3 reasons why executives leave resellers from GameStop to Gap

Shoppers are exploring a largely empty mall in Columbus, Ohio.

Matthew Hatcher | Getty pictures

Do not expect the flow of departures from dealers’ C-suites to stop immediately.

Already this year, Gap and Bed Bath & Beyond abruptly replaced their CEOs when the companies̵[ads1]7; sales plummeted. GameStop fired its CFO in the middle of the video game retailer’s attempt to renew the business. After staying around to help the Dollar General navigate the pandemic, the company’s longtime CEO said he was retiring.

As retailers stare down an increasingly challenging landscape, experts say executive shakeups are likely to become more common. Stimulus expenses that increased sales during the pandemic will no longer mask any underlying business battle. Rising inflation raises concerns that buyers will cut back on spending. And after the strain of the last two years, some leaders are ready for a change of pace.

“Retailers need to earn their jobs and make their money, because their jobs have become much more difficult over the last six months,” said John San Marco, a senior analyst covering retail at Neuberger Berman.

Wall Street is also on guard against retail as the economic backdrop becomes choppy. The shares in S&P Retail exchange traded funds are down around 30% so far this year, worse than the S&P 500’s decline of 18% at the same time.

As pressure builds up for retail executives to drive growth, they are more likely to disappoint boards and shareholders and be shown the door, San Marco said. In other cases, leaders may see the writing on the wall and want to leave while still driving high.

Here are three reasons why executives across the industry can look for a new job in the coming months.

Activist heat

Some executive shakeups are the culmination of intense scrutiny by activist investors.

“If your stock price has fallen, if your market value is less than your income, you will be a target for activists,” said Catherine Lepard, a retail partner at Heidrick & Struggles, which helps corporate executives with inheritance planning and leadership search.

A Bed Bath & Beyond store was seen on June 29, 2022 in Miami, Florida.

Joe Raedle | Getty Images News | Getty pictures

Bed Bath & Beyond, for example, became the target for Chewy co-founder Ryan Cohen, whose RC Ventures held a nearly 10% stake in the company. Cohen pushed for changes, including spinning or selling the company’s baby goods chain and cutting the salary of CEO Mark Tritton.

About three months later, Tritton was pushed out as sales declined, losses increased and inventories piled up. Sue Gove, an independent board member, was appointed interim CEO.

Cohen also turned up the heat on GameStop after buying shares of the old physical video game seller. He was used to lead the digital push as chairman, and the company gained a number of new executives, including Amazon veteran Matt Furlong who became its new CEO and Mike Recupero, also of Amazon, who became CFO.

Several shakeups followed – including the firing of Recupero earlier this month, just a year after he was brought into the company.

Dollar Tree, which had fallen behind rival Dollar General, also made extensive management changes after being caught in the crosshairs of an activist investor. The company settled with the investment company Mantle Ridge by adding seven new board members to the board. In late June, Dollar Tree also said it would have a new group of executives.

A Kohls store in Colma, California.

David Paul Morris | Bloomberg | Getty pictures

Kohl’s was also investigated by the hedge fund Macellum Advisors, which for several months pressured the dealer to pursue a sale and shake up the board. The dealer managed to re-elect his list of 13 board members earlier this year. But last week it said that the head of technology and supply chain left.

David Bassuk, global co-leader of retail practices at AlixPartners, said the activist investor’s attention to retail is increasing the pressure on corporate boards across the industry.

“There’s a lot of concern heading into the third quarter and fourth. It won’t get any easier 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 outages. That is up from the 52% who said the same thing in 2021.

2. Patience wears out for poor performance

When a dealer puts out subsequent quarters with weak sales, fails to deliver profits or falls behind competitors, sales in the C-suite become more likely.

Craig Rowley, senior client partner for hiring consulting firm Korn Ferry, compared the dynamics to what happens in sports: “If you have a team and for three or four years do not win, what do you do? You change the coach.”

Earlier this month, Gap said CEO Sonia Syngal resigned after the company’s Old Navy business saw a new strategy that backfired. Old Navy, once a growth driver for the company, had pushed into plus sizes to appeal to more customers. But the effort left the chain with too much clothing in larger sizes, and not enough of the sizes the customers wanted.

Syngal was replaced by Bob Martin, Gap’s CEO, as interim CEO. Old Navy chief Nancy Green had already left a few months earlier.

After struggling to become profitable, luxury retailer The RealReal also announced in early June that founder Julie Wainwright is stepping down as CEO. Chief Operating Officer Rati Sahi Levesque and Chief Financial Officer Robert Julian were appointed interim co-CEOs.

As sales growth from the pandemic disappears, Neuberger Berman’s San Marco said old leaders are being pushed out and new ones being brought in to cut spending and shrink brick-and-mortar footprints.

“Some of the CEO changes have taken place in companies that are likely to 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 separated from the parent company and brought in new management after losing customers to more trendy rivals.

Last week, the company appointed managers to three new leadership roles. It also announced that it was cutting around 160 managerial roles, or about 5% of the home office’s staff, to streamline operations and cut expenses.

3. Pandemic burnout

In some cases, longtime retail executives also decide to leave voluntarily after helping companies navigate the pandemic.

Among those who have retired after long terms are Walmart’s former CFO Brett Biggs, Home Depots’ former CEO Craig Menear, and most recently, Dollar General CEO Todd Vasos.

Some companies have asked executives to postpone retirements for the past 18 months to help solve supply chain bottlenecks, labor shortages and more, said Lepard of the management search firm Heidrick & Struggles.

Lepard now expects to see more delayed retirements announced, along with executives looking for a slower pace of burnout from the pandemic.

“The last couple of years for CEOs have been exhausting,” she said, adding that the departures will make room for new talent.

As the risk of an economic downturn approaches, she said several boards are looking for leaders with strong results for operational implementation and financial discipline.

Dealers are also increasingly using outsiders to lead their companies in new directions, according to Bassuk from AlixPartners. Walmart, for example, contacted former Paypal CEO John Rainey, who started last month as the company’s new CFO.

Earlier, Bassuk said companies would consider choosing managers with experience in sales or operations.

“It’s no longer the debate,” he said. “Now companies want someone from another industry to bring in innovation.”

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