Summary
The replacement of Steve Larkin at Zales is indicative of what is beginning to happen throughout the country in not only the Retail arena but most industries. During economic downturns, those companies having difficulties weathering the storm begin to look at key associates’ performance on Executive and upper management teams. How much of this desire for change is sincere and not merely a front to “appear” new and improved?
Analysis
The replacement of Steve Larkin at Zales is indicative of what is beginning to happen throughout the country in not only the Retail arena but most industries. During economic downturns, those companies having difficulties weathering the storm begin to look at key associates’ performance on Executive and upper management teams. Through this process many will be replaced in order to move the company in a “new direction.” How much of this desire for change is sincere and not merely a front to “appear” new and improved will appear in the financial health or further degradation of the company’s earnings. The latest example of this is with Julie Roehm, former Senior VP of Marketing Communications for retail giant Wal-Mart. Ms. Roehm was brought in by then CEO Lee Scott to transform Wal-Mart’s image from a low end, cheap retailer to a more attractive and hip discount retailer in order to glean more Target type consumers. Sadly, Ms. Roehm lasted only 10 months and was loudly fired from Wal-Mart. Many accusations have been tossed about but the one thing remains clear…..Wal-Mart’s consumer perception remains that of a very low priced, cheap retailer. So…was change really what was desired?
Returning to Zales however, they appear to be methodically clearing the upper decks in an effort to regain market share and improve floundering sales. 3rd Qtr losses surpassed 2nd Qtr losses by 33%, growing almost $7m. The one factor that did improve was gross margin but most of that 2.6% gain was on operating cuts not strategic and meaningful change. Given the performance of most of the competition and the short time Mr. Larkin had to affect any true major change, it’s curious as to why now he’s being replaced. He had been with Zales since 2006 so his leadership capabilities were evident. Another interesting pattern is the replacement of major financial positions beginning with the company replacing their Auditing company with Ernst and Young in May of 2008. In January of this year CFO Rodney Carter was abruptly terminated, replaced by Cindy Gordon who had been a Sr. VP and Controller. Ms. Gordon has since “resigned” after serving only 5 short months, leading us now to Matthew Appel from Exl Service Holdings. As an outsider looking in, this is a curious and compelling shuffle in a corporate financial area at a time when financial earnings and reporting is everything. Suspicious – Yes, Coincidence?
One thing is certain – the revolving door in management and Executive teams will continue until companies begin to see bottom line improvements or settle in to a comfortable new reality. Hopefully the companies in search of these associates will begin to look at the vast pool of talent currently available in the unemployment ranks. Most are well educated and experienced people in limbo due to circumstances beyond their control. When the two eventually meet in the right industries, serious change and bottom line improvements can and will occur.
