Shoppers explore a nearly empty mall in Columbus, Ohio.
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Don’t expect the stream of C-suite departures from retailers to stop anytime soon.
Already this year, Gap and Bed Bath & Beyond abruptly replaced their CEOs as company sales plunged. GameStop has fired its chief financial officer amid the video game retailer’s efforts to revamp its business. After staying to help Dollar General through the pandemic, the company’s longtime CEO said he was retiring.
As the retail sector watches an increasingly difficult landscape, experts say management shakeups are likely to become more common. The stimulus spending that boosted sales during the pandemic will no longer mask underlying business difficulties. Soaring inflation raises fears that buyers will cut back on spending. And after the tension of the past two years, some executives are ready for a change of pace.
“Retail CEOs are going to have to earn their place and earn their money because their jobs have gotten a lot tougher over the past six months,” said John San Marco, senior research analyst covering the retail industry. retail at Neuberger Berman.
What’s driving the exodus of retail executives
Wall Street is also wary of the retail industry as the economic backdrop becomes more choppy. 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 period.
As pressure mounts for retail executives to drive growth, there’s a greater likelihood they’ll disappoint boards and shareholders and be shown the door, San Marco said. In other cases, leaders might see the writing on the wall and want to leave while they are still on track.
Here are three reasons why industry executives may be looking for a new job in the coming months.
1. Militant heat
Some executive reshuffles are the culmination of scrutiny by activist investors.
“If your stock price has fallen, if your market value is below your revenue, you’re going to be a target for activists,” said Catherine Lepard, partner in retail practice at Heidrick & Struggles, which assists corporate boards with succession planning and executive search.
A Bed Bath & Beyond store is seen on June 29, 2022 in Miami, Florida.
Joe Raedle | Getty Images News | Getty Images
Bed Bath & Beyond, for example, became the target of Chewy co-founder Ryan Cohen, from whom RC Ventures acquired a nearly 10% stake in the company. Cohen has pushed for changes, including splitting or selling the company’s baby goods chain and cutting CEO Mark Tritton’s pay.
About three months later, Tritton was forced out as the sales slump continued, losses piled up, and inventory piled up. Sue Gove, an independent director on the board, has been named interim CEO.
Cohen also ratcheted up the pressure on GameStop after buying stock in the former brick-and-mortar video game seller. He was tapped to lead its digital push as chairman of its board and the company secured a slate of new executives, including Amazon veteran Matt Furlong who became its new CEO and Mike Recupero, also a CEO. ‘Amazon, who became its chief financial officer.
More reshuffles followed, including the firing of Recupero earlier this month, just a year after he joined the company.
Dollar Tree, which had fallen behind rival Dollar General, also made sweeping changes to its management after being caught in the crosshairs of an activist investor. The company has reached an agreement with investment firm Mantle Ridge adding seven new directors to its board. At the end of June, Dollar Tree also said it would get a new group of leaders.
A Kohl’s store in Colma, California.
David Paul Morris | Bloomberg | Getty Images
Kohl’s has also come under scrutiny from hedge fund Macellum Advisors, which for months pushed the retailer to pursue a sale and upset its board. The retailer successfully re-elected its slate of 13 directors to the board 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 investor focus on the retail sector is increasing pressure on corporate boards across the board. of the sector.
“There’s a lot of anxiety going into the third quarter and the fourth. It’s not easy anytime soon,” he said.
A survey of 3,000 business leaders this fall by AlixPartners found that 72% of CEOs said they were worried about losing their jobs in 2022 due to disruption. That’s up from the 52% who said the same in 2021.
2. Patience runs out for poor performance
When a retailer has back-to-back quarters of sluggish sales, fails to post a profit, or falls behind competitors, C-suite sales become more likely.
Craig Rowley, a senior client partner at recruitment consultancy Korn Ferry, compared the dynamic to what happens in sports: “If you have a team and for three or four years you don’t win, what do you do? you? You change the coach.”
Earlier this month, Gap said its CEO, Sonia Syngal, was stepping down after the company’s Old Navy business saw a new strategy backfire. Old Navy, once the company’s growth engine, had moved into plus sizes to attract more customers. But the effort left the chain with too many clothes in larger sizes, and not enough of the sizes customers wanted.
Syngal was replaced by Bob Martin, executive chairman of Gap’s board of directors, as interim CEO. Old Navy CEO Nancy Green had already left 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 Rati Sahi Levesque and Chief Financial Officer Robert Julian have been named interim co-CEOs.
As the pandemic-driven sales surge wanes, Neuberger Berman’s San Marco said old executives are being pushed out and new ones brought in to cut expenses and reduce physical footprints.
“Some of the CEO changes were at companies that will probably end up being much smaller than they are today,” he said.
Victoria’s Secret may offer a playbook to select retailers, San Marco said. The lingerie retailer has spun off from its parent company and established new leadership after losing customers to hipper rivals.
Last week, the company named executives to three new leadership positions. It also announced it was cutting about 160 management positions, or about 5% of its head office workforce, to streamline operations and reduce expenses.
3. Pandemic burnout
In some cases, longtime retail executives are also voluntarily deciding to leave after helping businesses through the pandemic.
Among those to step down after long tenures are former Walmart chief financial officer Brett Biggs, former Home Depot CEO Craig Menear, and more recently Dollar General CEO Todd Vasos.
Some companies have asked executives to delay retirements over the past 18 months to help address supply chain issues, labor shortages and more, the company’s Lepard said. Heidrick & Struggles executive search firm.
Now, Lepard expects to see more delayed retirements announced, as well as executives looking for a slower pace after pandemic burnout.
“The past two years for CEOs have been exhausting,” she said, adding that departures will make room for new talent.
As the risk of an economic downturn looms, she said more boards are looking for leaders with a strong track record of operational execution and financial discipline.
Retailers are also increasingly calling on outsiders to steer their businesses in new directions, according to Bassuk of AlixPartners. Walmart, for example, brought in former Paypal executive John Rainey, who started last month as the company’s new chief financial officer.
In the past, Bassuk said companies have debated whether to choose executives with sales or operations experience.
“That’s no longer the debate,” he said. “Now companies want someone from another industry to bring new thinking.”