The Supply Side: Walmart CEO says company ‘just getting started’ with changes

Walmart CEO Doug McMillon, 58, has logged 40 years in the retail business, spending the past decade at the helm of the global retail and technology company. He is the fifth CEO in the company’s 62-year history and said the late David Glass is his mentor and role model.

“More than anyone else in the company, I have aspired to be more like David Glass,” he said during a recent Morgan Stanley event. “His wisdom, his kindness and his willingness to take risks were amazing. … In 1996 David was heavily criticized in the media because he was taking the company from a discount store business into grocery, while he was expanding Sam’s Club and going into international at the same time. The media said with Sam’s passing, that David was making a ton of mistakes that could sink the company. But those risks paved the way for where Walmart is today,” McMillon said.

Glass was hailed as a transformational leader who served as Walmart CEO for 12 years — 1988 to 2000. Glass ushered in the supercenter format and transformed the distribution network. He grew the company from $16 billion when he took over to more than $160 billion when he retired. That growth rate of 75% annually for 12 years will likely never be topped. Walmart’s market cap grew 15.5% annually for 12 years.

McMillon is also seen as a transformational CEO trying to position Walmart for the next 60 years. Some of the risks McMillon has taken in his tenure include billions of dollars invested in people, training and technology. The investments took time to pay off — and some areas have yet to turn a profit — and came at the expense of shorter-term profits. He said at the Morgan Stanley event that it’s not always possible to get everything right at the same time, but there is strength in Sam’s Club, International and U.S. operations.

“It feels to me like we have made progress, and yet we are still getting started. We have changed the way we think and our way of working. … Our business is different today. Yes, we are running good stores, but the way we are doing it gives me optimism that we can deliver not only for the next few years but also over the long term. The inside of the company has changed, we are literally people led and we have some talented folks, but also technology is changing the way we operate and empowering Walmart for tomorrow,” he said.

McMillon is credited with bringing in good merchants like Greg Foran, the New Zealander who ran U.S. stores between 2014 and 2019. Foran cleaned up the stores, found efficiencies and grew the U.S. business while also supporting higher wages and training academies for hourly employees. Judith McKenna came from Walmart’s ASDA business in the United Kingdom and served as chief merchandising officer under Foran. McKenna would lead the international division through its right-sizing efforts before retiring earlier this year. Grocery pickup expanded exponentially during Foran and McKenna’s reign. Foran returned to New Zealand in 2019 to become the CEO of New Zealand Airlines.

Under McMillon, Walmart reduced its international footprint divesting businesses in Brazil, the United Kingdom, Argentina and Japan. McMillon said he wrestled with the decision to exit the countries because Walmart did not have a give-up mindset. But once the decision was made to exit the businesses, more oxygen was breathed into the remaining assets. He said the countries that Walmart exited were slower growing and had their own internal challenges.

Walmart instead looked to India and acquired a majority stake in Flipkart for $3.5 billion. That business continues to grow and has spun off a secondary business known as Phone Pe. McMillon said the two companies will go public when the time is right, but for now they are growing and sharing data insights across the global enterprise.

Early in McMillon’s tenure, he made another risky move with a $3 billion investment to acquire Jet.com and hire its CEO Marc Lore. McMillon said Walmart needed to think more like a digital company, and Lore helped foster that mindset. There were more than a half dozen other small acquisitions under Lore’s direction to try and grow Walmart’s e-commerce business. McMillon admits some of that period was painful for profits, but the lessons learned were valuable. Most of those businesses were sold off, and Lore exited in early 2021 after just four years on the job.

McMillon also made the tough decision to unify the online and in-store merchandising teams under Walmart U.S. CEO John Furner. The businesses had existed in separate silos. But with growing demands by shoppers to get products online or in stores, the consolidation was made in an effort to bring efficiencies to the operation. Walmart also expanded its online pickup and delivery programs which proved invaluable during the pandemic.

Walmart is now growing its global online sales through the marketplace and its own operation. Online sales have grown from $25.1 billion in 2019 to more than $100 billion in the recent fiscal year. McMillon said the retailer is just getting started, equating it to the second inning of a nine-inning game.

The online marketplace for third-party sellers, which also stood up under McMillon’s tenure, grew 50% over the past year and has 150,000 active sellers, according to the recent earnings report. He said this part of the business has potential because of add-on services like fulfillment, data insights and advertising to generate more revenue.

Other business units like Walmart Connect, the advertising platform, generated $3.7 billion in sales last year and has grown by double-digits in each quarter so far this year. This revenue is considered a key contributor to Walmart’s overall revenue growth. This business is still in its infancy but had 6% of all U.S. retail media spend last year. The recent $2.3 billion acquisition of VIZIO and its SmartCast platform is expected to give Walmart Connect additional ways for advertisers to reach customers at scale.

McMillon also oversaw the Walmart+ membership program, which is growing but not nearly fast enough, according to the retail veteran. He recently said Walmart is not interested in releasing membership data because the program is just a small piece of what the retail giant is doing to make shopping more convenient and prices more affordable.

Under McMillon, Walmart has grown revenue by $171 billion over the past 10 years to $648.12 billion last year. Walmart’s market cap has grown from $276.8 billion to $534.23 billion a decade later, resulting in annual growth of 8.9%. As of Dec. 5, Walmart’s market cap was valued at $766.93 billion, up 43% this fiscal year.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by Firebend.