Shoppers browse a nearly empty mall in Columbus, Ohio.
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Don’t expect the flow of retailers’ C-suite exits to stop anytime soon.
Already this year, Gap and Bed Bath & Beyond abruptly replaced their CEOs as the companies’ sales collapsed. GameStop has fired its chief financial officer amid the video game retailer’s efforts to revamp its business. After staying on to help Dollar General deal with the pandemic, the company’s longtime CEO said he is retiring.
As the retail sector faces an increasingly challenging landscape, experts say leadership changes are likely to become more frequent. The stimulus spending that boosted sales during the pandemic will no longer mask any underlying business struggles. Rising inflation raises concerns that shoppers will cut back on spending. And after the strain of the past two years, some executives are ready for a change of pace.
“Retail CEOs are going to have to earn their spots and earn their money because their jobs just got a lot harder over the last six months,” said John San Marco, senior retail analyst at Neuberger Berman.
What drives the exodus of retail managers
As the retail industry faces mounting challenges, the exodus of executives likely won’t stop anytime soon
Scrutiny by activist investors is one reason executives are out of a job.
Company boards also hold executives accountable for poor performance.
In some cases, longtime executives are retiring after being burned out by the pandemic.
Wall Street is also becoming wary of the retail industry as the economic environment becomes increasingly volatile. Shares of the S&P Retail exchange-traded fund are down about 30% so far this year, worse than the S&P 500’s 18% decline over the same time.
As pressure mounts on retail managers to drive growth, they are more likely to disappoint boards and shareholders and be shown the door, San Marco said. In other cases, executives may see the writing on the wall and ask to leave while they are still at a high level.
Here are three reasons industry executives should be looking for a new job in the coming months.
1. Activist heat
Some executive changes are the culmination of intense scrutiny by activist investors.
“If your stock price has fallen sharply, if your market value is less than your earnings, you’re going to be a target for activists,” said Kathryn Lepard, a partner in the retail practice at Heidrick & Struggles, which helps companies grapple with succession planning and executive search.
A Bed Bath & Beyond store is seen on June 29, 2022 in Miami, Florida.
Joe Riddle | News from Getty Images | Getty Images
Bed Bath & Beyond, for example, became the target of Chewy co-founder Ryan Cohen, whose RC Ventures amassed a nearly 10 percent stake in the company. Cohen pushed for changes, including spinning off or selling the company’s baby products chain and cutting CEO Mark Tritton’s pay.
About three months later, Tritton was forced out as sales continued to decline, losses mounted and inventories piled up. Sue Gove, an independent director on the board, was appointed interim chief executive.
Cohen also turned up the heat on GameStop after buying stock in the legacy physical video game retailer. He was tapped to lead its digital push as chairman of the board, and the company got a slew of new leaders, including Amazon veteran Matt Furlong, who became its new CEO, and Mike Recupero, also from Amazon, who became its chief financial officer. director.
More changes followed — including the firing of Recupero earlier this month, just a year after he was brought on board.
Dollar Tree, which has lagged behind rival Dollar General, also made sweeping management changes after coming under the crosshairs of an activist investor. The company settled with investment firm Mantle Ridge, adding seven new directors to its board. In late June, Dollar Tree also said it would be getting a new batch of leaders.
A Kohl’s store in Colma, California.
David Paul Morris | Bloomberg | Getty Images
Kohl’s also came under the scrutiny of hedge fund Macellum Advisors, which for months had been pushing for the retailer to pursue a sale and shake up its board of directors. The retailer was able to re-elect its slate of 13 board members earlier this year. But last week it said its chief technology and supply chain officer was leaving.
David Bassuk, global co-head of the retail practice at AlixPartners, said activist investors’ attention to the retail sector is increasing pressure on company boards across the industry.
“There is a lot of concern going into the third and fourth quarters. It’s not going to get any easier anytime soon,” he said.
A survey of 3,000 business executives this fall by AlixPartners found that 72 percent of CEOs say they worry about losing their jobs in 2022 due to disruption. That’s up from 52% who said the same in 2021.
2. Patience runs out for poor performance
When a retailer posts back-to-back quarters of slow sales, fails to post a profit, or lags behind its competitors, turnover in the C-suite becomes more likely.
Craig Rowley, senior client partner at recruiting consulting firm Korn Ferry, compared the dynamic to what happens in sports: “If you have a team and you don’t win for three or four years, what do you do? You change the coach.”
Earlier this month, Gap said its CEO Sonia Singhal was stepping down after the company’s Old Navy business backfired on a new strategy. Old Navy, once the engine of the company’s growth, had imposed large sizes to appeal to more customers. But the effort left the chain with too many clothes in plus sizes and not enough in the sizes customers wanted.
Singhal was replaced by Bob Martin, Gap’s executive chairman, as interim CEO. Old Navy CEO Nancy Greene had already left just a few months earlier.
After struggling to become profitable, luxury resale retailer The RealReal also announced in early June that founder Julie Wainwright was stepping down as CEO. Chief Operating Officer Rathi Sahi Levesque and Chief Financial Officer Robert Julian were named interim co-executives.
As the pandemic sales surge fades, Neuberger Berman’s San Marco said old leaders are being pushed out and new ones brought in to cut costs and shrink physical footprints.
“Some of the CEO changes happened in companies that will probably end up being much smaller than they are today,” he said.
Victoria’s Secret may offer a playbook for some retailers, San Marco said. The lingerie retailer has split from its parent company and brought in new management after losing customers to more modern rivals.
Last week, the company appointed executives to three new leadership positions. It also announced it was cutting about 160 management positions, or roughly 5 percent of its home office headcount, to streamline operations and cut costs.
3. Pandemic burnout
In some cases, longtime retail leaders have also decided to voluntarily leave after helping companies deal with the pandemic.
Among those who have stepped down after long tenures are former Walmart CFO Brett Biggs, former Home Depot CEO Craig Menier and most recently Dollar General CEO Todd Vassos.
Some companies have asked executives to delay retirement in the past 18 months to help resolve supply chain issues, labor shortages and more, said Leppard of executive search firm Heidrick & Struggles.
Lepard now expects to see more delayed retirements, along with executives looking for a slower pace after being burned out by the pandemic.
“The last few years for CEOs have been grueling,” she said, adding that the departures will make room for new talent.
As the risk of an economic slowdown looms, she said more boards of directors are looking for leaders with a strong track record of operational execution and financial discipline.
According to Basuk of AlixPartners, retailers are increasingly bringing in outsiders to lead their companies in new directions. Walmart, for example, tapped former Paypal executive John Rainey, who started last month as the company’s new chief financial officer.
In the past, Basuk said companies would weigh whether to select executives with sales or operations experience.
“That’s not the debate anymore,” he said. “Now companies want someone from another industry to bring in new thinking.”
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