Unimpressive results at Wal-Mart Stores Inc. are hurting pay for its top executives.
Wal-Mart CEO Doug McMillon, who took over the top job at the world’s largest retailer in February 2014, received a compensation package worth $19.06 million in the fiscal year ended Jan. 31, 2015, according to an Associated Press analysis of a regulatory filing Wednesday. That’s down 24 percent from $25.3 million in the prior year.
McMillon’s base salary was $1.2 million, up from $954,408 from the previous year. But his stock awards were $14.6 million, down from $23.01 million a year earlier.
And although McMillon received a cash bonus of $2.8 million, more than double the previous year’s $1 million, he had the potential to grab more. He stood to get a cash bonus of $3.8 million in the latest year.
Seventy-five percent of McMillon’s cash bonus last year was based on total company operating profit, while the rest was based on total sales.
“Our financial performance did not meet the challenging targets,” according to the proxy statement filed with the Securities and Exchange Commission. “Accordingly, our short-and long-term incentive pay was below target levels.”
Wal-Mart’s net revenue for the year rose 1.9 percent to $473 billion, while profit was up 2.1 percent to $16 billion.
Wal-Mart’s namesake U.S. division, which accounts for about 60 percent of total sales, reported a 0.5 percent increase in sales at stores open at least a year. That is considered a key indicator of a retailer’s health.
Wal-Mart is facing difficulties on a number of fronts. The company’s low-income shoppers in the U.S. are struggling with stagnant wages and high costs of daily living. At the same time, Wal-Mart faces fierce competition from online stores and dollar chains that offer convenience and lower prices.
Since McMillon has assumed the top spot, he has replaced the head of the U.S. division, accelerated the pace of smaller-store openings and stepped up the retailer’s e-commerce efforts.
In February, the company made news by announcing it would increase starting wages for its hourly employees to at least $10 by February 2016.
The Associated Press formula calculates an executive’s total compensation during the last fiscal year by adding salary, bonuses, perks, above market interest that the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the SEC.
The value that a company assigned to an executive’s stock and option awards was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company’s stock in the year after the awards are granted. Most stock-compensation programs require an executive to wait a specified amount of time to receive shares or executive options.
In afternoon trading Thursday, Wal-Mart shares rose 91 cents, or 1.2 percent, to $79.34.