Matthew Hatcher | Getty Images Don’t expect the flow of departures from retailer C-suites to stop anytime soon. Already this year, Gap and Bed Bath & Beyond abruptly replaced their CEOs as the companies’ sales slumped. 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 stepping down. As the retail sector faces an increasingly challenging landscape, experts say executive reshuffles will likely become more common. Stimulus spending that boosted sales during the pandemic will no longer mask any underlying business struggles. Rising inflation is raising 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 keep 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 at Neuberger Berman. .
What’s driving the exodus of retail executives
With the retail industry facing mounting challenges, the executive exodus likely won’t stop anytime soon Scrutiny by activist investors is one reason executives could find themselves out of a job. Company boards also hold executives accountable for poor performance. In some cases, longtime executives are retiring after pandemic burnout. Wall Street is also becoming wary of the retail sector as the economic landscape grows brighter. Shares of the S&P Retail exchange-traded fund have fallen about 30% so far this year, worse than the S&P 500’s 18% decline over the same period. As pressure mounts on retail executives to drive growth, there’s a greater chance they’ll disappoint boards and shareholders and be shown the door, San Marco said. In other cases, executives may see the writing on the wall and want to leave while it’s still up. Here are three reasons why industry executives could be looking for a new job in the coming months.
1. Activator heat
Some executive reshuffles are the culmination of intense scrutiny by activist investors. “If your stock price has plummeted, if your market value is less than your revenue, you’re going to be a target for activists,” said Catherine Lepard, a retail partner at Heidrick & Struggles who helps boards of the company with succession planning and executive searches. A Bed Bath & Beyond store is displayed on June 29, 2022 in Miami, Florida. Joe Raedle | News Getty Images | Getty Images Bed Bath & Beyond, for example, has been targeted by Chewy co-founder Ryan Cohen, whose RC Ventures has amassed a nearly 10% stake in the company. Cohen has pushed for changes, including spinning off or selling the company’s baby chain and cutting pay for chief executive Mark Tritton. About three months later, Tritton was pushed back as sales declines continued, losses mounted and inventory piled up. Sue Gove, an independent director on the board, has been appointed as interim chief executive. More upheavals followed – including Recupero’s firing earlier this month, just a year after he joined the company. Dollar Tree, which had been left behind by rival Dollar General, also made sweeping changes to its leadership after being targeted by an activist investor. The company settled with investment firm Mantle Ridge, adding seven new members 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 has also come under scrutiny from hedge fund Macellum Advisors, which for months has been pushing the retailer for a sale and shake-up of its board. The retailer managed to re-elect its slate of 13 board members earlier this year. But last week, it said its head of technology and supply chain was leaving. David Bassuk, global co-head of the retail practice at AlixPartners, said the attention of activist investors in the retail sector is increasing pressure on company boards across the industry. “There’s a lot of concern about 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% of CEOs said they were worried about losing their jobs in 2022 due to disruption. That’s up from 52% who said the same in 2021.
2. Patience wears out for poor performance
When a retailer posts back-to-back quarters of lackluster sales, fails to turn a profit, or lags behind its competitors, turnover in the C-suite becomes more likely. Craig Rowley, senior client partner for recruitment consultancy Korn Ferry, likened 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 CEO Sonia Syngal was leaving after the company’s Old Navy business saw a new strategy backfire. Old Navy, once a growth engine for the company, had gone big 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, Gap’s executive chairman, as interim CEO. Old Navy CEO Nancy Green 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 has stepped down as chief executive. Chief Operating Officer Rati Sahi Levesque and Chief Financial Officer Robert Julian were named interim co-CEOs. 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 brick-and-mortar footprints. “Some of the CEO changes have taken place in companies that will probably end up being much smaller than they are today,” he said. Victoria’s Secret could offer a playbook for some retailers, San Marco said. The underwear retailer has spun off from its parent company and brought in new leadership after losing customers to more fashionable rivals. Last week, the company appointed executives to three new leadership roles. It also announced it was cutting about 160 management roles, or about 5% of its in-house workforce, to streamline operations and cut costs.
3. Pandemic burnout
In some cases, longtime retail leaders are also voluntarily deciding to 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 Menear, and most recently, Dollar General CEO Todd Vasos. Some companies have asked executives to delay retirements in the past 18 months to help solve supply chain problems, labor shortages and more, said Lepard of executive search firm Heidrick & Struggles. Now Lepard expects to see more delayed retirements announced, along with executives looking for a slower pace after exhaustion from the pandemic. “The last two years for CEOs have been exhausting,” he said, adding that departures will create room for new talent. As the risk of an economic slowdown looms, he said more boards are looking for leaders with a strong track record of operational execution and financial discipline. According to AlixPartners’ Bassuk, retailers are also increasingly using outsiders to take 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, Bassuk said companies would weigh whether to select executives with either sales or operations experience. “That’s not the conversation anymore,” he said. “Now, companies want someone from another industry to bring fresh thinking.”
