Recent retail headlines have not inspired much confidence in the sector’s future.
More than 5,400 retail store closures have been announced this year so far, up 165 percent from 2016, with 10 major retailers filing for bankruptcy, according to Fung Global Retail & Technology. There are certainly retailers opening stores — nearly 3,300 by Fung Global Retail & Technology’s count — but the closures still far outpace openings.
While most retailers have yet to report second-quarter sales, many analysts expect revenues to remain restrained.
The dour retail trends are hitting the companies’ CEOs right where it hurts, in their bank accounts. In a pay-for-performance industry, fewer and fewer retailers are rewarding their executives with bonuses.
According to new research from retail recruiting and organizational consulting firm Korn Ferry, 73 percent of North American of retailers with annual sales between $1 billion and $50 billion paid little to no bonuses to senior executives this year for last year’s performance.
Thirty-five percent of the group paid no bonus at all, and that metric has progressively gotten larger over the past 5 years. In 2013, only 10 percent of senior retail executives were left out of the bonus pool, Korn Ferry said.
“What the trend reflects is that the business is getting tougher. Retailers are setting plans they aren’t able to achieve” says Craig Rowley, senior partner at Korn Ferry in an interview with CNBC.
“They set their plans, and if they don’t perform, they don’t get paid,” Rowley explains. “What’s concerning is, I don’t think they are setting wild and crazy plans. They are setting what they think to be achievable plans, and then they don’t execute, which says they are having a tough time predicting the trends.”
Korn Ferry data shows historically about half of retailers achieve their profit plans and subsequently pay executives normal bonuses. But this year, only 15 percent have met or beat their profit plans.