Companies aren’t afraid to send their top dogs packing when the going gets tough.
The big surprise this week was Sonia Syngal‘s departure as Gap Inc. CEO as the San Francisco clothing giant finds seemingly no solution to sagging sales. Bed Bath & Beyond (BBB) CEO Mark Tritton got the boot after the home goods chain posted a dismal first quarter earnings report and also dismissed chief merchandising officer Joe Hartsig.
Those moves came after Patrik Frisk‘s tenure as Under Armour CEO wrapped in June and Missguided parted ways with founder Nitin Passi before restoring him to the chief executive post when the ailing e-tailer found a willing buyer. Big names like former Asos top brass Nick Beighton and one-time Forever 21 boss Daniel Kulle both left their respective companies in October.
Dollar General is also losing CEO Todd Vasos when Nov. 1 rolls around. While the dollar store is doing well, his retirement seems like an anomaly these days. And Kulle’s exit at Forever 21 was said to be a mutual decision because the “fit” wasn’t right.
With sales expected to falter under inflation’s weight, many retailers will likely be looking for the proverbial fall guy when earnings look grim. The CEO is the among the first place firms look for a sacrificial lamb.
Gap and BBB have long struggled to right their respective ships, meaning their most recent CEOs don’t necessarily deserve the blame for disappointing company performance. That’s particularly true when an executive takes on the role at a company with its back already against the wall. And a relatively short tenure marked by supply chain disruptions and the Covid pandemic doesn’t help matters.
Yet, it’s also easy to think that a new chief with a fresh set of eyes could hold the secret to reversing a retailer’s fortunes. However, the C-suite’s fresh meat is usually set up for failure when the real underlying challenge typically has more to do with a stale business model alienating consumers.
Retail analysts Ike Boruchow at Wells Fargo and Jay Sole at UBS expect retailers will face an uphill battle clearing out excess inventory and trying to save their gross margins. Boruchow believes some companies will have little choice but to revise their outlooks in light of inventory challenges and a potential sales slowdown.
Though June’s U.S. retail sale rose 1.0 percent, they might have actually dipped 1.0 percent when factoring in inflation, according to Wells Fargo economists.
Moody’s Investors Service credit analyst Manof Chadha on Friday expects slower home goods and apparel sales as consumers factor inflation into their budgets.
“Home and apparel categories are getting softer as higher interest rates and shrinking disposable income make consumers hesitant to spend on non-essentials and the shift to services continues,” Chadha said. “The low unemployment rate and wage gains have supported consumer spending, but in the coming months we see consumers increasingly being more selective in their spending and postponing purchases due to higher prices and uncertain economic environment, putting a damper on retail sales.”
A slowdown will pressure more struggling retailers to consider putting their chief executives on the chopping block.