From Gap to GameStop, there’s a retail executive exodus underway — and more departures are coming

Don’t expect the stream of departures from retailers’ C-suites to stop anytime soon.

Already this year, Gap and Bed Bath & Beyond abruptly replaced their CEOs as the companies’ sales plunged. GameStop fired its chief financial officer in the middle of the video game retailer’s efforts to revamp its business. After sticking around to help Dollar General navigate the pandemic, the company’s longtime CEO said he was retiring.

As the retail sector stares down an increasingly challenging landscape, experts say executive shakeups will likely become more common. Stimulus spending that boosted sales during the pandemic will no longer mask any underlying business struggles. Surging inflation is raising worries that shoppers will pull back on spending. And after the strain of the past two years, some executives are ready for a change of pace.

“Retail CEOs are going to have to earn their seats and earn their money, because their jobs just got a lot harder in the last six months,” said John San Marco, a senior research analyst covering the retail industry at Neuberger Berman.

Wall Street is becoming wary of the retail industry too as the economic backdrop gets choppier. Shares of the S&P Retail exchange-traded fund are down about 30% so far this year, worse than the S&P 500’s 18% decline over the same time.

As pressure builds for retail executives to drive growth, there’s a greater probability they’ll disappoint boards and shareholders and be shown the door, San Marco said. In other cases, executives might see the writing on the wall and want to leave while they’re still riding high.

Here are three reasons executives across the industry could be looking for a new job in coming months.

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

“If your stock price has plummeted, if your market value is less than your revenue, you’re going to be a target for activists,” said Catherine Lepard, a partner in the retail practice at Heidrick & Struggles, which helps company boards with succession planning and executive searches.

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

About three months later, Tritton got pushed out as sales declines persisted, losses mounted and inventory piled up. Sue Gove, an independent director on the board, was installed as interim CEO.

Cohen also turned up the heat on GameStop after buying shares of the legacy brick-and-mortar videogame seller. He was tapped to lead its digital push as the chair of its board and the company got a slate 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 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 sweeping changes to its leadership after getting caught in the crosshairs of an activist investor. The company settled with investment firm Mantle Ridge by adding seven new directors to its board. In late June, Dollar Tree also said it would get a fresh batch of leaders.

Kohl’s also came under scrutiny from the hedge fund Macellum Advisors, which for months pushed the retailer to pursue a sale and shake up its slate of board of directors. The retailer managed to reelect its slate of 13 board directors earlier this year. But last week, it said its chief technology and supply chain officer is departing.

David Bassuk, global co-leader of the retail practice at AlixPartners, said the activist investor attention on the retail sector is turning up the pressure on company boards across the industry.

“There’s a lot of concern heading into the third quarter and fourth. It’s not getting 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 disruption. That’s up from the 52% who said the same in 2021.

When a retailer posts consecutive quarters of sluggish sales, fails to post a profit, or falls behind its competitors, turnover in the C-suite becomes more likely.

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

Earlier this month, Gap said its CEO Sonia Syngal was stepping down after the company’s Old Navy business saw a new strategy backfire. 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 customers wanted.

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

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

As the sales surge from the pandemic fades, Neuberger Berman’s San Marco said old leaders are being pushed out and new ones are being brought in to slash expenses and shrink brick-and-mortar footprints.

“Some of the CEO changes have taken place at companies that probably will end up being a lot smaller than they are today,” he said.

Victoria’s Secret could offer a playbook for some retailers, San Marco said. The lingerie retailer spun off from its parent company and brought in new leadership after losing customers to trendier rivals.

Last week, the company appointed executives into three new leadership roles. It also announced it was cutting about 160 management roles, or roughly 5% of its home office headcount, to streamline operations and slash expenses.

In some cases, longtime retail leaders are also voluntarily deciding to leave after helping companies navigate the pandemic.

Among those who’ve stepped down after long tenures are Walmart’s former CFO Brett Biggs, Home Depot’s former CEO Craig Menear, and most recently, Dollar General CEO Todd Vasos.

Some companies asked executives to delay retirements over the past 18 months to help resolve supply chain snarls, labor shortages and more, said Lepard of the executive search firm Heidrick & Struggles.

Now Lepard expects to see more delayed retirements being announced, along with executives looking for a slower pace after 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 risk of an economic slowdown looms, she said more boards are looking for leaders with strong track record for operational execution and financial discipline.

Retailers are also increasingly tapping outsiders to lead their companies in new directions, according to Bassuk of AlixPartners. Walmart, for instance, tapped former Paypal executive John Rainey, who started last month as the company’s new chief financial officer.

In the past, Bassuk said companies would weigh whether to pick executives with experience in either sales or operations.

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