Few retail execs have what it takes to be CEO anymore—and it’s a troubling sign of a failing industry

February 13, 2023, 6:11 PM UTC
A Gap store in Manhattan
Of the eight Fortune 500 companies without a permanent CEO, half are retailers.

When Sonia Syngal abruptly ceded her two-year corner office post at Gap Inc. in July to an interim CEO amid supply-chain chaos, a Kanye West feud, and chronic sales declines, there was a sense of déjà vu in the retail industry. After all, her predecessor, Art Peck, had also been ousted suddenly in late 2019, after which the CEO role was again held by an interim chief for a few months.

Gap Inc., which also owns Athleta, Banana Republic, and Old Navy, is hardly the only retailer looking for a permanent CEO in a drawn-out search for someone with the hoped-for Midas touch. The RealReal’s founder Julie Wainwright stepped down last June as CEO of the luxury resale site, following a tenure that saw profitability drop, and her replacement was named only last week, eight months later. Similarly, Steve Rendle, former CEO of the North Face and Vans parent company VF, unexpectedly stepped down in December. Investors had tired of Vans’ sales slump and a 2020 acquisition of streetwear brand Supreme that failed to yield promised benefits.

The list goes on.

In January, Stitch Fix brought back founder Katrina Lake as an interim CEO to halt its revenue slide, and Rite Aid, which Moody’s downgraded this month, now has an interim chief at the helm after Heyward Donigan’s exit last month. Kohl’s was in a similar situation until Feb. 2 when it named board member and previously interim CEO Tom Kingsbury its permanent chief executive, replacing Michelle Gass. Last year, Starbucks, Under Armour, and Bed Bath & Beyond graced the list of companies needing many months to find a permanent CEO.

All told, half of the eight Fortune 500 companies without a permanent CEO are retailers. 

What’s tripping boards up is the one-two punch of a CEO job that is more complex than ever. The retail industry, in particular, has generally become less diligent about cultivating a leadership talent pipeline that generates executives able to handle the industry’s deep challenges. Simply put, the pickings are slim.

“There’s a real recognition that disruption is the norm in retail now and that there is no standard operating model,” says David Bassuk, managing director and head of AlixPartners’ global retail practice. And that means even more skills than before are required, which retailers themselves acknowledge.

On a November call with Wall Street analysts, and after the announcement of Gass’s departure, Kohl’s chair Pete Boneparth read a laundry list of qualifications the company’s search committee wanted in its next CEO, including expertise in brand-building, e-commerce, store operations, supply chain, data security, and the ability to “build great teams,” to name a few. He also noted that the committee couldn’t say how long it would take “until a permanent successor is named.”

Over at Gap, interim chief Bobby Martin said last summer that the board would “take the time to get this right.” It’s been six months and counting.

Retail CEOs likely agree that the job is now tougher. In AlixPartners Disruption Index released in January, 86% of surveyed retail CEOs thought it was challenging to know which disruption to address first, whether inflation, tech advances, or other issues.

Nevertheless, executive search firms Fortune spoke to say the paramount concern is finding the right person to helm an organization, barring an extreme emergency. At Bed Bath & Beyond, a company very much in an emergency and needing to assuage suppliers and lenders, the director and interim CEO, Sue Gove, was made permanent after four months. Of course, given the company’s trajectory toward possible bankruptcy, it’s not surprising executives weren’t lining up for job interviews. Moving slowly makes sense, lest a retailer must go back to the drawing board as Gap did.

“If a company has an excellent emergency succession plan in place whereby the interim CEO is a steady hand at the wheel, and they’ve got time, even one or two years, they’re going to take it,” says Catherine Lepard, a partner at executive search firm Heidrick & Struggles. 

Chief merchants are no longer CEO shoo-ins

Retail’s path to the CEO job has changed in recent years. For decades, retailers favored the venerated “merchant prince” who chose what products to sell and was seldom questioned or called upon to deal directly with prosaic matters like distribution and operations.

It was an exalted role because, after all, no one will buy products that aren’t appealing. Think Mickey Drexler at Gap, then J.Crew, in the 1990s and 2000s; Les Wexner, founder and former CEO of L Brands, which previously owned Victoria’s Secret; or luxury department store icon Stanley Marcus of Neiman Marcus.

Now, a CEO needs to have not only an instinct for what products customers want but also chops in other areas, notably supply-chain management, cybersecurity, sourcing, e-commerce, and store operations, as well as the ability to build teams and adopt a style of empathetic and inclusive leadership that employees expect of today’s CEOs.

While finding executives with such a mix of skills is a tall order, enough companies in the industry have succeeded by finding someone with the required areas of expertise who also knows how to put together a team that complements their skills.

“Retailers need the leader of the symphony, not the star of the show,” says Brenda Malloy, CEO of Herbert Mines Associates, an executive search firm focused on the retail industry. “You can have an orchestra of brilliant individual functional experts, but how does a CEO bring those people together?”

