Bentonville, AR, October 3, 2005--Wal-Mart said on Friday that the heads of its U.S. and international operations would switch roles as the world's biggest retailer struggles to boost sluggish sales growth at home and abroad.
John Menzer, who had headed Wal-Mart International, will take over major functions of the U.S. business, and Mike Duke, chief executive of the U.S. Wal-Mart Stores division, will run Wal-Mart International.
Both men were also promoted to the post of vice chairman -- a title that was previously held by Tom Coughlin, whom Wal-Mart now accuses of misappropriating company funds.
"John Menzer is one of the strongest executives in the upper ranks of management," Emme Kozloff, retail analyst with Sanford Bernstein, said in a note to clients.
Kozloff said the changes were a major step in the right direction as the retailer tries to recover from a series of problems including what she called the "Coughlin debacle" as well as a slew of high-profile lawsuits.
The moves come as Wal-Mart tries to revive sales growth at the U.S. Wal-Mart stores division, by far its largest unit. At the same time, Wal-Mart's international business -- its fastest-growing division -- has turned in disappointing results in key markets including Britain.
In August, Wal-Mart reported its smallest quarterly profit gain in four years as rising oil prices curbed consumer spending and drove up costs. Its U.S. division missed its sales target for the second straight quarter.
Wal-Mart spokeswoman Sarah Clark declined to say whether the management moves were specifically tied to the sales stumbles, but said the "timing was right to make the change."
"It's not a surprise that our sales performance this year is not exactly where we want it to be," she said in a telephone interview. "We hope these changes will provide an opportunity to boost performance."
In addition, Wal-Mart said Eduardo Castro-Wright, chief operating officer of the U.S. Wal-Mart Stores unit, was named president and CEO of that division, reporting to Menzer.
"We see this as a positive and a necessity given that the scope and complexity of Wal-Mart's U.S. business is too broad for a single executive to oversee anymore," Kozloff said.
Menzer spent six years in Wal-Mart's international operations and oversaw huge expansion in countries including Japan and Brazil. His primary focus now will be on boosting sales growth at the U.S. stores, where Wal-Mart faces intense competition from rivals including Target Corp. (NYSE:TGT - News).
One of Wal-Mart's key strategies for reviving U.S. sales is to add more upscale clothing and housewares in the hope of enticing shoppers who buy food at Wal-Mart but look elsewhere for fashionable goods.
Target's sales at stores open at least a year -- a key retail measure known as same-store sales -- have been growing faster than Wal-Mart's in recent quarters, in part because of demand for its trendy but affordable merchandise.
Wall Street has rewarded Target with a higher valuation. Its shares trade at about 17 times analysts' profit forecasts for the next fiscal year, compared with 14.5 for Wal-Mart.
As part of efforts to improve apparel sales, Wal-Mart plans to promote its George line, which is the No. 1 clothing brand in Britain but not widely known in the United States. Menzer knows that brand well: he once boasted at a Wal-Mart annual meeting that his entire outfit -- from his suit down to his socks -- came from the George line.
For Duke, who worked in Wal-Mart's logistics division before moving to the U.S. stores operation, the challenge will be to restore growth at Britain's Asda chain, where a weak retail market and stiff competition from Tesco Plc (London:TSCO.L - News) have hurt sales and profits.
