Retail CEOs face a brutal reckoning

“During his tenure, Nike made a number of mistakes that weakened the brand. A restructuring was needed to put an end to a period of very poor performance and demonstrate that serious change is underway,” Neil Saunders, managing director of GlobalData Retail, wrote in a statement on Thursday.

Investors are already signaling their confidence in the new hire and the change in course, and share prices rose in premarket trading.

However, Saunders said it is one thing to send a signal to the market, and another to convince consumers. “A jockey change does not automatically put Nike in the lead,” he said.

While Donahoe has been criticized for his lack of product innovation and unimaginative marketing – two elements that have long been at the core of Nike's success – being the CEO of a retail company in general is pretty tough these days.

Tighten your belt

The post-pandemic era of lavish spending is over.

According to the Census Office, Retail sales rose just 0.1 percent in August, slowing from July's 1.1 percent increase as some shoppers became more price-conscious and selective in their purchases.

This presents a more challenging environment for retailers. Some chains, including Walmart and Target, have begun lowering their prices to offer consumers more value.

Others find creative ways to attract more customers to their business.

Retail CEOs are faced with the task of navigating these choppy and unpredictable waters, and boards seem increasingly concerned about whether their top executives are up to the task.

Last year saw an exodus of CEOs from companies like Gap, Bed Bath & Beyond and Adidas. According to data from outplacement firm Challenger, Gray & Christmas, retail CEO turnover more than doubled in 2023, reaching its highest level since 2019.

Experts say this unusual sales volume is closely linked to the pandemic, which has upended the retail industry. Customers stayed home and avoided going to stores, online shopping soared, supply chains were thrown into chaos and stimulus packages boosted demand, making it almost impossible to gauge a company's performance.

But as restrictions eased and the pandemic shield was in place, CEOs became more vulnerable, with boards questioning whether CEOs were the right people to lead their companies into the next phase.

CEOs, pay attention

This pattern continued in 2024.

Last month, Starbucks CEO Laxman Narasimhan resigned after about 17 months in the job, a tenure marked by public criticism from longtime CEO Howard Schultz, declining sales and pressure from activist investors.

That same month, Nestlé's CEO was fired after eight years in the job. An insider told Reuters that the board was concerned about sales growth and slowing product development.

“There is once again a lack of patience at board level,” Jim Rossman, global head of shareholder advisory at Barclays, told the news agency.

“With the COVID-19 pandemic behind us and economic data stronger again, there are a lot of clues to judge a CEO's management skills. If he doesn't perform, he's out,” he added.