Chapter 1: What challenges did Doug McMillon face when he became Walmart's CEO?
More than a decade ago, Walmart brought on a new CEO. His name was Doug McMillan, and he had his work cut out for him. At the time, Walmart's reputation was in the gutter. Online shopping and Amazon were on the rise, and other retailers like Costco and Discount Grocers were stealing market share. Walmart's future wasn't totally clear. Fast forward to today, and Walmart is doing much better.
And Macmillan set the company on a course to hit a trillion-dollar market cap, which it did just a few days ago. Last month, after 12 years as CEO and more than three decades at the company, Doug Macmillan retired. Our colleague Sarah Nossauer interviewed him before his last day.
35 years. How do you feel?
Emotional, excited, you know, first and foremost. I think the company's in great hands. I don't know what I'm going to do next other than help with Walmart for a while, but we'll figure that out.
Sarah, you spoke to Doug about his tenure at Walmart. What stood out to you about the conversation?
I mean, for me, I've covered Walmart for 10 years, and I felt like he was a little bit more relaxed than he's ever been when I'm talking to him. I guess, you know, we've known each other for a while, but also he probably is on his way out the door and in a little bit of a different headspace than he has been the last 12 years.
So what would you say, like, what defined his tenure here?
I mean, I think now, looking back, what defined his tenure is that he, you know, he did it. Walmart did not succumb to Amazon, you know, in some quick succession of blows, as a lot of people thought a decade ago might happen. Walmart's a lot stronger than when he started.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudson. It's Tuesday, February 10th. Coming up on the show, how Doug McMillan turned Walmart around and what challenges his successor might face. Our colleague Sarah has been covering Walmart almost as long as Macmillan has been CEO.
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Chapter 2: How did Walmart's reputation change during McMillon's tenure?
So I guess to start, will you introduce yourself and tell us how long you've worked at Walmart?
Yeah.
Forever. My name is Doug McMillan. I'm a Walmart associate and I've been around for a long time. I just got my 35-year service award for 35 years of continuous service a few weeks ago.
Okay. And when did you start at Walmart?
Very first time was the summer of 1984, working in a warehouse here in Bentonville.
Why did you apply for that job in the first place?
My dad told me to make some money to pay my way through school. He was a dentist. He moved us here to open a practice and he said, you're gonna pay your own way through school. So in addition to mowing yards, you better get a job. McDonald's, Kraft, Walmart were the three employers of young people here in Bentonville at the time. The Kraft cheese plant didn't call me back.
McDonald's paid 335 and Walmart paid 650. I was very excited to get a job at Walmart.
And this was the summer before you started college?
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Chapter 3: What strategies did McMillon implement to turn Walmart around?
And you know Walmart well enough to know where to go to get those answers. You just go ask the associates. So that's what we did. I traveled around the country and asked our associates what needs to happen. And they said, you need to raise our wages. You need to give us some schedule certainty. You need to get the inventory out of the back room and get back to everyday low price.
We need some department managers back. We need to lower our prices. And so the team and I brought that plan back to our board in 2014 and said, this will work.
For him and executives at the time, the idea was we have to make our stores, like the thing that we have and we make most of our money and profit on, U.S. stores, super centers, we have to make them better. So our workers have to be happier. They have to stick around a little longer. We have to actually invest in the stores.
And if we can get the store operating better, then we can do this online stuff. So he and the company's board decided to invest in worker pay. And there was an announcement just before I started on the beat about, you know, they were going to go up to a minimum of $9 an hour, right, back in 2015. And eventually they would get up to $14, which is where they are today.
But early on, one big investor wasn't sold on the vision. Here's Sarah in her interview with Doug again.
I remember back in 2016, Warren Buffett started to sell his Walmart stock, and I think got out of Walmart by 2018, around there, and got a lot of attention at the time, right? And at the time, you know, Walmart sales were a little less even, and you were just at the beginning of all of these strategy changes. Have you talked to him since recently? Have you gloated to him a little bit?
