Change Comes to Wal-Mart

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Change is in the air these days, and Wal-Mart (NYSE: WMT) is apparently no different, given a surprising announcement today. CEO H. Lee Scott, who has headed up the company for almost nine years, plans to retire. I guess it's a better time to say "so long" than when the behemoth retailer was in the doldrums -- lately, Wal-Mart has been firing on all cylinders, so Scott can leave while it's all on a roll.

Scott will leave on Feb. 1, 2009, when the company's fiscal year ends. He will be replaced by Mike Duke, who is currently CEO of Wal-Mart's international segment. Interestingly enough, both guys are about the same age. (Scott is 59, Duke is 58.)

Duke's coming in at an interesting time. Although Wal-Mart, like fellow discounter Costco (Nasdaq: COST), has proven a bright spot in these tough economic times, it recently indicated that it may not be bulletproof -- or recession-proof -- as consumers struggle with their budgets.

Meanwhile, although it's been much easier to lure customers focused on cost-cutting these days, one can only hope Wal-Mart won't lose sight of the importance of protecting its brand while not seeming to do its business in a thuggish manner, which has often been a problem in the past.

Wal-Mart recently said that it's joining up with Duke Energy (NYSE: DUK) to use wind power to power some stores, so hopefully it will continue to look at new ideas. Plus, with the new Democratic administration coming in, an increase in the power and influence of unions could really present a challenge for Wal-Mart in the coming years.

Wal-Mart's not alone in switching CEOs: Last spring, rival Target (NYSE: TGT) handed the reins from Bob Ulrich to Gregg Steinhafel, another company long-termer. Interestingly enough, though, Target's been a bit of a disappointment in the otherwise thriving discount-retail niche.

Changes in management at publicly traded companies are more significant in some cases than in others. (Look at the crazy gyrations in Apple's (Nasdaq: AAPL) stock price whenever any wacky rumor circulates about Steve Jobs' health and well-being.)

Clearly, though, change is coming to Wal-Mart. In the past, the company has often been one of my less favorite retail names, primarily because of how it treats workers and suppliers (despite my admission that tough times made its stock more attractive, and did they ever). If Wal-Mart can continue to make good changes, any market share it steals during the recession might stick. I'd say Mr. Duke definitely has some challenges ahead.

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Wal-Mart Stores is a Motley Fool Inside Value selection. Costco Wholesale and Apple are Motley Fool Stock Advisor recommendations. Duke Energy is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 24, 2008, at 1:23 PM, kmacattack wrote:

    As a long term shareholder of Wal Mart, I was not unhappy to hear about Lee Scott's "retirement". From 1977 until 1992, I worked as a District Sales Manager for a major appliance distributor in Northeastern Oklahoma and Northwest Arkansas. I have seen Wal Mart grow from a bunch of small-town based variety stores into the mega-retailer of today on a first-hand basis. I almost feel guilty as a stockholder, though, because of the heavy-handed manner in which Wal-Mart treats employees . At every opportunity I ask employees about their treatment, wages and benefits, etc. and the general impression is that most employees are not all that thrilled about their job or their company. Most disturbing to me is the corporate policy which encourages profitable vendors which manufacture goods in the US to move their production to overseas.

    I have purchased 4 items at 4 different stores in the last year which were obviously used merchandise returned as defective and were placed back on the store shelves for resale, including a $150 air compressor, two Wagner "paint sticks", which were missing critical parts, and a car jack. These used items were the only ones placed on the shelf , so I was forced to buy them. In the case of the air compressor, the store had a back stock of at least 6 more in the warehouse, and, after an hour wait, I was provided with a replacement, which broke within 6 months. The common denominator is that all of the products were made in China. Remember the "Bringin' it home to the USA" slogan?

    If it is ever re-run, you should watch the documentary on CNBC about Wal-Mart, which I thought was more than fair in its treatment of the company and only scratched the surface regarding questionable business practices, destroying small town America, lowering the standard of living, etc.

    A good start for Wal Mart would be a strong labor union for their employees. Next, the company needs to revisit their corporate policy of forcing prices down, no matter what the cost to our nation, its work force, and consumers. A $150 compressor which is junk in less than a year is no bargain. I would much rather pay $200 for an American made product which will last 15 years.

  • Report this Comment On November 27, 2008, at 9:51 PM, tbirmingham wrote:

    I have been employed by Wal-Mart for 6 plus years and I am getting tired of hearing how "Heavy Handed" they are with us. This has not been my experience. Wal-Mart has treated my with respect and has paid me a good wage. If you have not worked for this company and your only knowledge is second hand please withold your neg. comments

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