The Post-Pandemic CEO Shakeup | BoF

With a possible recession on the horizon, fashion companies are making sure they have the right person in charge.

In the past week alone, three prominent industry chief executives — Gap Inc.’s Sonia Syngal, MatchesFashion’s Paolo De Cesare and Lyst’s Chris Morton — exited their posts.

They join a long, and rapidly growing trend that also includes The RealReal and Under Armour, whose CEOs departed in June, and Glossier, whose founder stepped aside in May. Earlier this year, executive transitions occurred at Chanel, Alexander McQueen and Versace. The list goes on.

But the frenetic pace of C-suite transitions isn’t unique to fashion. Through May, 668 CEOs from a full range of US firms, including non-profit, technology and retail, have left their posts, according to Challenger, Gray & Christmas, the highest total since the HR consultancy began tracking such changes in 2002.

Every company has its own story. But there are some common themes emerging. In many cases, leaders who steered their businesses through the upheaval of pandemic times — whether it was untangling snarled supply chains or making the most of unexpectedly robust e-commerce growth — may not be the best candidates to navigate those same firms through the post-pandemic era.

This year has brought plenty of new challenges, including inflation at a multi-decade high, plunging share prices, rising interest rates and a potential recession. Meanwhile, the supply chain issues of the last two years are gradually easing, and the e-commerce boom is over.

“Now, boards of directors [are saying] ‘when we hired this person, pre-pandemic, we were assuming [certain things].’ Those assumptions aren’t there anymore,” said Paula Reid, president of the executive search firm Reid & Company. “We’re looking for a different set of skills now.”

Many pandemic CEOs are ready to move on, too. The pandemic’s initial onslaught of store closures, bankruptcies, layoffs and major changes in the way people work meant many CEO’s spent months on end in crisis mode.

“Now that we’re kind of out of that initial two year crisis, you’ve got this pent up transition that happens,” Reid said.

High Fliers no More

Over the past year, some retailers that enjoyed robust profit gains bolstered by external factors like government stimulus checks, delays in debt repayments and surging e-commerce demand driven by pandemic angst may have misread their Covid bump as being “company specific” and “everlasting,” said Simeon Siegel, managing director and senior analyst at BMO Capital Markets.

When those metrics came down to earth – along with those retailers’ share prices – CEOs found themselves in a vulnerable position.

“The common denominator that I see right now is Covid allowed a lot of companies to mask the underlying challenges,” Siegel said. “In 2022, the rising tide that lifted all 2021 boats is now receding.”

Companies need to be careful not to make a change for change‘s sake, Reid cautioned.

“We tend to judge people constantly based on the context you’re seeing them operating, and it doesn’t always mean a lack of capacity to operate in another context,” she said. “It can sometimes mean a lack of imagination.”

Some firms that recently shed their CEOs, like Matchesfashion and Gap Inc., were struggling well before the pandemic. Despite playing in the sweet spot of luxury and e-commerce, which boomed amid the pandemic, Matchesfashion saw revenue fall 10 percent to £392 million ($464 million) in the year ending Jan. 31, 2021, resulting in a loss of £36.6 million. The company, under the leadership of Apax Partners, has now appointed its fourth CEO in under five years.

At Gap, Syngal’s efforts — including bigger investments in its athleisure brand Athleta and selling off tangential businesses like the multi-brand retailer Intermix and children’s label Janie and Jack — weren’t enough to meaningfully turn the tide. Gap shares are down over 50 percent this year; the board pulled the plug.

Fashion entrepreneurs have their own struggles, as investors signal they are going to be stingier about which firms they back going forward. Founders and CEOs who were masters at driving top-line growth may not be the right fit in an environment where profitability matters more, or where setting the company up for an IPO or a sale is the short-term priority.

Lyst’s Morton — who is handing the reins to the company’s chief operating officer Emma McFerran in September — said the leadership reshuffle would help the company grow “the complexity of [its] operations” in a market that is “accelerating and changing fast.”

“It’s increasingly clear that we have a unique opportunity ahead of us — my biggest fear is that we don’t take advantage of it,” Morton wrote in a LinkedIn post announcing the change.

On the luxury side, earlier this year, brands like Burberry, Versace and Alexander McQueen engaged in the C-suite musical chairs that has become typical for many high-end European labels (Gucci executive Gianfilippo Testa took the top job at McQueen, replacing Emmanuel Gintzburger, who moved to Versace, where he succeeded Jonathan Akeroyd, now at Burberry).

