BENTONVILLE, Ark. -- Wal-Mart Stores here has reversed the roles of its top domestic and international executives in a move analysts said better aligns their skills with the company's needs but also could cause some disruption entering the critical holiday shopping season.
John Menzer, president and chief executive officer of Wal-Mart International, is taking over operations for Wal-Mart Stores U.S.A. with the title of vice chairman, and Mike Duke, president and CEO of Wal-Mart Stores U.S.A., is taking over international operations, also with the title of vice chairman. Menzer will also continue to oversee global procurement, add strategic planning and benefits oversight and take on other responsibilities formerly held by other executives: logistics from Duke; information services and financial services from Thomas M. Schoewe, executive vice president and chief financial officer; and real estate and store planning from Thomas D. Hyde, executive vice president and corporate secretary. Duke will oversee more than 2,300 stores in nine foreign countries and Puerto Rico.
"The timing and magnitude of these management changes suggest Wal-Mart's turnaround remains in its early stages," said Adrianne Shapira, an analyst with Goldman, Sachs & Co., New York. "While holiday 2005 plans are firmly in place, these major leadership changes will create disruptions, both positive and negative, as new perspectives are brought to the table."
Deborah Weinswig, an analyst with Citigroup, New York, said the switch between Menzer and Duke "should better align management talent and enhance execution at the divisional and company level." She also said of Duke in his new role: "[That role] should leverage his strength in logistics and deepen the company's relationship with its international partners."
In a related change, Eduardo Castro-Wright, executive vice president and chief operating officer of Wal-Mart Stores U.S.A., will succeed Duke as president and CEO of Wal-Mart Stores U.S.A., with responsibilities for operations, merchandising, marketing, specialty divisions and new business developments at discount stores, supercenters and Neighborhood Markets. He was formerly chief operating officer for the Wal-Mart Stores division for the last six months after more than three years overseeing the company's Mexico operations.
Shapira of Goldman Sachs said Castro-Wright's previous success at the company's Mexican operations and recent improvements in the U.S. "suggest he has been a strong agent of change, focusing on cost cutting and in-store execution."
She noted Wal-Mart still has two major executive spots to fill overseeing global procurement and strategic planning, both of which are under Menzer's control. She said global procurement has been "a bright spot for the company's gross margin," adding that Ken Eaton, former senior vice president of global procurement, left Wal-Mart two months ago.
Some industry observers said the shifting of roles for Menzer and Duke may be designed to test their abilities as possible successors to Lee Scott as president and CEO. "The elevation of both Menzer and Duke to vice chairman status suggested the board views these executives as potential successors to Scott," Christine K. Augustine, an analyst with Bear Stearns, New York, said last week.
Shifting executives is standard operating procedure at Wal-Mart, she noted, "and helps develop a deep bench of well-rounded managers."
Duke's extensive background in logistics and distribution "will be important in his new role as head of international," Augustine said, adding that she expects him "to continue developing relationships with family-owned businesses in order to create a pipeline for acquisitions."
Menzer hired Castro-Wright to oversee Wal-Mart's Mexico operations, she added, "and we expect them to work together closely to address the lagging sales and operating profits at Wal-Mart U.S.A. Menzer is widely regarded inside the company as a great strategic thinker, and Castro-Wright [should] focus on execution of that plan."
Wal-Mart also announced another change at its Wal-Mart Stores division last week -- the appointment of Pat Curran, formerly senior vice president and a divisional manager for Wal-Mart U.S.A., as executive vice president for store operations, effectively succeeding Castro-Wright.
