Next Wal-Mart CEO faces challenges Sam Walton never saw

As Wal-Mart Stores Inc. prepares to anoint the fifth chief executive in its history, the world’s largest retailer is grappling with challenges founder Sam Walton never faced.

Wal-Mart’s board has identified international chief Doug McMillon, 46, and Bill Simon, 53, who runs the U.S. operations, as leading candidates to succeed Chief Executive Officer Mike Duke, according to a person familiar with the situation. While Duke, 63, isn’t expected to step down immediately, Wal-Mart may name his successor in the coming months, said the person, who asked not to be identified because the matter is private.

Wal-Mart is trying to goose slowing sales gains in the U.S. as such rivals as Inc. and the dollar stores lure its customers. Overseas, the company is struggling to ignite growth in China and other emerging markets even as it probes allegations of bribery in Mexico and possible violations of the Foreign Corrupt Practices Act.

The next CEO will face “tough decisions globally,” said David Strasser, a New York-based analyst for Janney Montgomery Scott LLC. “They have to pick and choose. China has been a big struggle. What do you do? Double down? Back out?”

In the U.S. “they’re dealing with a more competitive landscape and a consumer who is struggling,” he said.

Since Sam Walton stepped down in 1988, the company has looked inside for its CEO. Duke and his predecessors -- Lee Scott and David Glass -- all were insiders with years of experience at the company before taking over the top job. Duke was named CEO of the world’s largest retailer in November 2008 and didn’t formally take the reins until Feb. 1, 2009.

Succession Timing

“There are rumors and speculation about our company all the time and we just don’t comment on them,” David Tovar, a Wal-Mart spokesman, said in a telephone interview. He declined to comment on succession timing.

McMillon, who has been at Wal-Mart since starting as a summer worker in 1984, is close to the Walton family, three other people said. Simon joined Wal-Mart in 2006, after working in the food and beverages industry.

“Bill Simon has proven he’s done a really good job running the U.S. business; he righted the ship,” Strasser said. “It’s been tough with the low-end consumer. He could’ve been better driving sales but it’s on a good trajectory.”

Still, Simon lacks international experience, and Wal-Mart considers that a “growth area,” he said.

McMillon’s standing with the Waltons combined with his international experience could give him an edge with the board, said Jay Lorsch, a professor at Harvard Business School, which is based in Boston.

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