No, no, I would not do that. That's a funny question though. I like him a lot and have been blessed to spend some time with him. He made time for me to have breakfast with him occasionally and I love that. So when he started selling, it hurt my feelings.
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Chapter 4: How did Walmart adapt to the rise of e-commerce and competition?
But I didn't say anything. We just went about our business and I had confidence that our plan would work. But I finally called him and I said, Warren, I just have to know, is it me? Like, what is this statement? And he basically said, retail is changing so much and e-commerce is the future. And I just don't know what to make of brick and mortar retail anymore.
And the answer that was right along those lines. And I said, well, I respect that. There is a lot of change going on, but we're going to be one of the winners, and I hope to see you soon. And that was the end of that conversation. I've seen him a few times since then, but I would never bring that up. But I wish he'd stayed in, because he would have done well.
That's because McMillan's strategy was working. And once the stores were doing better, Macmillan started focusing on online shopping. And one way he did that was by spending billions of dollars buying two e-commerce startups, one called Flipkart and the other called Jet.com.
That was 2016, the Jet.com acquisition. It was $3.3 billion that they spent, and they put the founder of that company, Mark Lurie, at the head of their US e-commerce operations and brought in a bunch of folks who were Jet employees as executives to run their e-commerce operations.
While Jet itself did not survive in any way, and I think there's a lot of debate about whether or not it made sense to make that acquisition, it's clear that it changed the culture internally. It made it clear that this was a priority. And you did start to see their e-commerce sales grow pretty quickly.
And that also sort of like changed the narrative, right, around like, well, maybe Walmart can grow online. Maybe they are going to actually try to figure this thing out. So that was another important inflection point.
One way Walmart built up its online sales was through groceries.
It's the country's largest grocer. One of the key ways that Walmart grew so fast over the last 10 years is by figuring out how to sell groceries online. Like you can order online and you can pick them up in the parking lot or have them delivered to your home. And you pay the Walmart store price for those groceries. And that has been a massive success.
Right.
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Chapter 5: What impact did raising employee wages have on Walmart's performance?
So Walmart has had some wins. But what's the outlook for Walmart now that Macmillan is leaving?
You know, in some ways, it's a very, very different place. The company has grown online. It's still much smaller than Amazon online, right? But it's grown, and it's grown strongly from a massive base. It's gotten more high-income shoppers to shop there more often, which is a big transition it's never really pulled off in the past.
And how are employees today feeling about their wages and their jobs?
If you look at reputational data and the firms that track that stuff, their reputation is a little bit better, right? It's not like everyone thinks Walmart is a great employer or everyone thinks they pay enough. They get a lot of flack for having a large percentage, a number of workers that are in government subsidies like SNAP, right?
They're also the country's largest employer, so they're gonna have a lot of employees in general. but they have moved the needle. a lot more than they had before, right, on how people feel about them. They do say that their turnover, like their worker turnover, is down from where it was 10 years ago.
So they feel that they're, you know, getting employees to stick around longer, see them as a better place to work, and that more shoppers feel like it's a place that's for them.
And Walmart recently hit a trillion dollar market cap. How significant is that?
know it's symbolic right it it shows that they have figured out how to get investors to buy into what they're capable of and that its sales are strong and have been strong for a while and now we're in a cycle where walmart's known for low prices and people are looking for low prices and so i think investors currently are keyed into which retailers are benefiting from some of that and navigating that well
After the break, what Macmillan thinks a CEO's role should be in politics and the future of Walmart.
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Chapter 6: How significant is Walmart's recent achievement of a trillion-dollar market cap?
Yes.
Wages should go up, and we want our wages to go up, and I don't know why we can't create a higher floor on the minimum wage and then index it so that it moves over time and we don't end up in this situation that we're in. We need a healthy middle class in this country.
What do you make of the fact that he, that Doug McMillan in your interview called for a higher federal minimum wage?
Walmart has supported a higher federal minimum wage for a long time. That's not new. And there are a variety of reasons. We have to remember the federal minimum wage is $7.25. It's much lower than almost anyone pays, right? Especially, you know, like a large national public company. And so in some ways it's irrelevant for a Walmart to say that, right? They already start at 14.
