CEOs in the retail sector are turning over once again. The pandemic served as a pause button for many Boards that had CEO succession plans already defined. Yet, the pandemic also revealed some new tools that retail CEOs will need moving forward – mainly the understanding of data and technology related to online shopping.
Traditionally retail CEOs arrived at their positions either because they understood (and could predict) styles and trends, and/or were very good at managing the systems necessary to keep stores running efficiently. CEO turnover in S&P 500 companies fell in 2020 and 2021. The pandemic was unnerving and most companies did not wish to add another level of uncertainty with CEO vacancies. But as of July, the annualized succession for CEOs went from 9.6% in 2021 to 11.6% in 2022 (in the Russell 3000 index).
CEOs of S&P 500 companies typically last 6.4 years. Retailing during the pandemic has put them to the test. The entire retail sector is under immense pressure to operate faster, innovate, and also pay greater attention to social, governance, and environmental issues. What was necessary and desirable to run a major retailer in 2010 has changed dramatically. Recently, major companies like Dollar General, Home Depot, Gap, Bed Bath & Beyond, Under Armour, and The RealReal have made changes to their top men and women.
Gap went through hard times with its Old Navy chain. An overstock of very small and overly large sizes left the retailer with a serious stock issue. Shares of the retailer are down 55% this year. Bed Bath & Beyond made a risky move to “declutter” stores which had the opposite effect on shoppers. Customers were looking for more offerings, not less, especially in a world where anything imaginable can be purchased on our smartphones. The RealReal had made the transition from a startup to an established company, but running an established retailer takes different skills than that of leading an initial public offering.
Curiously enough, even CEOs who had performed well are cycling out at a quicker rate. Former CEO Craig Menear of Home Depot indicated he’d be stepping aside despite sales having boomed during the pandemic. Folks were clamoring for supplies to spruce up their homes and Home Depot, Lowe’s, and similar retailers cashed in. Another long-time CEO, Todd Vasos of Dollar General, was replaced in July. Over Vasos’s tenure, the company grew annual sales revenue by roughly 80% and 7,000 new Dollar General locations were opened.
Despite the positive performance of some, consulting firms like Customer Growth Partners point to Boards requesting CEO candidates with a much broader set of skills compared to those a decade ago. What those translate to will shift company to company, but it’s a mix of understanding and adapting to digitalized platforms while not neglecting face-to-face shoppers. The retail sector is going through some seismic shifts. The good ones are adapting with a quick and pleasant online shopping experience and ensuring traditional brick-and-mortar stores are stocked and ready for those who want to get back to the traditional form of consumerism.
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