Not every luxury label looked to a rival to fill the top job. Chanel appointed an industry outsider in former Unilever HR chief Leena Nair in January.

As these labels lap a stretch of accelerated gains, diversity of leadership experience could become more critical as companies look to move deeper into new growth categories and experiential offerings (like hotels and museum projects).

“Many of these CEOs are coming from big businesses that are not necessarily luxury background businesses, but more strategic consulting training, which I think is actually a good thing,” said retail consultant Robert Burke.

– Alexandra Mondalek contributed to this article

THE NEWS IN BRIEF

FASHION, BUSINESS AND THE ECONOMY

Lanvin Group aims to acquire another brand next year. First, Fosun aims to float Lanvin on the New York Stock Exchange via a blank-check company in October or November, said Joann Cheng, chairman and chief executive officer of Lanvin Group.

Burberry holds outlook steady amid China lockdowns. The British luxury brand continues to target high-single digit revenue growth and a 20 percent margin at a constant currency in the medium term, as it “actively manages” the impact of lockdowns in China and soaring inflation in its home UK market, the company said in a statement Friday.

Richemont, Burberry sales disappoint, dragged down by China’s Covid-zero strategy. Luxury shares fell Friday as investors responded to the impact of coronavirus lockdowns in the key market, as well as economic headwinds and surging inflation elsewhere. Richemont, the maker of Cartier jewellery and Vacheron Constantin watches, saw sales in mainland China plunge 37 percent in the three months through June.

Tommy Hilfiger Is returning to New York Fashion Week in September. The brand will show its fall 2022 collection in Brooklyn, marking its first runway show since the pandemic began. It will also be livestreamed on Roblox.

Inditex enters ‘clean tech’ with investment in circular start-up Circ. The fast-fashion giant joined a $30 million funding round, making its first venture investment in a clean technology company as interest in textile recycling grows.

Nike deepens ties to Fanatics with college sports apparel deal. As part of the arrangement, Fanatics will make Nike-branded shirts, replica jerseys and other gear for all genders, while Nike focuses on in-game products for the players. The companies declined to share financial terms.

Fast Retailing sees record profit on weak yen, sales boom. The Asian retailer raised its full-year operating forecast to 290 billion yen ($2.1 billion) from an earlier estimate of 270 billion yen.

US footwear industry expects weaker sales ahead. The footwear industry, seen as a bellwether for US consumption, is pulling back on hiring and investment amid predictions of a sales slowdown. A survey from the Footwear Distributors & Retailers of America found that 87 percent of companies expect weaker sales in the next six months.

Euro reaches parity with dollar for first time in decades. For the first time since 2002, the Euro has reached parity with the dollar. The US dollar index also hit a 20-year high, at $108.56, though it has slightly dropped since.

Savile Row tailor brand Gieves & Hawkes’ sale process kicks off. Advisers started formally soliciting bids for the 250-year-old Savile Row tailor brand this week, people with knowledge of the matter told Bloomberg.

THE BUSINESS OF BEAUTY

Sephora makes permanent exit from Russia. LVMH is selling Sephora’s Russia business to the local general manager, the company said on Monday in an emailed statement. In early March, the group temporarily closed its Russian stores.

PEOPLE

Victoria’s Secret names Pink brand head as CEO. Victoria’s Secret has named Amy Hauk chief executive of both the Victoria’s Secret and Pink brands.

Dior Beauty’s Jérôme Pulis exits amid ‘One Dior’ push. Pulis steered the brand’s communications and celebrity strategy during a period of rapid expansion for top fragrances like the Charlize Theron-fronted J’Adore and Johnny Depp-endorsed Dior Sauvage.

MEDIA AND TECHNOLOGY

Klarna’s valuation slashed by $39 billion amid fintech rout. The buy now, pay later giant said it raised $800 million from new and existing investors. Its new valuation is down from the $45.6 billion it achieved in June 2021.

Karlie Kloss brings a virtual runway to Roblox. The supermodel is launching the Fashion Klossette Designer Showcase with five pop-up stores to promote the virtual apparel of Roblox Corp. creators Builder Boy, Lovespun, Reverse_Polarity, RynityRift and Yourius.

Jason Wu releases wearable NFT gown With DressX. Digital fashion maker DressX partnered with American brand Jason Wu to release a wearable NFT of First Lady Michelle Obama’s 2009 Inaugural Ball gown.

Compiled by Diana Pearl.