No. of Recommendations: 4
An alternative point of view:
* I don't know the CEOs and their skillsets. How would I? You would need some real life direct experience working with them to really have a point of view. Terrible CEOs can look great in a good environment, working in a good business. Great CEOs can be overwhelmed by forces that a company does not have the positioning or resources to withstand. CEOs often look like heroes and goats as much by circumstance as by skill. You have to have a good sense of someone holistically over a long period to judge them well (although maybe you can judge terrible CEOs much more quickly).
* The market reaction isn't a great way to discern. Markets like to see change when things are going poorly, and I don't totally disagree. Sometimes change itself is helpful, even if the capabilities of the new are the same as the old because baggage can be limiting.
* My guess is that the new CEO didn't run the business into the ground. We are in a pretty unique environment with the pace of change on inflation directly affecting their customer base, labor costs showing no signs of abating at the low end of the pool, some impact from elevated shrink, and competitive forces that have come on strongly in a very short period of time. All of this kind of came together into retail aggressively (a lalapolooza event) in the last 9 months. Even the old CEO would probably have been challenged to adjust to such an amplified wave striking in such a short time.
* Maybe the old CEO saw the forces amassing and was happy to retire while things were still good, hoping someone else could carry on through the challenge and he could escape the bows and arrows that he knows are inevitable from armchair analysts. Any maybe the new CEO didn't appreciate how disruptive this period was going to be to hold stability.
* But if you think that the forces affecting you are manageable once you get through the period of fast change. If inflation stabilizes at whatever level so it becomes normal, if shrink starts to come down a bit, if Temu's incredibly fast adoption slows, and if labor inflation starts to moderate, the business model might start to deliver as it has in the past. And as the returning CEO, you get the opportunity to benefit by coming in while things are bad and retiring again once things are good. I would say you are a pretty smart CEO, able to read the tea leaves, and know what's necessary to continue to deliver in a way external judges are able to appreciate. Maybe that is the insight that makes the old CEO a more skilled person than the new CEO who wasn't able to discern what was ahead.
