Big retailers Target (NYSE:TGT), J.C. Penney (NYSE:JCP), and American Eagle Outfitters (NYSE:AEO) are on the hunt. They're looking for new Chief Executive Officers who will be able to heal the wounds of prior leadership and get the companies back in the competition. If they are unable to fill the positions fast, they risk losing more consumers, and profit.
Target expanding the search
Target, currently being led by interim CEO John Mulligan, is seeking a "comeback chief" who will lead the efforts in the company turnaround. As a result of the data breach earlier in the year, where criminals gained access to approximately 40 million customer credit and debit card accounts, and the failing attempt at penetrating more deeply into the Canadian market, Target saw tremendous declines in its revenue and has had a difficult time luring back wary customers.
However, its first-quarter numbers recently boasted improvement. Up 2.1% from the year earlier, revenues jumped from $16.71 billion to $17.05 billion.
Target has definitely made advances under John Mulligan. For example, he has hired a new chief information officer, introduced a safer "chip-and-pin" credit card technology, and is currently working on remediation steps to prevent any similar event from occurring again.
Despite the progress under Mulligan, Target will continue to seek a new candidate to lead the charge. Mulligan declared that he would not be interested in CEO for the long run. Instead, he would return back to his position as Chief Financial Officer after a candidate is selected.
According to Paul Ziobro and Joann S. Lublin of the Wall Street Journal, Target, starving for transformation, will willingly seek nominees from outside the company and even outside the industry if necessary. This is surprising, since Target leaders have traditionally been trained and molded from within the company for over 100 years.
According to Michelle Fox of CNBC, Mulligan said, "Whoever the new CEO is, the focus will be on three areas: growing sales and traffic in the U.S., continuing to improve Canada, and getting the company to be a leading 'Omni-channel' retailer." Until then, Target continues to pick up the pieces and rebuild.
American Eagle struggles to soar
American Eagle Outfitters is trekking on the same uphill climb as Target. It is losing its competitive advantage to the "fast-fashion" retailers, such as Forever 21, Charlotte Russe, and H&M.
These stores quickly deliver apparel based on the most recent fashion trends presented at Fashion Week, which is an event in the fashion industry where designers are able to present their latest collections to media and buyers. As a result, "fast-fashion" retailers are drawing in teens and even young adults who are on the hunt for the best deals while keeping up to date with the latest fashion developments.
For American Eagle, the 2013 fiscal year numbers were highly disappointing. As the final quarter came to a close, American Eagle saw an overall sales drop of 5%, net revenue decreased by 7%, and in an attempt to compete with the "fast-fashion" retailers, American Eagle increased promotional activity, leaving the company with a 28% decrease in gross profit.
Unfortunately, the start of the new fiscal year hasn't brought improvement. With a 5% plunge in net revenue, 15% decrease in gross profit, and comparable sales down another 10%, the first quarter has not proven fruitful for American Eagle.
In January, ex-CEO Robert Hanson announced that he would be leaving the company immediately, for reasons undeclared (you can read about that here). Consequently, American Eagle still finds itself searching for a contender to fill his position. Preferably, someone who can make necessary changes to help the company compete aggressively in the "fast-fashion" market and help American Eagle soar again on the right path.
The search continues for J.C. Penney
In 2011, J.C. Penney selected Ron Johnson to fill the position of previous CEO Myron Ullman. Now, after a 25% sales decline and losing roughly $1 billion, J.C. Penney is continuing to seek a leader, even a year later.
Bill Ackman, a recent ex-board member of JCP reported, "We were unable to attract a long-term CEO at the time we replaced Ron because the company needed capital and the CEO candidates that we had approached would not come on board without the company having adequate resources."
The requirement for a new CEO becomes more crucial and less appealing as the clock continues to tick by. Over the last 4 fiscal years, J.C. Penney has only sunk deeper. In 2011, J.C. Penney recorded $17.76 billion in total revenue, dropping yearly to $11.86 billion in February of 2014. Net income has fallen from $389 million to -$1.39 billion since 2011 as well. How much longer can J.C. Penney afford the decline? Will J.C. Penney ever find a candidate brave enough to bring afloat the sinking ship?
Foolish final comments
As the quest to find new CEO'S continues for Target, American Eagle, and J.C. Penney, the retail industry continues to change. The new CEO's may need to respond to consumer demand for large price reductions and a quickly changing line of apparel that is consistent with the latest trends. However, they will likely have to repair the wounds left in each company by previous CEO's who have made a mess, and washed their hands of it.