Last updated: November 21, 2008 9:30 pm

Wal-Mart’s new chief

The impact of a change at the top should not be overstated. A new face leading a vast organisation has about the same short-term effect as repainting the headquarters a different shade of beige. This is particularly the case for big, defensive retailers. Without the swings of the business cycle to move things along, genuine shifts in profitability or market share unfold over the course of many years.

Wal-Mart is a case in point. The world’s largest retailer made the surprise announcement on Friday that chief executive Lee Scott would stand down in February after eight years at the top and three decades with the company. Mike Duke, head of international operations, will become only the fourth Wal-Mart CEO in the group’s history.

The very fact that the move can take place in the midst of a financial crisis and recession illustrates the retailer’s solidity. Two years ago, there had been rumblings of discontent from investors. Wal-Mart’s major period of expansion took place in the 1990s under the guidance of David Glass and saw its share price move from $10 in 1995 to touch $69 briefly at the turn of the century. It has tracked sideways since but found favour this year as American consumers became ever more cost-conscious and as the rest of the market tanked.

So there is little broken that Mr Duke needs to fix. The company’s recent decision to move investment from the US to international markets now looks prescient. The three-year plan to improve the domestic business (that produces four-fifths of turnover) is in the capable hands of Eduardo Castro-Wright. The main challenge will be to continue the role as the public face of Wal-Mart practised by his predecessor. Appeasing unions and environmentalists while preaching a message of sustainability from atop a large and aggressive retailer requires the diplomatic skills of a prince. This duke must rise to the task.

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