Follow the Leadership
There have been more than a few headline-grabbing leadership transitions in the retail world recently. And, to be honest, “transitions” might be too gentle of a euphemism: some big names from some big-name brands have left, been fired, forced out, voted off the board, or otherwise pressured to step down in the last few months.
Consider that Lululemon founder and chairman Chip Wilson resigned under pressure last December, Target CEO Gregg Steinhafel was fired in early May, Dov Charney, the former chairman and chief executive of American Apparel, was ousted in mid-June and, most recently, Dollar General CEO Rick Dreiling announced his retirement plans. While executive turnover and the search for fresh leadership is an integral part of the high-stakes competitive game that every retailer plays, the high-profile departures of a number of CEOs and executives — all in a comparatively short space of time — seems like something more significant than just random chance. The big question to me is: are they connected? Not directly connected, of course, but are these firings and pressured departures related to a larger retail industry trend?
On the surface, it seems like each of the ousted leaders I reference above left for different reasons. The assumption is that Steinhafel was fired at Target primarily as a result of the high-profile credit card information theft/scandal last December; Wilson was forced to resign from Lululemon’s board in the wake of his controversial comments about customers’ bodies, and Charney for a series of alleged transgressions ranging from the pedestrian to the bizarre. Dollar General’s Dreiling appears to be the only one who wasn’t asked to step down — he’s simply retiring.
All very different cases, right? I wonder. Because it strikes me that beneath the public reasons cited for the departure of each of these CEOs there is a bigger story of poor financial performance and ongoing uncertainty. Yes, Target suffered a significant data breach, but Steinhafel wasn’t fired until months later. I wonder if his firing wasn’t linked more to the fact that Target has been performing below expectations for the last couple of years. The brand’s Canadian rollout has been a disaster, and, while the mega retailer still occupies a prominent place on the retail landscape, the consumer credit scandal is really just the latest in a series of missteps.
The alleged behavior of Dov Charney at American Apparel, if true, certainly justifies his ouster, but, with American Apparel’s sales on the decline and the brand’s stock price trading a under a dollar per share, there is a backdrop of deeper problems there that is hard to ignore. And while Chip Wilson’s resignation as Lululemon chairman was brought on ostensibly by the backlash from his indelicate public comments, the athletic apparel retailer has been losing market share to competitors — a process that seemed to accelerate after the company took a public relations beating from the initial see-through yoga pants fiasco last year.
While Dollar General CEO Rick Dreiling might seem to be leaving on top of the world — Bloomberg reports that, since he took over in 2008, Dollar General’s annual sales have gone up 80% (to $17.5 billion) and the brand has increased its number of stores by 38% — peeling back the layers of the onion reveals a bit more uncertainty. The rapid proliferation of dollar stores has the investment community worried, and with larger numbers of value-oriented retailers selling overstocks or seconds (which is, after all, the exact same formula for merchandising a dollar store), there’s legitimate concern that the dollar-store concept might see even more of its market share eroded. Dollar General has had a great deal of success establishing itself as the only general merchandise store in small tertiary markets, but the brand has run into increasing competition everywhere else.
If there is more going on here, and if this executive turnover is about more than just the proximate cause of a scandal or a planned retirement, what might that say about the state of the industry? I think it’s another sign that the marketplace is extremely unsettled. There are a lot of moving parts in the retail world these days, and we’re continuing to struggle to adjust and adapt to integrate online and mobile sales into what has long been an exclusively brick-and-mortar business model. In that context, and in the context of a lingering period of underwhelming sales and mediocre economic conditions, there may also simply be less tolerance for CEO mistakes.
These disgruntled and frustrated boards are impatient to get sales moving in the right direction sort of like a sports team owner or GM trying to turn things around by firing the manager or coach: It’s easier to change the one person at the top than revamp the whole team. There’s no way to know right now if these moves will “work,” or if these CEO departures were the result of thoughtful and strategic deliberation or nervous impatience, but I’ll be watching these retailers closely in the months and years ahead to see how things evolve.
What do you think? Is this executive turnover partly due to an industry in transition, an underwhelming economy, and retailers trying to find their way, or is this really just about a few isolated scandals? Leave a comment below to continue to conversation, or email me at [email protected].
Click here for past columns by Jeff Green.
Smith’s Food & Drug to anchor Utah mixed-use development
Salt Lake City – The Howard Hughes Corporation (HHC) and Smith’s Food & Drug are planning a 78,000-sq.-ft.food and drug store in Holladay, Utah. The 57-acre mixed-use Cottonwood development, located eight miles from downtown Salt Lake Cit, will feature upscale shopping, dining, entertainment and offices in a “Town Square” style setting as well as multi-family residences when complete.
Transforming the former Cottonwood Mall, the redevelopment by The Howard Hughes Corporation will include approximately 620,000-sq.-ft. of retail and entertainment, 260,000-sq.-ft. of office and approximately 600 residences.
Smith’s Food & Drug has signed a letter of intent to build a combination food and drug store that will offer a wide selection of prepared and specialty foods; organic food selections; bakery, pharmacy, dairy and floral as well as fresh meat and seafood. The new store will feature a multi-level parking structure for customers’ shopping convenience.
Report: New mixed-use development coming to Birmingham, Mich.
Birmingham, Mich. – A new 49,000-sq.-ft. mixed-use development including an entire floor of retail space is slated to open in downtown Birmingham, Michigan, in third quarter 2015. According to the Macomb Daily News, the development, called “The Forefront,” will be located in the Principal shopping district and feature retail stores on the first floor and 11 luxury condos on the second and third floors.
The development will be built on the site of an existing building, which will be demolished.