My brain is so flooded with voluminous trivial business information it’s a wonder I haven’t sprouted a second head to store all the information. Name a Fortune 500 company and I’ll instantly tell you where it is located and likely the chief executive who runs the operation. I also have a great handle on America’s most overpaid and overrated CEOs, a recurring focus of this blog.
Yet until a few days ago, it would have taken considerable effort for me to name the CEO of Walmart. Moreover, I was surprised to learn this week that the retailer still ranks No.1 on the Fortune 500 for generating $648 billion in revenues last year. I long perceived Walmart as evil, a company that destroyed mom-and-pop businesses, obliterated the retail districts of countless cities and towns, left abandoned buildings, bribed foreign governments, paid miserly wages, and routinely engaged in obscene stock buybacks that further enriched the Walton family, already among the richest persons in America.
Walmart, which removed the hyphen from its name in 2008, was long vilified in the media, including this 2005 book by Texas journalist Bill Quinn titled, How Wal-Mart is Destroying America (and the World).
I also never cared for some of Walmart’s political associations and its corporate dishonesty. Hillary Clinton once served on Walmart’s board, despite lacking any business experience. The company’s PR for years ago was headed by Leslie Dach, a powerful Democratic political operative who was responsible for possibly the first known instance of internet misinformation. It was a blog called Wal-Marting Across America featuring a seemingly independent couple named Jim and Laura transversing the U.S. in an RV and gushing about all the Walmarts they visited and the staff they encountered.
Bloomberg revealed that Jim and Laura were bought and paid for by the PR firm Edelman, where Dach oversaw the Walmart account before joining the company full time. I’ve long found it farcical that Edelman publishes an annual “Trust Barometer” given the agency’s well-established deceptions and dishonesty over the years.
There is still much to criticize about Walmart, whose stores I’ve yet to ever step foot in and likely never will. But reading this Fortune story by Phil Wahba, I developed a healthy respect and admiration for Walmart and its CEO Doug McMillon, who unquestionably is one of America’s most accomplished business leaders. Notably, McMillon was rejected by Harvard, Stanford, and Wharton business schools.
Wahba’s McMillon profile is superb business journalism, chock full of great details and anecdotes and deftly structured to allow readers to draw their own conclusions. I’m compelled to note that Wahba’s LinkedIn profile suggests he hails from Canada, from where yours truly also emigrated.
Among the many admirable qualities of Walmart’s McMillon is that he isn’t an itinerant CEO-for hire who has bounced from company to company declaring his brilliance to transform their operations, promising to make them considerably more efficient and profitable than his predecessors. McMillon has roots in Bentonville, Arkansas, where Walmart is headquartered and his father, a dentist, moved his family when McMillon was a teenager. McMillon began his Walmart career loading trucks and worked his way up through the ranks.
In his recent University of Arkansas commencement address, McMillon shared that on his first day working at Walmart, he rear-ended his boss’s car. I’ve linked to McMillon’s address, which I found especially inspiring given that University of Arkansas students appear more respectful and committed to learning than their counterparts at costly Ivy League schools long mistakenly perceived as more elite institutions.
Among the biggest criticisms of Walmart were the poverty wages it paid its employees. Under McMillon’s watch, the retailer has increased entry-level wages multiple times and now pays $14 an hour, compared to $9 in 2015. The wage increases were achieved without union involvement, although arguably the pay boosts contributed to Walmart’s ability to prevent employees from organizing. (Walmart has faced accusations of illegal union busting activities). McMillon has ramped up training programs to allow for faster advancement, and the company was a pioneer in paying the college tuitions of its employees.
On the environmental front, McMillon in 2017 committed to working with suppliers to eliminate one gigaton of greenhouse gas emissions by 2030. Walmart this year made good on that promise, six years ahead of schedule.
Those who perceive Walmart as catering mostly to working-class and economically challenged persons are mistaken. Walmart CFO John David Rainey recently told Barron’s that two-thirds of Walmart’s market gains at the end of last year were households making $100,000 or more, a feat partly accomplished with the rollout of a higher-end grocery private label brand.
