It’s always easier to take over a job where your predecessor has failed.
When an NFL team, for example, has a bad season and fires its coach, fans generally give the new boss a bit of a honeymoon period. That never lasts long, but it’s generally better than taking over for someone who has won championships and set high expectations.
In taking over for Doug McMillon, new Walmart CEO John Furner steps in for an arguable legend. He’s inheriting a company that has seen its stock rise by over 76%, in the past five years, according to Yahoo data, while adapting its business to compete with Amazon.
That’s a challenging job to step into, given the history of executive changes. McKinsey cited research showing that 27% to 46% of executive transitions are viewed as failures or disappointments after two years.
“New CEOs often arrive with a mandate to turn a company around. Walmart Inc.’s John Furner is taking the helm with another daunting challenge: coming in at a high point,” Bloomberg reported.
In just his third earnings call since taking over as CEO, Furner shared key insights into how he sees the chain’s shoppers, the company’s value proposition, pricing during a struggling economy, and leading the charge into AI.
Walmart shoppers want value
Since taking over in February, Furner has spent a lot of time visiting Walmart locations around the world.
“Getting into stores, clubs and our supply chain is one of the best parts of my job, whether that’s here in the U.S. or places like China and India where I got to spend time recently. Running an omnichannel business through great stores and clubs requires the best technology and people that embrace innovation while executing the basics every day,” he shared during the chain’s first-quarter earnings call.
He found that shoppers around the world share a focus on value, something Walmart seeks to deliver.
“No matter where I am in the world, I’m reminded that customers are more alike than not. They want value for their money, a broad assortment and great experiences, and I love how Walmart delivers across each of these. When I look at the consumer, especially here in the U.S., they’re telling us they’re feeling some pressure and they’re looking to Walmart for value,” he added.
Walmart needs to keep investing in price
In the United States, Furner said that challenging economic conditions have pushed Walmart to focus on value.
“We’re continuing to invest in prices, extending the rollbacks we started in the second half of last year, and we now have about 7,200 rollbacks in place. We’re also finding ways to help families stretch their dollars as outdoor summer activities get underway. We recently launched a basket of grilling essentials that feeds 8 people at under $5 per person,” he said.
Furner believes those changes are working.
“We saw strong growth in eCommerce, including advertising and marketplace. We’re gaining market share, and growth in transactions and units is driving the top line. Transaction growth in the U.S. was the strongest we’ve seen in 6 quarters,” he added.
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AI is part of Walmart’s future
Walmart embraced technology under McMillon, particularly after it purchased Jet.com from founder Marc Lore in 2017.
When Lore stepped down five years later, McMillon praised him for transforming the company.
“During Lore’s tenure, Walmart grew its online assortment from about 10 million items to more than 80 million, expanded and transformed its e-commerce fulfillment network, and enabled same-day delivery on thousands of items, next-day delivery on hundreds of thousands of items, and two-day delivery on millions of items,” McMillon shared with Supermarket News.
Furner was closely allied with Lore and took over as the company’s digital boss when he left. As CEO, he has continued to transform the company.
“We’re also becoming AI native. Using AI, we can now serve customer needs that previous technologies could not meet, from making shopping easier and more personalized to expanding the range of shopping occasions and interactions we have with our customers and members,” he said during the earnings call.
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Investments have included creating an AI shopping agent, Sparky.
“Sparky is becoming more useful by the day. You can now use Sparky in stores and automatically reorder items you have on repeat. Sparky even speaks Spanish these days. As we’ve mentioned before, customers using Sparky have an average order value that’s about 35% higher than non-Sparky customers,” he said.
Walmart set Furner up for success
While McMillon’s retirement seemed sudden to outsiders, the company had been preparing for the transition for years, and Furner has been with the chain for more than 32 years. Analysts are confident that he will continue the chain’s success.
“We view this as an orderly, internally driven succession that maintains strategic continuity rather than signaling a shift in direction,” Brett Husslein, analyst at Morningstar, wrote. “McMillon departs after a period of strong growth. We expect Walmart to continue prioritizing its digital and artificial intelligence-led efforts under Furner.”
GlobalData Managing Director Neil Saunders was also confident the succession would be smooth.
“Fortunately for Walmart, it has a strong leader waiting in the wings in the shape of John Furner,” Saunders told Marketwatch. “Furner has demonstrated his capabilities by overseeing the success of the U.S. business — Walmart’s biggest operational entity. He also understands the philosophy of Walmart and how to use this for commercial advantage.”
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