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3 Reasons Executives Leaving GameStop Retailers for Gap

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Shoppers inspect a nearly empty mall in Columbus, Ohio.

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Don’t expect the flow of exits from top retailers to stop any time soon.

Already this year, Gap and Bed Bath & Beyond suddenly changed their CEOs as the companies’ sales plummeted. GameStop fired its chief financial officer in the midst of the video game retailer’s efforts to revamp its business. After he stayed to help Dollar General deal with the pandemic, the company’s longtime CEO said he was stepping down.

As the retail sector faces an increasingly difficult situation, personnel changes are likely to become more frequent, experts say. The stimulus spending that boosted sales during the pandemic will no longer hide any underlying business concerns. Rising inflation raises concerns that buyers will cut back on their spending. And after the stress of the past two years, some executives are ready for a change of pace.

“Retail executives will have to earn their jobs and make money because their job has become so much harder in the past six months,” said John San Marco, senior research analyst for retail at Neuberger Berman.

Wall Street is also wary of retail as the economic backdrop becomes increasingly volatile. Shares in the S&P Retail exchange-traded fund are down about 30% this year, worse than the S&P 500’s 18% drop in the same time period.

As pressure builds on retail executives to spur growth, San Marco said they are more likely to disappoint boards and shareholders and be scrambled. Other times, executives may see the writing on the wall and want to leave while they’re still on top.

Here are three reasons industry leaders might be looking for new jobs in the coming months.

1. Activist heat

Some personnel changes are the culmination of scrutiny from activist investors.

“If your stock price has plummeted, if your market value is less than your income, you will be a target for activists,” said Katherine Lepard, a retail partner at Heidrick & Struggles, who helps company boards with succession planning and executive searches.

The Bed Bath & Beyond store opened June 29, 2022 in Miami, Florida.

Joe Radle | News Getty Images | Getty Images

Bed Bath & Beyond, for example, was the target of Chewy co-founder Ryan Cohen, whose RC Ventures acquired almost 10% of the company. Cohen pushed for changes, including a spin-off or sale of the company’s children’s products chain and pay cuts to CEO Mark Tritton.

About three months later, Tritton was forced out due to a continued drop in sales, increasing losses, and stockpiling. Sue Gove, an independent director on the board of directors, was named interim CEO.

Cohen also made a fuss at GameStop after buying shares in a legacy video game retailer. He was appointed head of digital advancement as chairman of the board, and the company received a roster of new leaders, including Amazon veteran Matt Furlong, who became its new CEO, and Mike Recupero, also of Amazon, who became its chief financial officer.

More reshuffles followed, including the sacking of Recupero earlier this month, just a year after he joined the company.

Dollar Tree, which lagged behind rival Dollar General, also made sweeping changes to its leadership after it came to the attention of an activist investor. The company settled with investment firm Mantle Ridge, adding seven new directors to its board. At the end of June, Dollar Tree also said it would receive a new batch of leaders.

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 has been pushing the retailer for months to sell and change its board of directors. Earlier this year, the retailer managed to re-elect its slate of 13 board members. But last week, the company said its chief technology and supply chain director was leaving.

David Bassuk, Global Co-Head of Retail Practice at AlixPartners, said active investor attention to the retail sector is increasing pressure on boards across the industry.

“There are a lot of concerns in the third and fourth quarters. It won’t get any easier,” he said.

A survey of 3,000 business executives conducted by AlixPartners this fall found that 72% of executives said they were worried about losing their jobs in 2022 due to work outages. This is up from 52% who said the same in 2021.

2. Patience runs dry due to poor performance

When a retailer reports sluggish sales for consecutive quarters, fails to make a profit, or lags behind its competitors, senior management turnover becomes more likely.

Craig Rowley, Senior Account Partner at consulting firm Korn Ferry, compared this 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? trainer.”

Earlier this month, Gap said its CEO Sonia Singal was stepping down after the company’s Old Navy business faced the negative impact of the new strategy. Old Navy, once the company’s growth driver, has switched to plus size models to attract more customers. But the effort left the chain with too many plus size clothes and not enough sizes that customers wanted.

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

Struggling to become profitable, luxury resale retailer The RealReal also announced in early June that founder Julie Wainwright was stepping down as CEO. COO Rati Sahi Levesque and CFO Robert Julian have been named interim co-CEOs.

As the surge in sales due to the pandemic wanes, Neuberger Berman’s San Marco spokesman said old leaders are being squeezed out and new ones are coming in to cut costs and reduce market presence.

“Some CEO changes have occurred in companies that are likely to end up being much smaller than they are today,” he said.

Victoria’s Secret may offer guidance to some retailers, San Marco said. The lingerie retailer has split from its parent company and brought in new management after losing customers to more fashionable competitors.

Last week, the company appointed executives to three new leadership positions. The company also announced the reduction of about 160 management positions, or approximately 5% of head office staff, to streamline operations and cut costs.

3. Pandemic burnout

In some cases, longtime retail leaders are also voluntarily choosing to leave after helping companies deal with the pandemic.

Those who stepped down after a long tenure include former Walmart CFO Brett Biggs, former Home Depot CEO Craig Menier, and most recently Dollar CEO Todd Vasos.

Some companies have asked executives to delay retirement for the past 18 months to help address supply chain issues, labor shortages and more, said Lepard of executive search firm Heidrick & Struggles.

Lepard now expects more retirement delays to be announced, with executives expecting a slower pace after the pandemic burnout.

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

As the risk of an economic downturn looms, more boards are looking for leaders with a strong track record of operational execution and financial discipline, she said.

Retailers are increasingly bringing in outsiders to take their companies in new directions, according to AlixPartners’ Bassyuk. Walmart, for example, has hired former Paypal chief executive John Rainey, who started last month as the company’s new chief financial officer.

In the past, Bassiuk said, companies weighed whether to choose executives with sales or operations experience.

“This is no longer a discussion,” he said. “Now companies want someone from another industry to bring in a new mindset.”

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