Walmart: Perspective, please Premium

Reaction to new chief has been as underwhelming as the shares have been underperforming

The stock price says the new boss is a lot like the old boss – who was nothing special.

Walmart announced on Monday that Doug McMillon, chief of its international operations, would succeed Mike Duke as the company’s chief executive, the shares responded with a 0.8 per cent gain. Fair enough: Mr Duke’s departure was expected and Mr McMillon was one of the frontrunners. But the limp response is dispiriting in the context of the underperformance of the shares since Mr Duke took charge in 2009: they have been beaten by the S&P 500, big-box rival Target and, even, the grocery chain Kroger.

That reflects, in part, three charges against Walmart. Its international efforts have been helter-skelter and, as a result, growth is slowing and a serious bribery scandal is unfolding in Mexico. Cost-cutting efforts are proceeding slowly. And adaptation to new trends in retail, most importantly ecommerce and smaller-format stores, has been slow.

The charges are, to a degree, true. But perspective is required. On the shares: choose a longer time period and Walmart’s performance looks much better. The stock was a rock during the crash. Operationally, 2013 has been rough, as US same-store sales growth has shifted into reverse and international growth has slumped. But Walmart has nearly half a trillion dollars in annual sales and $200bn in assets. Inevitably it is slow to adapt and its growth, measured in percentages, has limits. But it remains an awesome economic machine. In the five years before this one, the company added, on average, $18bn in sales each year (Amazon? $9bn). It has kept margins stable despite having a best-price strategy in increasingly competitive markets. Mr McMillon is now the most important merchant in the world. If he can tackle the big issues head-on, Walmart’s stock price will start telling a different story.

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