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Retail CEOs: Good Rewards for Bad Performance

Friday July 25, 2008
The latest retail CEO to bail out of the boardroom on a golden parachute is Charming Shoppes’ Dorritt J. Bern. After announcing Charming’s strategy to eliminate 150 corporate and field management positions, cut 200 full-time home operations positions, and close 150 stores earlier this year, Bern just announced her own elimination this week. Shortly afterwards, the media announced the $5-6 million she will be paid to leave. Bern should have used a better contract negotiator. Six million in CEO-dollars is more like a yellowed bed sheet than a golden parachute. I wonder how much the hundreds of other ousted employees got paid to get fired.

One of Charming’s chains is Petite Sophisticate. I used to be a loyal Petite Sophisticate customer until the styles got irrelevant, the fabrics got cheap, and the sales people got pushy. I guess in a way Bern is being held accountable for that and whatever else has caused Charming’s stock to plunge. But her $6 million punishment is kind of like being grounded and confined to your bedroom with nothing but your plasma TV, iPhone, high speed internet, and PS2 to entertain you.

It would have been fun to listen in when the first CEO convinced a board of directors that being at the top of the corporate ladder is akin to the being at the top of the professional sports ranks. That was a masterful sales job. I would be willing to bet it was a sports agent turned corporate contract negotiator who pulled it off the first time. The notion that a company should pay a CEO vast sums for getting fired because the firing might have a detrimental effect on the CEO’s future earnings is quite a notion indeed!

Admittedly, the half life of a retail CEO seems to be getting shorter. Some of this year’s more notable short-timers include these high profile CEO’s:

  • Daryl Brewster led Krispy Kreme’s stock price from about $9.00 to around $3.00 in just two years. He received $2.8 million for that 2-year accomplishment when he resigned in January for “personal reasons.” I should hope that a 66% decline would be “personal.”

  • Paul Harrington resigned in March, 2008 after just 2 years as the head of slumping sales for Reebok. He took his good-bye bonus to CA to “pursue new career and business opportunities there.”

  • Woolworths was much less kind when they booted Trevor Bish Jones out of his corner office. Not only did he get a pitiful one-year salary severance, he didn’t even get to pretend that his departure was in the pursuit of some greater happiness. Woolworths’ press release bluntly announced, “It has been agreed between the Board and Trevor that this is an appropriate time to seek new leadership for the business.” Ouch, Trevor. You might want to think about hopping over the pond where we hold our ousted corporate failures in greater esteem.

  • Also this week, John Poon resigned as Esprit Holdings’ deputy chairman and CFO, claiming he had no disagreement with the board. While it’s nice to believe that Poon skipped happily out the doors towards “his intended pursuit of other interests,” I have to believe that the board had at least a little bit of disagreement with the 27% drop in share prices this year.

When I was walking through the mall tonight I wondered which of the part-time retail employees might follow their retail career path all the way to that rock star CEO status or how many of them even wanted to try. It’s all glitter and glamour if you don’t mind the risk of public failure and professional humiliation. A good sports agent is a must.

Sometimes Spending is Just Too Difficult

Friday July 18, 2008
There is a new shopping center that I pass almost every day, and today I opted to visit it in lieu of wasting my TGIF mood in rush hour traffic. It was a much larger hub of big boxes than I realized. Best Buy, Costco, Whole Foods, Target, Lowe’s, Borders, a 14-screen AMC theater and a 30 lane bowling alley were side by side, with lots of smaller and independent stores in between. Big retailers in a big shopping complex in the middle of a big residential area sounds like the makings of big profits.

To look at the packed-like-Christmas parking lot was to see tangible evidence of its success. To DRIVE the parking lot was to experience the tangible evidence of its failure.

There were obviously not enough spaces built into a parking lot shared by 7 big box stores. The parking lot layout was complicated, with stop signs about every 20 feet, or so it seemed. The multiple lanes of traffic that were converging in many unnecessary places were all trying to figure out the taking-turns system of chaos that was supposed to pass for traffic control. The spaces that were easily accessible to my desired Borders destination were across four lanes of traffic without a pedestrian crosswalk.

While the flow of cars into the complex was substantial, the flow of cars out of the complex was equally substantial. The exiting vehicles might have been filled with satisfied shoppers who had just pumped their Friday paychecks into the retail economy. But since there were two SUV’s that had been doing the parking space dance with me, I concluded that it was more likely that the departing cars were filled with people who, like me, had decided to take their paychecks home because it just wasn’t worth the effort it would take to spend them.

Considering how difficult it is for some people to earn their money, retailers just can’t afford to make it difficult for people to spend their money. While most retailers don’t have control over their parking lot design, they have complete control over the design of their shopping experience.

I was shopping in an Old Navy store this week and there was one particular corner of the store that was a jumbled mess. Upon examination it was easy to determine why. All of the petite sizes were hanging on the top bars, which were way too high for petite-wearing women to reach. So, the small sizes had been yanked off their hangers to be examined, and then draped on top of the lower racks when they were not purchased. Why any retailer would think it is a good idea to put the short-person sizes on the top rack I will never know. But I will tell you from first-hand experience that it is the rule, not the exception.

The good news is that in every jumbled mess, there is the opportunity to recover lost sales. With every hassle, there is the opportunity to prove to the customer that you are willing to make changes on their behalf. With every exodus is the opportunity to find a way to improve the invitation to come back inside.

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