I also think that Walmart understands that it benefits when more consumers feel like they can spend, right? There's a benefit to a strong U.S. economy to Walmart. That's part of how they make money.
And a lot of people who make minimum wage, of course, shop at Walmart. So if you raise the minimum wage, they'll have more money to spend at Walmart.
Yeah, yeah. There's a reason that Walmart and other retailers reported such strong sales when we were getting stimulus checks during the pandemic. You know, that all flowed right to Walmart and others' bottom line.
Speaking of politics, you asked him about a CEO's role in speaking out on political or social issues. How vocal was McMillan during his tenure on politics?
In the constellation of CEOs speaking out, I would place him at medium to high medium in terms of speaking out. You saw McMillan join in to speak out to support gay rights. The company made changes about how it sold guns after mass shootings. But you saw him speak out, you know, when there were other moments of national stress over like race relations or discrimination.
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Chapter 7: What is Doug McMillon's perspective on a CEO's role in politics?
But he and the company have quieted down quite a bit on those types of topics.
I don't get up every day thinking about politics. I get up every day thinking about how we serve customers better and thinking about our associates. They're people, though, and these issues matter to them. And so what happened over a period of years is there were things that occurred where our own associates were like, we want to hear something from you on this subject.
And a number of things happened in a series that led businesses to commenting more often. And like some things, they can be taken too far. And we don't have to comment on everything. We shouldn't comment on everything. We should live in a way that's consistent with our values.
In my case, I should be doing everything I can from a practical point of view to make people that work at Walmart feel heard and included. They've gotta be happy or customers won't be happy. That is the primary focus. And I'm sure in the future, John Furner, who's replacing me and other CEOs will end up speaking up on some things and they will consider, what do my stakeholders think?
Do I have an ability to make a difference? How does this relate to my brand and my business? And at times, I'm sure people will speak up, but there's a lot of judgment required because there's no formula that tells you when you should and when you shouldn't.
Walmart's next CEO is John Ferner, another longtime employee of the company. Like Macmillan, Ferner started as an hourly store employee and worked his way up.
John and I have been working together for almost 20 years. He's been with the company for more than 30 years. His dad worked for the company, met his wife at the company. Sam Walton rubbed his head one day at a camp out.
I mean, this is a situation where you've got someone who's eight years younger than I am, that deeply loves the company, has done all the jobs, merchandising, operations, sourcing, all three segments, lived around the world. He really knows the business and he's got a futuristic view of what the company can become, including how to apply AI.
Why are you leaving now?
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Chapter 8: What are the expectations for Walmart's future under the new CEO?
And the job of a CEO is to lead before you need to lead, not after. So, you know, when you're running laps and it's time to hand the baton, hand it over and cheerlead.
Sarah, what did you think of that answer? Why do you think he's retiring?
It's a really good question. I mean, you know, he's been CEO for 12 years. It was going to happen at some point. I believe that he could have stayed on longer if that's what he really felt strongly about.
I think that they also, you know, the executives and the board decided that John Ferner was the heir apparent and coalesced around that and then had to decide, you know, how long will he wait for to be given that role? And this is clearly when they thought they should make that transition.
So they're excited about Ferner's AI experience, but Walmart is a retailer, not a tech company. So what are their plans for AI?
Yeah, so I think they have said they aren't going to create an LLM. They're not going to create ChatGPT. They're not going to create a system that lets people interact with AI in that way. But they want to... Well, they've signed two deals, one with OpenAI with ChatGPT and Google to be part of shopping on their AI platforms. And so they see it as a way for people to shop. Yeah.
So that's one thing. They're experimenting with something called Sparky, which is like a little AI chatbot in their app that is supposed to enable shopping. I would consider that pretty nascent, though, and who knows what that will become down the road.
What would you say are the biggest challenges that the new CEO is going to face?
I think part of his challenges is that his predecessor is seen as having done a really good job. And that, you know, it's hard to come into a company that's not doing well, of course, and when it's a turnaround. It's also kind of hard to come into a company that's doing really well under the guy who preceded you.
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