In a surprising move, Walmart (NYSE:WMT) said after hours on Thursday that Greg Foran, the CEO of Walmart U.S., would be resigning to become CEO of Air New Zealand.
The New Zealander had served as the chief of Walmart's U.S. stores for five years, driving a turnaround in the segment's performance as well as 20 consecutive quarters of same-store sales growth. That growth is a major reason why Walmart shares have doubled since 2015. The U.S. segment makes up a majority of the company's revenue and, in fact, would be the biggest company in the U.S. by revenue if it were a stand-alone business.
Foran's leadership helped to eliminate stock-outs, streamline inventory, improve customer service, and focus on its online grocery juggernaut. However, in recent months, he clashed with e-commerce chief Marc Lore on multiple occasions over strategy. It's unclear if that conflict led to his departure, but it may have played a role.
Big shoes to fill
Walmart has tapped John Furner, the current Sam's Club's CEO, to replace Foran. Furner will step into the role Nov. 1, just ahead of the start of the holiday shopping season. Foran will remain with the company until Jan. 31, 2020, to guide the transition.
Like Walmart CEO Doug McMillon, Furner is a career-long Walmart employee who has served as a manager at various levels and as an executive with Walmart U.S., Walmart China, and Sam's Club. Introducing Furner, McMillon said: "He has the experience and judgment to know what we should continue doing and what we should change. He embraces technology and new ways of working, and he keeps our customers and Sam's Club members at the center of everything we do while delivering results for the business."
Not only does Furner have a big job in replacing Foran and steering a consumer staples business that does more than $300 billion in annual sales, but Furner also comes to Walmart at a time when its omnichannel strategy appears to be at a turning point.
Last week, Walmart agreed to sell ModCloth, probably for less than it bought it for, just two years after it acquired the online women's clothing retailer. According to The Wall Street Journal, Walmart is also laying off a few dozen employees at Bonobos, an online men's clothing retailer it also acquired in 2017. Meanwhile, the company is seeking a buyer for Jetblack, its high-end personal shopping service that is, according to The Journal, losing $15,000 per member annually.
Rift with Lore
In recent months, Foran was in the news mostly because of his repeated clashes with Walmart's U.S. e-commerce chief Marc Lore, whom the company brought on when it acquired Jet.com for $3.3 billion in 2016.
At Recode's recent CodeCommerce conference, Lore acknowledged "frustration and tension" between the e-commerce business, which has been losing money, and the stores, which are the company's profit center but also a business that needs to change to deal with the threat from Amazon.com and the rise of e-commerce.
Vox earlier reported that Walmart's e-commerce business is on track for losses of over $1 billion this year, leading to one source of the tension between the company's online and offline divisions. Meanwhile, some reports have indicated that Lore is considering leaving the company, though he has denied the rumors.
Though Walmart's stock price is at an all-time high and its financial performance remains strong, the company is at a strategic crossroads: It needs to figure out the best way to invest and grow its e-commerce business to compete with Amazon while not depriving its stores of needed resources, or sinking the bottom line too much.
Foran's departure could be a temporary setback, but it also offers a chance for the company to reset this strategy and, more importantly, for Lore to build a strong relationship with Furner so Walmart's stores and e-commerce businesses can work together rather than focusing on different goals.
There's no question that the online grocery initiative has been a success, but the company can only rely on its expansion for the next year or two before it's already added grocery pickup stations to nearly all of its stores. Finding that next major growth driver will be the most important challenge for Furner, Lore, and McMillon over the coming years.