Can Walmart's New U.S. CEO Turn Its Struggling Operation Around?

A blog about business and economics.
July 24 2014 2:49 PM

A Few Weeks Shy of Earnings, Walmart Reshuffles Its U.S. Operations

108190466-bill-simon-president-and-ceo-of-walmart-u-s-speaks
Bill Simon was abruptly removed as president and CEO of Walmart U.S.

Photo by Mark Wilson/Getty Images

Walmart is three weeks away from reporting its second-quarter earnings, but it's not holding back on big announcements. The retailer said today that U.S. chief Bill Simon is out and will be replaced in early August by Greg Foran, the former head of Walmart's Asia division.

The shake-up comes at a "very, very odd time," as Belus Capital Advisors' Brian Sozzi wrote. Companies usually don't make major changes that risk getting investors anxious so close to reporting their quarterly results. But Walmart has been through some tough times recently. Same-store sales have declined in each of the past five quarters. In February, leaked meeting notes revealed that the company was struggling to keep its shelves stocked even as sales growth continued to slow. And just a few weeks ago, Simon set off alarm bells by suggesting in an interview with Reuters that improvements in the labor market were not actually translating to increased consumer spending at Walmart.

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"Bottom line: a decision to replace a high-ranking leader of a major retailer BEFORE back to school and BEFORE holidays is no laughing matter, and speaks volumes as to the current trends in the U.S. business," Sozzi wrote. "At least Walmart will be able to blame Simon for its financial challenges for the remainder of 2014, with Foran looking to pitch a better story to investors in 2015 and at the hoopla filled annual meeting."

That said, it's not as though Walmart has been short on excuses for its shoddy U.S. performance. For the first quarter, Walmart followed the lead of every other business and blamed its poor results on "unseasonably cold and disruptive weather." The quarter before that, Walmart cited cuts to government benefits and higher taxes as tightening its customers' belts. Go back one more and the excuse was a "challenging global economy and negative currency exchange rate fluctuations." If Simon is supposed to be the last in this string of excuses, Foran will presumably be under a lot of pressure to turn Walmart's U.S. operation around.

Foran comes to the U.S. leadership from a brief stint as president and CEO of Walmart Asia. Before that, he headed up Walmart China, where he was credited with improving store operations and making strategic investments in the supply chain, a company release said. Simon, for his part, had worked at Walmart for eight years and will stay on with the company for six months as a consultant during the transition. His retirement package could be worth as much as $9 million.

Alison Griswold is a Slate staff writer covering business and economics.

 

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