The revolving door is swinging faster.
There’s been a spate of short-tenured chief executive officers through the retail-fashion industry, as shareholders lose patience with ceo’s at brands that continue to flounder despite the healthy economy encouraging consumers to spend.
Three days before, Jan Singer left as ceo of the struggling Victoria’s Secret, after working there two years and trying to find new customers for the brand. She was succeeded by John Mehas, who left as president of Tory Burch after two years to join Victoria’s Secret.
In July, Barnes & Noble fired ceo Demos Parneros for alleged sexual misconduct, becoming the book store’s fourth ceo to vacate the seat in five years. Parneros was only on the job for a year, and had succeeded Ronald Boire, who was in the hot seat for under a year. “It’s all about Lenny Riggio,” said one retail expert who requested anonymity. Riggio is executive chairman and a veteran of the company, and the architect of the chain’s massive expansion.
Last June, Iconix Brands Group ousted ceo John Haugh, who was two years on the job trying to turn around the licensing company which had been losing market share and business with mass retailer chains.
Stefan Larsson lasted 18 months as ceo of the Ralph Lauren Corporation until leaving in the spring of 2017, which sources said was more about differences with the legendary designer and who does what, rather than company results. Larsson previously ran Old Navy and was dogged by speculation on whether he was a good fit for Ralph Lauren — a fact the designer himself has acknowledged.
A year ago, Jerry Storch left as ceo of the Hudson’s Bay Co., after about two and a half years on the job, and in April 2015, Marigay McKee left Saks Fifth Avenue as president after 15 months there.
Roger Farah was co-ceo of Tory Burch for just over two years, from September 2014 to February 2017. It’s believed he left on his own accord. And Paul Blum joined Henri Bendel as ceo in February 2016, stayed until June 2017, and now Bendel’s is in the process of permanently shutting down.
“This industry is more volatile. It’s under pressure to improve results. Shareholders are demanding more and ceo’s and the boards have to be accountable,” stated Janet Kloppenburg, president of JJK Research Associates. “In some cases, there’s a lot of debt on the balance sheet, so you have to get the Ebidta up or you can’t cover the debt burden. There’s not a lot of waiting time.
“Importantly, in terms of the economic backdrop, it’s about as good as it gets. Consumers are spending, unemployment is the lowest it’s been, and interest rates are only going to go up. So if you’re not able to fix the business in this environment, boards will find someone they think can do it.”
As Mark Cohen, director of retails studies and adjunct professor at Columbia Business School, sees it, the retail industry has always been very challenging and is probably more so today, but the retailers themselves are making a tough situation worse. “Companies faced with poor performance are hiring people without the requisite relevant experience,” Cohen said. “They may not have been a ceo before or they’re just not particularly schooled in the type of business they’ve joined.”
A 2018 Conference Board study on ceo succession among S&P 500 companies underscores how industry ceos are in the hot seat. The report reads: “Analysts contend that the wholesale and retail industry is among the most vulnerable to today’s changes and disruptions, including ongoing pressure to develop an omnichannel presence to compete with online shopping. That these pressures require fresh leadership and a renewed strategic vision is confirmed by data on ceo turnover, which at 22.7 percent in 2017 — up from 16.3 percent in 2016 — was by far the highest of all industries in 2017…In 2015, retail and wholesale had an 11.3 percent succession rate.”
In contrast, companies in the finance, insurance, transportation and communication and extraction industries reported the lowest overall succession rates by industry, or less than 8 percent for each sector, according to the Conference Board report.
“Definitely, it’s the Wall Street pressures. People have a shorter fuse and people are much more under scrutiny,” said retail expert Walter Loeb. “They have to perform more effectively for their company. Stocks are not performing and people are worried about 2019.”
Cohen believes retail boards have “completely unrealistic expectations. It takes two to five years to properly reposition a business that has lost its way. When businesses get tough, shareholders or owners get very impatient and look to solve problems with the wave of a magic wand. With a new ceo, who is typically an outsider, there is a high probability of failure. The half-life of ceo’s of public companies has continued to shrink as expectations increasingly ramp up and unhappiness continues to ramp up.”
“To be a successful ceo today is very different from what was required 20 years ago,” said one former ceo who requested anonymity. “It used to be the world of the merchant prince. Retail was all about being merchant-driven. But in the last 10 years, retail has become far more complex with the advent of online, investment in technology, the changing world of marketing, analytics and customer-relationship management. The complexity of the business is such that a ceo has to be much more multi-dimensional to be successful. I’m not saying merchandise is any less important. It’s important as well. But we don’t have an industry where people have been trained to do all of these things.
“On top of all this, retail has become harder. There are so many more places where people can buy many more products.”
Corporate structures don’t help the situation. “At Ralph or J. Crew, you still have individuals with large stakes involved,” and not always seeing eye to eye with the ceo’s they appoint, said the former ceo. “Stefan Larsson in effect went to the board and said ‘it’s Ralph or me,'” who should be calling the shots.
“It was a different situation at J. Crew where the board lost confidence in Jim Brett,” who formerly ran West Elm, the furniture retailer. “He wanted to democratize the brand and sell it on Amazon. He had not been in the soft goods business.”
“I strongly believe you do not need a ceo and a chairman,” at the same company, Loeb said. “You need a ceo but you don’t need a chairman overlooking the ceo’s shoulder. Home Depot has one person running the whole shebang — Craig Menear. Why can’t other companies combine the jobs? It cuts expenses and it creates a more efficient and direct reporting line. You get things done quicker.”