Ouch! 3 Stocks That Suffered Under the Hands of New CEOs
Recent news that Walt Disney Co. (NYSE:DIS) had suddenly and unexpectedly fired its CEO, Bob Chapek, and was bringing back former CEO, Robert Iger shook the business world. Chapek’s tenure running Disney lasted barely two years and was tumultuous as the company navigated its way through the Covid-19 crisis when its theme parks were forced to close and its movies were held out of theatres. And with Disney+ not expected to deliver a profitable quarter until fiscal 2024, DIS stock has sunk 38% in 2022. The upheaval at Disney has shone a light on the problems companies often have with succession planning. Here are three stocks that have suffered at the hands of new CEOs.
Amazon (AMZN)
Remember Jeff Bezos? With Amazon (NASDAQ:AMZN) stock down 45% this year, many shareholders wish that the founder and former CEO of the e-commerce giant would return to the helm and right the ship. Amazon’s share price has steadily declined since the giant’s new CEO, Andy Jassy, took the reigns at the Seattle-based online retailer on July 5, 2021. Since the leadership handover, AMZN stock has lost half its value.
To be fair, Jassy, whose pay package last year exceeded $200 million, inherited multiple problems at Amazon.
Coming out of the pandemic, Amazon was too bloated. The company had too many employees, was opening an excessive number of warehouses, and had surplus inventory as consumers returned to in-person shopping.
As a result, Amazon has reported a string of disappointing earnings and spent much of this year laying off staff, canceling new projects and focusing on obtaining more content for its Prime streaming service.
While many analysts say that Andy Jassy is making the right moves to improve Amazon, there are those who are pining for the return of Jeff Bezos, who is spending most of his time these days running his commercial space company Blue Origin and building a $485 million super yacht.
Podcast host Scott Galloway recently predicted that Bezos would return to lead Amazon again in much the same way that Bob Iger is leading Disney again.
Federal Express (FDX)
Since its founding in 1971, shipping and logistics giant Federal Express (NYSE:FDX) had always been led by Fred Smith, a hard charging CEO and Vietnam veteran. Smith and his family built Federal Express from a small, regional logistics company in Memphis, Tennessee into a global powerhouse that today rivals United Parcel Service (NYSE:UPS) for supremacy in the courier and shipping industry.
Not surprisingly, Wall Street watched intently when Smith stepped down earlier this year. His replacement, Raj Subramaniam, has received a lot or scrutiny and media attention since he took over as CEO of FedEx this past summer — and not in a good way. Subramaniam came out of the gates strong, announcing that he was raising the quarterly dividend by 53%.
FDX stock jumped 14% in one day on that news. However, the new CEO’s honeymoon with investors was short-lived.
In September, FDX stock fell 21% in a single trading day after the company withdrew its earnings guidance, citing worsening business conditions. Subramaniam said weakness in Asia and ongoing issues in Europe were hurting FedEx’s business.
Consequently, FedEx pulled its previous earnings guidance and reported preliminary results that were well below Wall Street’s forecasts. Earnings for the company’s fiscal first quarter were projected to be $3.44 a share, far below the $5.10 average estimate of analysts, according to Refinitiv data.
More recently, FedEx announced that it is cutting costs and increasing the fees it charges as it seeks to achieve $2.7 billion of savings. Specifically, FedEx said that it plans to eliminate flights, cancel infrastructure projects, and close offices as thedemand for its services wanes amid a global economic slowdown. The company also raised its shipping rates to boost its revenue.
FedEx said it would reduce the frequency of its flights and park many of its cargo jets. The company is also shuttering package sorting facilities and corporate offices.
In 2022, FDX stock is down 32% and currently trades at $175.25 a share. Since Subramaniam became CEO on June 1 of this year, the share price has fallen 20%.
Starbucks (SBUX)
Starbucks (NASDAQ:SBUX) has been in turmoil since former CEO Kevin Johnson retired this past March. The departure of Johnson led legendary former CEO Howard Schultz to return as interim CEO of Starbucks in a similar arrangement as the one which Disney announced with Bob Iger.
This fall, Schultz named Laxman Narasimhan as the new, permanent CEO of Starbucks. Narasimhan is now shadowing Schultz in the top job and will officially takeover as CEO in April 2023.
Schultz’s return as interim CEO (his third stint running Starbucks) has been rocky. On his first day back at the Seattle-based coffee giant, Schultz cancelled the company’s $20 billion stock buyback program, saying he wanted to reinvest SBUX’s profits directly in its business.
A few weeks later, he eliminated the role of chief operating officer (COO) entirely as the retail coffee chain restructures its business. This came as the company continues to battle slowing sales abroad, particularly in China where ongoing Covid-19 lockdowns remain an issue, and combats an aggressive unionization drive across its network of nearly 9,000 coffee shops in the U.S.
The moves by Schultz and the problems afflicting Starbucks have led to a 15% decline of SBUX stock this year. The shares currently trade at just under $100. The announcement that Laxman Narasimhan would take control as the permanent CEO next spring has done nothing to help the stock recover.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
