Exec exodus: retail's C-suite revolving door

U.S. retailers are seeing an exodus of C-suite executives, with CEO exits up 15% this year versus H1 2021.

Why it matters: The management shakeups — some at retail incumbents like Gap and Bed Bath & Beyond — could mean we see some strategic dealmaking as new leaders seek to fortify their companies' positions.

What they're saying: D.A. Davidson analyst Tom Forte will be watching for a sea change. His first question, “Is there a significant change in strategy from an M&A standpoint?"

• "How are they doing and hiring senior talent around them? And then to what extent if at all, are they moving the needle on hiring for the firm in general?” he says.

Context: As the industry navigates evolving consumer behaviors, inflation and a looming recession, some 62 CEOs across the retail, apparel, consumer products and food sectors have left so far this year, according to outplacement firm Challenger Gray & Christmas.

• ​​CEOs, like the U.S. workforce at large, delayed their job quitting plans in the chaos of 2020.
• In recent months, they've been as much a part of the Great Resignation as their employees — so much so that public boards are widening their nets when it comes to executive search processes.

The latest: Some CEO moves were planned or arranged transitions — like at Dollar General and Keurig Dr Pepper — while others left behind struggling businesses.

• Gap CEO Sonia Syngal departed last week, leaving behind a company that saw slumping sales and a strategy pivot (to offer more inclusive sizes) that it scaled back.
• Bed Bath & Beyond’s Mark Tritton was ousted after a slew of bad sales figures.
• Some founders passed the mantle after strategic events — like newly public Pinterest and The RealReal.

Flashback: CEOs of companies who weren't able to operate business as usual during the height of COVID-19 without losing market share are now paying the price, says Andy Challenger, senior vice president of Challenger, Gray & Christmas.

• “There’s a scorecard on public organizations in the stock market,” Challenger says. Companies may have overextended during the pandemic, either by hiring too much or reading too deeply into consumer trends and now things are starting to shift back, he says.
• COVID “certainly caught a handful of leaders out in front of their skis,” he says.

Yes, and: Not all retail executives were able to navigate the ebb and flow of online shopping during the pandemic, as well as the subsequent shift back to the physical world as the economy reopened.

• “It's more difficult to operate as an omnichannel retailer than either a pure-play physical retailer or a pure-play e-commerce retailer,” Forte says.
• That said, it has been particularly difficult for the sector throughout the pandemic as they’ve been hit with store closures, supply chain disruptions, and — lately — excess inventory, as consumer behavior shifts to outside-the-home activities.

The bottom line: The executive turnover is evidence that retail players can’t skate on short-term trends or hype, startup and legacy companies alike.

• The ones who are getting it right have seen the fruits of their labor, "in terms of return on capital invested, in terms of growth, in terms of image in the marketplace," says Andrea Guerzoni, EY’s global vice chair of strategy and transactions.
• “It's become really super difficult to hide in this environment if you don't have the right strategy adopted,” Guerzoni says.