It’s a tough time in retail — and CEO heads keep rolling
Nike just ousted its CEO after struggling to boost sales.
John Donahoe is the latest retail CEO to hit the chopping block.
The Nike boss is stepping down next month and will be replaced by Elliott Hill, who started in 1988 as an intern and worked his way up the ranks before retiring in 2020.
Analysts say Donahoe’s departure was somewhat inevitable after Nike’s long period of decline and underperformance.
“Under his tenure, Nike made a number of mistakes which have weakened the brand — a shakeup was required to try and draw a line under a period of very bad performance and to demonstrate that serious changes are underway,” Neil Saunders, managing director of GlobalData Retail wrote in a note on Thursday.
Nike is replacing John Donahoe as CEO.
Investors are already signaling confidence in the new hire and change of direction, with shares up in premarket trading.
But as Saunders points out, sending a signal to the market is one thing, but convincing consumers is another. “A change of jockey does not automatically put the Nike horse out in front,” he said.
Though Donahoe has been criticized for lack of product innovation and uninspiring marketing — two key elements that have been at the heart of Nike’s success — the reality is being a retail boss right now is pretty tough.
Belt-tightening
The era of post-pandemic indulgent spending is over.
Retail sales rose by just 0.1% in August, slowing from a 1.1% increase in July as some shoppers are becoming more cost-conscious and selective with their purchases.
This is creating a more challenging environment for retailers. Some chains, including Walmart and Target, have started cutting prices to offer more value for consumers.
Others are finding creative ways to get more customers through the door.
Retail CEOs are tasked with navigating these choppy and unpredictable waters. And increasingly, boards seem to be rethinking whether their head honchos are up to the job.
The past year or so has seen an exodus of CEOs from companies such as Gap, Bed Bath & Beyond, and Adidas. According to data from outplacing firm Challenger, Gray & Christmas, CEO turnover in retail more than doubled in 2023 and was at the highest level since 2019.
Experts say this unusual amount of turnover is closely connected to the pandemic, which upended retail. Shoppers stayed at home and out of stores, online shopping soared, supply chains fell into chaos, and stimulus checks boosted demand, making it almost impossible to gauge a business’s performance.
But as restrictions eased and the protective shield of the pandemic lifted, CEOs became more vulnerable as boards questioned whether these were the right people to lead these businesses into the next stage.
Watch out CEOs
This pattern has continued in 2024.
Last month, Starbucks CEO Laxman Narasimham stepped down after about 17 months in the job. His tenure was tainted by public criticism from longtime CEO Howard Schultz, falling sales, and pressure from activist investors.
Laxman Narasimhan was ousted as CEO of Starbucks this year.
That same month, Nestle’s CEO was ousted after eight years in the job. One insider told Reuters that the board had become concerned about sales growth and slowing product development.
“There is a fresh lack of patience at the board level,” Jim Rossman, global head of shareholder advisory at Barclays, told the news agency.
“With the COVID-19 pandemic behind us and some stronger economic data, there is plenty to judge a CEO’s management abilities by and if they aren’t performing they are out,” he added.