It follows then that lengthy periods seen without a permanent CEO at certain companies point to their failure to attract talent or draft an adequate succession plan, significant risks in times as tumultuous as those the industry has experienced the last few years. 

A case in point is Target, whose CEO Brian Cornell staged one of retail’s most remarkable turnarounds. When Cornell in 2014 replaced Gregg Steinhafel, a longtime CEO who had let the company drift, the retailer had lost much of its “Tarzhay” cachet. Its stores were dated, its famed low-price collaborations with designers generated less excitement, and its merchandise was often out of stock. Worse still, Target, long admired as a talent development machine, had lost much of its ability to turn out retail’s next leaders.

Target’s board decided to look externally, selecting Cornell, a former higher-up at PepsiCo, Michaels, and Sam’s Club. Cornell, who in September 2022 agreed to stay at Target for three more years, set about assembling an A-team that included a top-notch operations chief in John Mulligan (a finance chief who had been interim CEO before Cornell), and a merchandising whiz from Nordstrom in Mark Tritton. Cornell also lined up a team of executives in charge of groceries who renewed growth in that category. Still, it took three years for Cornell’s strategy to gel and turn Target around in earnest.

Under Cornell, Target has reinvested in its leadership talent machine and is again regarded as one of the best “academy companies.” Indeed, members of Cornell’s team have gone on to become CEOs of H&R Block, Harry’s, and Blue Nile. And that means the odds of another lengthy handover when Cornell eventually leaves are lessened.

Where is the next generation of talent?

The industry’s corner office hasn’t been immune to the talent shortage. There are simply too few CEOs who have undergone the leadership development needed today compared to just a few years ago. That’s partly because retailers have grown less heedful about developing the necessary pipelines, a problem that’s worsened in recent years as retailers saw profits crushed by a push into low-margin e-commerce. That, coupled with the boom in tech, means that much potential talent has been lured away, exacerbating a vicious cycle in which retailers sacrifice leadership programs in leaner times.

“It’s a huge problem. Where are people going to get trained under a program in a skill-building culture, with leadership training and cross-functional exposure?” Herbert Mines’ Malloy says.

To be sure, many retailers are still known for minting top talent, notably Walmart, Target, Best Buy, and Macy’s. Macy’s CEO Jeff Gennette, for instance, joined the company in 1983, starting as an executive trainee, before taking assignments in different markets and functions on the way to becoming president in 2014 and CEO four years later. His career path is a textbook case of succession planning. Walmart’s Doug McMillon followed a similar upward trajectory.

But with fewer retailers operating as training grounds, and given the sector’s travails, search firms hardly enjoy an embarrassment of riches. “There is not necessarily a huge supply of storied retail CEOs with a brilliant track record,” says Lepard, the Heidrick & Struggles partner. 

As a result, boards are looking further afield for candidates in other sectors, such as consumer goods, tech, and hospitality. The caveat is that CEOs coming from another industry must have consumer-facing experience. Under Armour in January tapped a hospitality executive when it named Stephanie Linnartz, president of Marriott, its next CEO. And in 2012, Best Buy turned to travel executive Hubert Joly to fix the company, much to the consternation of Wall Street at the time. It turned out to be a prescient decision.

Consumer products companies have also minted many retail CEO stars. Target, Dick’s Sporting Goods, and Ulta Beauty are among the companies led by PepsiCo alumni. And Kohl’s ex-CEO Gass, who will take the reins at Levi Strauss within 18 months, made a name for herself at Starbucks before joining Kohl’s a decade ago. Regardless, don’t expect boards to tap CEOs from industries too far removed from anything directly touching consumers, like biotech. “The risk of going outside the industry is typically high, and this is not the time for high-risk propositions in many retail boards,” says AlixPartners’ Bassuk.

Sometimes, the qualifications from a different industry are not immediately clear. When Herbert Mines’ Malloy suggested U.S. Cellular’s then-CEO Mary Dillon to Ulta Beauty’s board members in 2013, it wasn’t obvious to them how her skills at a phone company could apply to the fledgling beauty store chain. But U.S. Cellular was a tech company operating hundreds of stores, and Dillon had obtained the experience and speed needed to help a fast-growing retailer like Ulta successfully ramp up. “That came together, and it was just magic,” Malloy says. “But at first, the directors’ reaction was, ‘What do you bring to the table, and why would I want to do this?’”

Dillon went on to double Ulta’s sales during her eight years as CEO and now heads Foot Locker. Just as crucially, she groomed her successor, Dave Kimball.

Ultimately, the full-time CEOs that retailers desperately want must be able to blend the practical with the visionary. “Retail is still detail, so they have to make sure that they’re great at building fantastic, high-performing teams and not lose the execution capability,” says Lepard. Boards are also more inclined to look for “those who blend the strategic with the visionary, somebody who can look at where a retailer is today but also, where’s the white space?” she says. And that takes time.

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