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November 21, 2008

In the Spotlight – Mike Duke, Wal-Mart

This week has seen two major appointments shake the food retail landscape. Just days after Carrefour named a new CEO, arch-rival Wal-Mart looked within and appointed Mike Duke, the head of its international operations, to the top job. Dean Best reports.

By Dean Best

This week has seen two major appointments shake the food retail landscape. Just days after Carrefour named a new CEO, arch-rival Wal-Mart looked within and appointed Mike Duke, the head of its international operations, to the top job. Dean Best reports. 


It’s all change at grocery retail’s top table.


Just days after Carrefour, the world’s second-largest food retailer, appointed Nestle veteran Lars Olofsson as its new CEO, larger rival Wal-Mart said today (21 November) that it too would soon see a new man in the hot seat.


The US retail titan has named Mike Duke, the head of its international operations, as its new president and CEO. Duke, 58, will take up his new roles in February, replacing Lee Scott, who has spent nine years in charge of the company.


The market seems to back the move, with shares in Wal-Mart rising in early trading.


The appointment comes at a time of strength for Wal-Mart, which has benefited as the economic downturn has hit consumer spending in a number of its markets, not just in the US.


At home, Wal-Mart has seen sales grow faster than a number of its rivals as US consumers are lured by its low prices. The company may have indicated that it will cut capital spending in the US next year as the recession bites but it is likely it will continue to benefit from consumers’ greater desire for value well into next year.


Wal-Mart’s international business, however, has outpaced the growth of at home. Underlying income from its businesses outside the US jumped 15.1% during the first nine months of the year – against a 9.3% rise in income from its US stores. Wal-Mart’s international sales climbed 16.5% – twice the growth it generated in the US, where sales rose 7.1%.


Duke has spent the last three years running Wal-Mart International, which, as a stand-alone business, is expected to see sales reach almost $100bn this year. Wal-Mart’s operations reach 14 markets outside the US, from well-established subsidiaries like the UK’s Asda to fledgling operations in markets like India.


Duke’s appointment to the top job is a further sign that Wal-Mart is looking to increase its focus on its international businesses, particularly in more buoyant markets. Last month, Duke told analysts and investors that the retailer would look to spend more on faster-growing emerging markets.


“There will be some shift in our capital allocation for the next five years,”  Duke said. “In the last five years, two thirds of our capital went into the mature markets. You will see in the next five years more of a shift towards the emerging markets of the world. Those markets like Brazil that we’re really pleased with, and markets like China.”


One market likely to be high on Duke’s list of priorities is one in which Wal-Mart is not even present yet – Russia. Speculation has long swirled about Wal-Mart ambitions in Russia and, although the company has yet to make its move, it is unlikely to wait too much longer – especially given that two months ago arch-rival Carrefour announced plans to set up shop in the market.


That said, Wal-Mart faces fierce competition at home. Notwithstanding the pressure of dealing with a downturn in consumer spending, the retailer has had to face the entry of Tesco in its own backyard. Wal-Mart’s launch of its own small-format Marketside stores last month signalled that the retailer is ready to battle for the growing number of US consumers looking to convenience retailing.


It seems, then, that Duke, a graduate in industrial engineering, will have plenty of work to do to keep the Wal-Mart juggernaut firing on all cylinders.

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