15792 Fri, 12/19/2008 - 11:55am
By Barbara Thau
Wal-Mart’s appointment of Mike Duke as its new leader signals a heightened focus on the company’s next big growth vehicle: the international market.
Beyond steering the international business with a sure hand as vice chairman of Wal-Mart International, Duke brings to the chief executive officer spot wide-ranging retail experience, analysts said.
On Feb. 1, Duke will become CEO of the world’s biggest retailer, succeeding longtime CEO Lee Scott. Analysts don’t expect sweeping changes at Wal-Mart under Duke’s leadership as the company has been firing on all cylinders lately—Wal-Mart has been one of the few retailers to eke out comparable-store sales gains during this economic crisis. But they do expect Wal-Mart’s $100 billion international arm to now take center stage.
“The company’s fundamental momentum should ensure a smooth leadership transition as Mike Duke will inherit a firm in its sweet spot, focusing on price when price matters,” said Adrianne Shapira, Goldman Sachs analyst, in a research note.
Scott is “handing off Wal-Mart when the management team and company are operating strongly,” echoed Deborah Weinswig, Citigroup retail analyst, in a research note.
But with Duke at the helm, Wal-Mart will have a very different public face.
Scott could be described as a charismatic extrovert with a bit of a swagger. By contrast, Duke is a low-key manager who has stayed largely under the radar during his 13 years with Wal-Mart, analysts said.
Duke is “no nonsense, he’s not a high-profile guy,” Joseph Feldman, managing director of Telsey Advisory Group, told HFN.
“He’s more of an introvert,” added Craig Johnson, president of Customer Growth Partners, a retail consultancy.
Under Duke’s watch, the international division has become the fastest-growing part of Wal-Mart’s business. And he has shepherded its expansion into mature and emerging markets.
Wal-Mart has earmarked its global arm to be the key growth engine in the years to come.
At Wal-Mart International, Duke “put a lot of the right people in the right places,” Johnson said.
For one, Duke named Vicente Trius to head up Wal-Mart Brazil, a business “that has been a home run.”
And he has deftly managed the complex challenges associated with the Asian business, he said.
“He’s fixing Japan, cranking up growth in China, and getting Bharti [Wal-Mart’s joint venture in India] up and running.”
What’s more, Duke is the best man to steer the company as it goes up against the rise of Tesco—the U.K. supermarket giant that recently entered the U.S. market with its Fresh & Easy format—and Wal-Mart’s biggest global competitor, Johnson said.
“The other reason they made Duke CEO is that Tesco is Wal-Mart’s number-one competition, it’s not Target,” he said.
While Target only competes with Wal-Mart in the U.S. market, Tesco competes with them in a dozen countries. and Asda [Wal-Mart’s British chain] has been outcompeting Tesco in its own backyard in the U.K.”
Tesco has also expanded into non-food categories, such as home, with a variety of different formats.
Analysts said Duke will leverage his broad-based retailing experience in his new role.
Wal-Mart’s signature management tact is to rotate its executives throughout various departments so that they get exposure to all facets of the business, and Duke is a product of that strategy.
Since joining Wal-Mart in 1995, he’s lead the logistics, distribution and administrative divisions, and has headed up the U.S. operations. As vice chairman, he oversaw the redesign of merchandise distribution systems and the recruitment of management teams.
“We see in Mike Duke a capable executive, who knows the firm inside and out having served in leadership roles across logistics, distribution, Wal-Mart U.S. and international,” Shapira said.
Duke also brings merchandising experience from outside the Wal-Mart bubble, Feldman said.
Before joining Wal-Mart, Duke spent 23 years with Federated Department Stores, now Macy’s, and the former May Department Stores.
Analysts expect Duke to take a hands-off approach to the U.S. business. That’s because Eduardo Castro-Wright, president and CEO of Wal-Mart U.S., has turned that business around. After Wal-Mart’s ill-fated upscale push, Castro-Wright orchestrated the retailer’s about-face back to its low-price roots, fixing former problem areas, such as home.
“Eduardo is doing a great job,” Johnson said. “I don’t think Duke will be making a lot of changes at the domestic company.”
However, a key domestic labor issue could fall into Duke’s lap as President-elect Barack Obama has supported the passage of the Free Choice Act, legislation that paves the way for the unionization of workers, Feldman said. And it’s no secret that Wal-Mart is historically anti-union.