5 Retail CEOs at Risk of Being Dethroned: Analyst

NEW YORK ( TheStreet) -- Retailers could be facing a wave of new management.

A majority of companies stood on the sidelines amid the recession, not wanting to make major changes at the top. Instead they rode out the recession with familiar faces in the corner office.

But now, as consumers start to open their wallets and confidence slowly returns, there is an opportunity for retailers to replace inefficient CEOs with new leaders who can navigate the evolving retail landscape.

"I believe heads will roll in the retail and consumer discretionary sector this year, with the boards of directors re-evaluating if the present management team, starting with the CEO, is best fit to steer the publicly traded ship in the new realities of doing business," Wall Street Strategies analyst, Brian Sozzi wrote in a note.

>>Retail Executive Moves of 2011

Those at the top now have to run an integrated business that is both global and digital.

So far in 2011 we have already seen a game of musical chairs at the top posts at Sears ( SHLD), Wet Seal ( WTSLA), Kenneth Cole Productions ( KCP)and CVS Caremark ( CVS). And it appears more changes are looming.

As a result, Sozzi compiled a list of retail and consumer discretionary sector CEOs that he believes are at risk of being dethroned in the near future.

Those leaders that qualify to sit in the hot seat, according to Sozzi, have the following characteristics in common: a track record of underperforming share prices on both a relative or absolute basis; or a share price underperforming peers in 2010; or being responsible for mistakes made pre-recession.

Sozzi notes that he left out Wal-Mart's ( WMT)CEO Mike Duke from the list, as the discounter's share price has been in the doldrums for over 10 years and he does not believe the missteps related to "Project Impact" bare Duke's fingerprints.

Pacific Sunwear of California's ( PSUN) CEO, Gary Shoenfeld, is also missing, since he is still somewhat new to the company and is in the process of righting the wrongs of prior CEO Sally Frame Kasaks, Sozzi says.

Click on for a look at the CEOs Sozzi says are at risk of losing their leadership positions....


Quiksilver's ( ZQK) leader, Bob McKnight, founded the skate and surf inspired retailer in 1976.

But since McKnight was appointed president of the company in February 2008, the stock has tumbled 44%. Shares have also plunged 69% since hitting an all-time high in March 2005.

In the last three years McKnight has earned $3.7 million in salary and bonus.

McKnight's biggest faux pas was the purchase of Rossignol, a ski business, at an inflated valuation, only to sell off the concept for next to nothing, Sozzi notes. Debt overhang from the purchase still lingers.

Still, the stock soared 138% in 2010, and in recent months Quiksilver has finally gotten a better grasp on expense control and inventory, Sozzi says.

American Eagle Outfitters

The retirement of American Eagle Outfitters' ( AEO) CEO James O'Donnell is rumored to be imminent, leaving the teen retailer searching for a new leader.

O'Donnell, 70, took the reins in November 2003. After his appointed to the post, shares of American Eagle surged 182%, hitting an all-time high in January 2007.

Since reaching that high, however, the stock has tumbled 56% and in 2010 shares ended down 12%.

Amid the recession, American Eagle struggled to remain competitive against deep price cuts from rivals like Abercrombie & Fitch ( ANF).

Sozzi says O'Donnell spent too much time focusing on the now discontinued Martin + Osa concept. American Eagle's execution in men's and women's tops has also been inconsistent and the company is behind the curve on international expansion.

Hot Topic

Hot Topic ( HOTT) has been ice cold, as the specialty retailer struggles to find its niche.

At the helm is Betsy McLaughlin, who has been serving as CEO since 2000. Since she came on board in the role, shares of Hot Topic have fallen 27%.

Sozzi blames McLaughlin for over-expanding the teen retailer and being reluctant to reduce the store fleet.

While the company's namesake concept has been adrift, Sozzi notes that it is missing a real opportunity with its plus-size Torrid business. In February, same-store sales at Torrid grew 2.1%, while the same measure declined 2.6% at Hot Topic stores opened at least a year.

The company's Shockhound online music strategy also continues to bleed money, Sozzi says.

McLaughlin has received $2.5 million in salary and bonus in the last three years.

Ethan Allen

After 25 years with the same management, is it time for a change in leadership at Ethan Allen ( ETH)?

Farooq Kathwai became CEO in 1988 and has received an increase in salary every year since 1998. Kathwai has received $3.5 million in salary and bonus in the last three years.

Over the past 10 years, shares of Ethan Allen have tanked nearly 40%.

Ethan Allen has consistently under-delivered on earnings, Sozzi says. Kathwai also attempted to overhaul the business by adding design center associates amid the recession and has, he contends, over-expanded the chain.

Liz Claiborne

Liz Claiborne's ( LIZ) CEO William McComb may not be entirely to blame for the company's missteps.

McComb was handed a sinking ship when he accepted the CEO post in November 2006, Sozzi says. Nonetheless, his recent forecast warning has been all his doing.

Liz Claiborne reported a smaller fourth-quarter loss in February, but issued a lackluster 2012 outlook that essentially disseminated its ambitious three-year guidance.

Shares of Liz Claiborne have sunk nearly 84% since McComb became CEO. He was awarded $4.2 million in salary and bonus in the last three years.

--Written by Jeanine Poggi in New York.

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