Wal-Mart CEO talks about pay raises, how customers shop and what he's learned from critics

Economic Indicators Associated Press

When Wal-Mart CEO Doug McMillon took the top job at the world's largest retailer last year, he inherited some big problems.

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Wal-Mart Stores Inc., which has more than 11,000 stores in 27 countries, has struggled with two years of mostly sluggish sales due in large part to a challenging global economy and major changes in how people shop.

Workers' groups have targeted Wal-Mart over its pay and treatment of its U.S. employees with protests. And overseas, the retailer is still being scrutinized nearly two years after a Bangladesh factory that made some of its clothes collapsed, killing over 1,100 workers.

McMillon, whose first job at Wal-Mart was an hourly position loading trucks as a college student in 1984, has had to wrestle with these issues since he became CEO in February 2014. In the past year, he's replaced the head of the struggling U.S. division, accelerated the pace of smaller store openings and stepped up the retailer's e-commerce efforts.

But last week, McMillon made his boldest move yet by announcing that Wal-Mart would give raises to nearly 40 percent of its 1.3 million U.S. workforce as part of a billion-dollar investment in changes to employee pay and training. Wal-Mart said it would increase starting wages for U.S. employees to at least $9 per hour by April and by at least $10 by February 2016.

Two days before he made the announcement, McMillon, 48, spoke with The Associated Press exclusively about the pay and training increases, the fallout from the Bangladesh disaster and other issues that are affecting Wal-Mart. What follows are edited excerpts from a 40-minute interview at Wal-Mart's headquarters in Bentonville, Arkansas:

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Q: What is behind the decision to raise wages?

A: What's driving us is we want to create a great store experience for customers and do that by investing in our own people.

Q. How would you address critics who say Wal-Mart should go beyond the wage increase it announced?

A. I think we are playing our role. Creating opportunities for so many people, and clarity on how they can grow in a company into a lot of great jobs. I have a great amount of pride in the role we play.

Q. As the nation's largest private employer, Wal-Mart has outsized influence in the national debate over raising the federal minimum wage from $7.25 to $10.10 an hour. Why has Wal-Mart remained neutral in the debate?

A. It's clear to us what we need to do to run a good business, and we are taking action on that. As it relates to a federal minimum wage, there are other people responsible for figuring that out. I am not an economist. Someone else can sort out what the best decision is there.

Q: Is it hard to break the perception that Wal-Mart has low-end jobs?

A: What we can worry about is the reality. If the reality is good enough, eventually I think most people know perception corrects itself. Our job is to create great store experiences for customers and online and in every way we can service them. And over time, that matters the most.

Q. Do you think Wal-Mart is unfairly targeted for its labor practices?

A. Nobody ever promised that this will be fair. So I am not under the illusion that it will be.

Q. What have you learned from your critics?

A. I have learned from (former Wal-Mart CEOs) Mike Duke and Lee Scott the value of listening to critics. We have ears and we care. Sometimes, you can learn more from criticism than you can from flattery. So we listen to all of it, but at the end of the day, we are doing what we need to do for our business.

Q. How do you think your first year has gone?

A. I feel good about the first year. I think we've increased our clarity as it relates to our strategic plan. Our leadership has a better sense of where we need to go do to capitalize on our opportunities. I feel like we have done a good job of listening to our associates and beginning to respond appropriately to set them up for success. Growing an e-commerce business is important. And we are getting stronger in markets like China.

Q. What will it take to get more customers back in the stores?

A. No doubt business is going increasingly mobile and increasingly online. We don't really care how the customers want to shop. We want to be in the position to serve them in any of those ways.

Q. Wal-Mart is one of a group of North American retailers and clothing makers that agreed to a five-year pact aimed at improving safety conditions at Bangladesh factories. Do you think you're making inroads in Bangladesh?

A. We have such a big supply chain that we do business with a lot of people in a lot of categories. That can make it more challenging for us. But we do care. We are making investments, and I have no doubt that we are making things better. But it will be an ongoing effort across the supply chain to try to create a more sustainable situation for everyone.

Q. How much have you been influenced by your time at Wal-Mart?

A. I've been here pretty much my whole adult life. So what I believe and the things I learned have been largely influenced by Wal-Mart, and much of our culture will stand the test of time and still will be really valuable to the business and to the communities we serve. But there are things that need to change ... how we serve customers, the tools that we use to do it.

Q: Wal-Mart has made some mistakes, right? For instance, before you became CEO, Wal-Mart reduced labor in stores, which resulted in unstocked shelves and low employee morale.

A: The economic environment these past few years has been challenging globally, and I think our focus on productivity was well-placed. But sometimes we can go too far. And the thing about Wal-Mart is we course-correct.

Q. How would you describe employee morale at stores now?

A. The word I would use to describe us at the moment is 'encouraged.' We've got a lot of associates with a lot of experience and pride in the business. We're listening and responding to them and making changes. And I think they're encouraged that we are on the right track.

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