will be vice president of fresh charter initiatives, which focuses on improved performance in fresh merchandise, according to the March 13 memo. This announcement comes on the heels of three new U.S. positions created by Foran in December. The new posts and persons were:

• Meat Czar: Scott Neal
• Senior vice president of Fresh: Shawn Baldwin
• Senior vice president of Private Brands: Jack Pestello

Foran told analysts in October that he planned to address meat quality, improve the fresh business, expand private label, clean up cluttered stores, rightsize staffing, improve customer service and ultimately drive more top line sales revenue, an edict he received from McMillon.

ANALYSTS’ REACTION
Most analysts applaud Foran’s focus on improving the grocery experience given the retailer is investing heavily in Neighborhood Market stores this year and next.

“Food is a big part of what Wal-Mart has become,” said Brian Yarbrough, an analyst at Edward Jones in St. Louis. “It is a big traffic driver and getting it right could help overall sales.”

The retailer’s grocery business has struggled with quality concerns, a reduction in food-stamp benefits and rising supply costs and occasional food safety scandals from Asian-based suppliers, according to Zack’s Equity Research.

“We are positive on the company’s efforts on improving grocery offerings, the current scenario is alarming for its investors. Wal-Mart expects fiscal 2016 sales growth in the range of 1% to 2% as was announced during fourth quarter fiscal 2015 conference call. This was however lower than 2% to 4% growth expected during the October 2014 investor conference,” noted Zack’s.

Carol Spieckerman, CEO of newmarketbuilders.com, said that organizational restructurings will be an ongoing reality in retail for several years as retailers seek to become more agile and address the needs of shoppers in the future.

“At the same time, grocery is key to driving trip frequency and loyalty right now so it makes sense that Wal-Mart and others are increasing scrutiny there,” she said.

For instance, Spieckerman said Target’s announcement that it also would double down on grocery came in the wake of more than 1,700 corporate layoffs. She says this one-two punch of restructuring and zooming in on grocery is becoming a pattern.

“Foran made it clear from the beginning that he will focus on mastering black and tackle basics and eliminating unforced errors. Grocery could be considered a ‘core basic’ for Wal-Mart and as such, little room can be left for error there, particularly as competitors both digital and physical relentlessly attack the category,” she said.

SERVICE, WAGES
Another area Foran must tackle is the customer service doled out by those on the frontline in stores around the country. Lisa Pietro, a produce handler with Walmart in Winter Haven, Fla., recently told The City Wire that corporate rhetoric in past two years about improving “fresh” produce, which was to include more training for handlers in conjunction with the money-back guarantee was more talk than action.

Pietro said she was one of just three handlers in her store that was open 24 hours a day. She said the training consisted of computer modules which no one in her department had time to watch.

Wal-Mart has repeatedly said it is addressing short labor levels and is adding more hours and raising starting pay to $9 per hour this spring. Foran has vowed to look closely at this issue noting that it takes times to fix.

Spieckerman gives Wal-Mart a favorable nod saying the retailer “must build an effective management and process scaffolding first,” knowing full well that it also “needs to improve training and front-line tactics.”