Groceries account for 60% of Walmart’s sales. Walmart also sells high end electronics, including new and refurbished Apple products, and premium wines like Austin Hope Cabernet, which can be had from Walmart for $46.48, compared to $55.99 at BevMo, and $68.99 at wine.com. (Austin Hope Cabernets from California’s Paso Robles region are Starkman Approved).
Walmart is also achieving great success with its Walmart + membership program, the retailer’s answer to Amazon Prime. From a standing start in 2020, Walmart has already enrolled more than 60 million members. Rainey told Barron’s that Walmart + members spend twice as much, although Barron’s didn’t make clear twice as much as whom.
Unlike Target, Walmart under McMillon has judiciously avoided political controversies. A year after he assumed command, Arkansas introduced a “religious freedom” bill that critics charged could result in discrimination against gays and other historically marginalized groups. Walmart issued a statement signed by McMillon saying the legislation undermined Arkansas’ “spirit of inclusion” but avoided maligning those who championed the bill.
In 2019, after 23 persons were murdered by a gunman at a Walmart in El Paso, Walmart voluntarily halted sales of ammunition and called on Congress and then President Trump to improve background checks.
“I don’t wake up in the morning thinking about making political statements,” McMillon told Fortune. “I don’t have an agenda other than serving people, and we want to serve everybody.”
A decade or two ago, McMillon’s statement would have been deemed simple business common sense. These days, it’s a radical position.
Walmart’s harnessing of technology is truly impressive, which shouldn’t come as surprise because the company was a tech pioneer long before the dotcom era. Walmart was an early adopter of UPC codes, those barcodes that appear on the backs of every package that allow companies to better track and inventory their merchandise. Although UPC codes are universal today, they gained acceptance when Walmart began using them in 1983, which the company, quite rightly, includes as one of its six pioneering accomplishments.
Without UPC codes, there would be no Amazon, which long bested Walmart on the e-tailing front. Walmart last year generated $65.4 billion in e-commerce sales, more than quadruple what it generated from online sales in 2019, making it the No. 2 online seller in the country after Amazon.
Walmart is also generating increasing revenues from advertising sales, which have considerably higher margins. In March, the company announced plans to acquire the television maker Vizio for $2.3 billion, which would make it such an advertising powerhouse that the FTC has launched an antitrust probe. Vizio is a market leader in so-called automatic content recognition, which can determine what owners of its TV sets watch, the games they play, and the ads they see. Advertisers regard the data as pure gold.
For all his innovations, McMillon remains deferential to founder Sam Walton, who is still very revered throughout Walmart. Fortune reported that “Mr. Sam” was repeatedly referenced by employees who met with McMillon as part of a celebration of their lengthy years of employment.
“We don’t celebrate Sam and talk about him for nostalgic reasons,” McMillon said. “Sam had a set of beliefs that generated success, and those principles are relevant today.”
Walmart’s commitment to its longtime Bentonville home is impressive. The company is building a new headquarters on a 350-acre construction site that will include bike paths, a fitness center with two large swimming pools, and outposts of hip local coffee shops. Fortune reported that the company has closed regional hubs across the country and relocated employees to the company’s Bentonville headquarters.
Although Bentonville was once viewed as a hick town, Fortune said the city’s population has doubled in the past 20 years and characterized its nightlife scene as “more Austin than Ozark.”
Walmart’s commitment to Bentonville is a sharp contrast to GM’s loyalty to Detroit, where CEO Mary Barra quietly relocated 4,000 employees to its suburban “tech center” these past few years and shamelessly claims that a mere two floors in a heavily taxpayer subsidized downtown office building will serve as the company’s headquarters.
Barra recently irreparably harmed southeastern Michigan with the opening of an expansive tech center in Silicon Valley where several of the company’s top technology executives will be located. GM “is going to where the talent is,” Barra told the Detroit News, suggesting Michigan is a backwater for tech talent.
Barra serves as a good reference point given that she received $28 million last year, despite failing miserably on every critical performance metric she previously outlined, particularly her promised EV transformation. By comparison, McMillon was awarded a $27 million payday, with Walmart firing on all cylinders.
If Barra is worth $28 million, then McMillon is being paid the same low price as the merchandise he sells.