And that’s the way it should be.
A good company or sports team has a deep bench to ensure departures don’t hurt their ongoing operations. Buchanan’s departure from her Walmart role as the chief merchandising officer at its U.S. e-commerce business would be a body blow for many businesses, but for the Bentonville behemoth, it’s just a minor blip in the road.
Walmart stock is coming off its best annual performance in years, delivering a total return of just less than 30%. By comparison, the stock has generated an annualized total return of 9.9% over the past 10 years.
It’s not going to be easy replacing someone of Buchanan’s caliber, but the company will find a strong candidate.
Walmart has a long history of reaching into its deep pool of talent to find replacements for staff turnover. Although it’s something every business experiences, staff turnover is something retailers have gotten used to. Even the best have people leave for greener pastures.
A classic example of Walmart plugging a hole on its executive team is the January 2017 resignation of Rosalind Brewer. At the time of Brewer’s resignation, she had been the CEO of Sam’s Club for five years. Brewer wanted a new challenge.
That new challenge came in October 2017, just months after stepping down from Walmart. Brewer became the chief operating officer for Starbucks (NASDAQ:SBUX), a job she’s still doing today.
How good an executive is Brewer?
She’s credited with reviving Starbucks’ growth since joining more than two years ago and that’s reflected in its stock price, which is up 64% since her first day in October 2017. Over the same period, the Walmart stock price gained 51%.
Walmart’s loss is definitely Starbucks’ gain. Brewer will either succeed SBUX CEO Kevin Johnson or she’ll leave to be a leading CEO elsewhere.
A Revolving Door
As for Walmart, it replaced Brewer immediately with John Furner, Sam’s Club’s chief merchandising manager. Approximately 33 months later in November 2019, Furner was promoted to CEO of Walmart’s U.S. business, replacing Greg Foran, who took a job as the CEO of Air New Zealand. Foran spent eight years working for Walmart, the last two as the head of its U.S. operations.
Like musical chairs, Furner’s role as CEO of Sam’s Club was given to Kathleen McLay, who had been executive vice-president of the retailer’s Neighborhood Markets’ stores. McLay joined Walmart in April 2015.
By utilizing an HR strategy that combines internal promotions and hiring externally, Walmart has been able to ensure there’s enough talent to fill the inevitable holes that are created when employees jump ship for new opportunities.
You’re never going to be able to keep everyone happy, which is why the ability to fill your pipeline with good people will pay dividends for shareholders for years to come.
It’s safe to say that this intangible isn’t found anywhere on its balance sheet or income statement.
The Bottom Line on Walmart Stock
In November, I argued that Target (NYSE:TGT), not WMT stock, was the better stock to buy heading into the holidays. One of the main reasons is the leadership of CEO Brian Cornell, who was named CNN Business CEO of the Year for 2019.
One of the things Cornell has done since his hiring in July 2014 is to strengthen the company’s executive ranks with a combination of internal and external hires, including promoting the company’s chief human resources officer, Stephanie Lundquist, to be president of its food and beverage operations.
To remain at the top you’ve got to hire quality talent for both current opportunities and future ones. Walmart has shown that regardless of when and where executives leave, it has a succession plan in place to fill any gaps that might arise.
You can’t put a value on that quality.
At the time of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.