Was CFO Switch at Walmart.com a Sign of Turmoil?

Senior management at Walmart.com may have stolen a page from the history books of its parent company, Wal-Mart Stores Inc.

In mid-March, the Web subsidiary promoted Greg Penner, its vice president of business development, giving him the new title of CFO, and then reassigned Sam Dunn from CFO to vice president of inventory management and planning. Dunn spent 13 years at Wal-Mart Stores, rising to the post of vice president and divisional controller, before taking over the CFO's spot at the Menlo Park, Calif.-based Web site in June 2000.

Penner has been with Walmart.com since last year, and before he joined the retailer's Web unit, he was a general partner at Peninsula Capital, and invested in software and Internet infrastructure companies. Before that, he worked in strategic planning at Wal-Mart Stores and corporate finance at Goldman, Sachs.

A spokeswoman for Walmart.com could not provide a specific reason for the switch in CFOs apart from saying that it was "driven by the business needs" of the company. She was not aware of any other re- assignments or job shifts among senior management since Walmart.com was created in January 2000 as a joint venture with Accel Partners, a Palo Alto, Calif. venture capital firm.

The spokeswoman also said that neither Dunn nor Penner were available for interviews.

To a certain extent, the job switch is interesting because it bears an eerie resemblance to a management shuffle carried out by Wal-Mart's legendary founder Sam Walton in the late 1980s, who had two of most senior lieutenants, David Glass and Jack Shewmaker, change jobs.

At the time, the move was explained as an attempt to groom the two executives for different responsibilities. Ultimately, Glass took over as CEO from Walton and led the retailer to one of the most successful growth spurts in its history.

Today, both Glass and Shewmaker are members of the Bentonville, Ark.- based company's board. Glass is chairman of the executive committee, and Shewmaker has retired from his day-to-day management role.

While the 1980s' change in Wal-Mart's executive posts was not sparked by any problems that were apparent to the outside, the recent change in the Web site's CFO position took place while Wal-Mart is still working feverishly to get its Web strategy in order.

Wal-Mart's Web site has been troubled almost since its inception, with Wal-Mart taking the unusual step of shutting it down late last fall just as the all important holiday shopping season was reaching its peak. After a six-week shutdown, Walmart.com was relaunched in December.

In February, the Web site laid off 24 people, or 10 percent of its staff. In early March, the financial press picked up on a rumor first circulated by The Sunday Times of London that Wal-Mart Stores was about to hand the management of the troubled site to Amazon.com. But nothing has come of that since.

The Web site's sales are included in the totals for the parent company, Wal-Mart Stores Inc., but they are not broken out separately. Neither the parent company nor the Web site will say what percentage of Wal- Mart's $191 billion in sales in the fiscal year that ended in January 2001 came from the Web site. Nor is it clear to what extent the Web site has been a drag on earnings.

But clearly, Walmart.com is far from the pacesetter in E-commerce that its parent company has been in traditional retailing. As long as that's the case, executives at Wal-Mart are unlikely to be patient.

For example, in the latest survey from Nielsen-NetRatings, Walmart.com didn't even break into the top 10 E-tail Web sites ranked by the percentage of Web shoppers who have made purchases at individual sites. For the month of March, Amazon.com, which had 15.1 percent market share, ranked first. Southwest.com, with 2 percent, ranked tenth.

Several industry analysts say Wal-Mart, despite its sterling reputation in the traditional brick-and-mortar world, has been stymied in its efforts to transport its expertise to the Web. One of Wal-Mart's strengths for years has been its inventory management and control, and its logistical expertise with moving goods from suppliers through its warehouses to its stores at minimal cost.

But the company's strengths haven't given it an advantage in Web retailing, where catalog merchants and direct mailers, such as Lands' End and J. Crew, seem to have a leg up on brick-and-mortar retailers because their customer databases are already closely tied to their shipping and order fulfillment systems. In retailing parlance, the direct mailers possess an "order-of-one" fulfillment system.

Wal-Mart derives the overwhelming majority of its revenue from its massive stores built on the scale of aircraft hangars, and lacks a comprehensive database linking customer purchases to individual customers. The retailer has been playing catch up in the Web space, and by all accounts, it seems that the firm is still unable to break free of its troubles.

A spokesman for parent company Wal-Mart Stores Inc. referred all questions about the Web site to Walmart.com. A spokeswoman at the Web site's Menlo Park, Calif., headquarters told CFO.com, "We are moving toward profitability."

"Our charge is adding value to the shopping experience and making sure the sum of the parts is greater than the whole," she added.

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