Retail executives these days are paying for their companies’ tepid performance, with nearly three quarters (73%) in North America getting reduced bonuses this year. More than a third (35%) are receiving no bonus at all, according to a study from talent consulting firm Korn Ferry cited by CNBC.
That’s in stark contrast to 2013, when just 10% of retail executives in the top ranks had to forego a bonus, according to the report. The study looked at performance-based compensation at retailers with between $1 billion and $50 billion in annual sales.
Executives at Abercrombie & Fitch, Express, GNC Holdings, Rite Aid and Stage Stores got no bonus at all this year, while those at Home Depot, Dick's Sporting Goods and PVH Corp did, according to the report.
Sales per square foot at most retailers have declined in recent years, down from almost $375 in the early part of the 21st century to $325, according to recent research from CoStar, and consumer priorities have shifted. Young people are less interested in buying clothes, shoppers are fixated on price, and e-commerce and mobile are changing how consumers shop. Add to that the fact that many larger retailers over-built their physical footprints, leading to a correction which has been accelerated by the growth of e-commerce.
It’s a set of changes that is like a retail temblor, shaking the foundation of how to do business. And the performance of many retailers in the midst of it all suggests that many executives haven’t landed on the formulas to address it, according to Korn Ferry researchers.
In addition to pressure on sales and traffic, many retailers are also seeing already thin margins squeezed, thanks to consumers’ keen focus on getting deals and retailers’ penchant to turn to price to get people into stores. A recent study by Inmar showed that of the 69% of consumers who make a list before shopping, 41% use coupons.
"[I]t is clear that retailers are working hard to attract shoppers with many resorting to discounting to stimulate buying," GlobalData Retail Managing Director Neil Saunders told Retail Dive. "While this is good news for consumers, it is bad news for margins and will dampen growth levels. Such a dynamic may be exacerbated by further bankruptcies in the sector and the consequent stock liquidations that follow.”
And that won’t do much for the bonus checks of retail executives.