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Thu July 24, 2014
Business

4 Theories About Why Wal-Mart Changed Its U.S. Chief

Originally published on Thu July 24, 2014 4:23 pm

Bill Simon, head of Wal-Mart's U.S. division, is leaving the retail giant, the company said Thursday.

Any major shake-up at Wal-Mart is closely watched because the company is so important — it tops the Fortune 500 list with annual sales approaching a half-trillion dollars. So lots of people are speculating about what Simon's departure really means. Here are some theories:

The Simplest Explanation

Simon was a top candidate to become the chief executive after the previous CEO, Michael Duke, retired. But in February, Doug McMillon stepped into that job.

Wal-Mart spokesman David Tovar has been telling reporters that it's "not unusual" for one executive to leave when passed over for the top spot. Simon himself said in a statement: "This felt like the right time to move on and focus on my next opportunity."

So this may be a routine career move. Nothing to see here; please move along.

The Small-Store Explanation

Charles Fishman, author of The Wal-Mart Effect, says Simon may have been pushed out in favor of someone who's better at operating small-format stores.

Wal-Mart's shift to smaller grocery and convenience-type stores has been dramatic. This year — for the first time ever — the company will open more small stores, i.e., those with less than 40,000 square feet, than superstores, with 200,000 square feet.

As that trend accelerates, Wal-Mart wants Greg Foran, who was head of Wal-Mart Asia, to run its U.S. operations. Before coming to Wal-Mart, he worked for Woolworths Ltd. in Australia. So Foran has overseen stores of varying sizes, Fishman notes.

Fishman says the smaller-store trend is here to stay because so many Wal-Mart customers have complained, "It takes me too long to walk from my car." When customers see a superstore these days, many think, "It's just too big," he says.

At Wal-Mart, "they clearly were looking for fresh eyes" that could see stores the way today's customers do, he says.

The Five-Failed-Quarters Explanation

At Wal-Mart, U.S. same-store sales have declined for five straight quarters. Simon himself admitted in a recent Reuters interview that sales were not improving, blaming the still-tough job market.

"It's really hard to see in our business today ... that it's gotten any better," he said.

A can't-do attitude is rarely welcome in corporate America, where executives are expected to spur growth even through hard times.

So Simon may have doomed himself by sounding too down in the Reuters interview. Brian Sozzi, founder of Belus Capital Advisors, put it this way: "That is a no-no, perhaps a final straw in light of poor management of the business during his tenure."

The Time-For-A-Fresh-Face Explanation

Wal-Mart, which has a lot of low-wage positions among its 1.3 million U.S. workers, has been hit with protests by union-backed groups. Polling suggests the focus on Wal-Mart's reputation for low wages may have dinged its image with some consumers.

And some investors also have gotten tired of Wal-Mart's lackluster stock performance.

So maybe it was just time for a change. Sandy Skrovan, research director at Planet Retail, wrote that to get moving again, Wal-Mart "is definitely open to bringing in fresh blood and new thinking."

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