By Teresa Rivas
"Don't want to be a richer man," David Bowie sings in his classic 1970s tune, Changes. But it turns out that's exactly what change can do for retail shareholders.
On Feb. 1, the two biggest big box retailers, Walmart and Target, got new blood in the corner office: John Furner is the new chief executive officer of Walmart and Michael Fiddelke is the new CEO of Target. Both are company veterans taking over from longtime leaders, but that's where many of the similarities end for the rival retailers, as Walmart has gone from strength to strength in recent years, while Target is struggling with a yearslong stock slump.
Nonetheless, while their peers' shares have declined since the start of February, Walmart and Target's shares are higher since their new CEOs took the helm. In that span, the State Street SPDR S&P Retail exchange-traded fund and the State Street Consumer Discretionary Select Sector SPDR Income ETF have fallen more than 4% and 7%, respectively, while Walmart has risen nearly 8% and Target has surged more than 15%.
Part of that gap in performance is the shift toward essential retailers since the start of the Iran War, but some of it might just be part of a familiar pattern following CEO transitions, according to a recent analysis by Bernstein analyst Zhihan Ma.
She reviewed 340 CEO changes across the past quarter-century at U.S. consumer companies with a market capitalization of at least $20 billion, and compared their stocks' performance with the S&P 500 after the leadership transitions. Ma found that on average, "these 340 CEO changes resulted in a +2% outperformance vs. the S&P in the first year following the announcement and +3% after two years."
However, that belies a rather "mixed bag" under the surface. Costco Wholesale's strong stock performance showing after its 2023 leadership change strengthens the case that new management is good news at big box retailers. The picture isn't as clear at discounters, however.
Dollar General "meaningfully underperformed" following its new CEO's installation in 2023, in contrast to outperformance at Five Below and Dollar Tree. Elsewhere in home improvement, the Marvin Ellison-led turnaround at Lowe's bore fruit, while Home Depot turned in a relatively stable performance after its 2022 CEO change.
Of course, no two retailers are the same, which explains the variability. Nonetheless, Ma's analysis leads her to believe that two key factors come into play -- when retirements and activist investors are the catalysts for new leadership.
On the first point, roughly a third of her studied CEO changes occurred because of a retirement, in which case the stocks lagged behind the S&P 500 by about 1.5% the first year and 3% after two years. By contrast, CEO changes not due to retirements led to outperformance of 4% and 6%, respectively, after one and two years.
That makes intuitive sense, given that investors may be sad to see a successful CEO hand over the reins, and are more than happy to see a dud sent packing. Still it's even a bit more nuanced than that, Ma writes, as a CEO going out on a high note is generally better for the stock.
"Companies with earnings per share beats going into a CEO retirement outperformed the market by +1% in the first year while those with EPS misses underperformed by -8%," she says. "Similarly, companies with EPS declines underperformed by -9% in the first year, while those with EPS growth outperformed by +2%."
Activist involvements are rarer, accounting for only about 10% of CEO changes. That is actually a good thing for the companies: Ma found that activist-driven CEO changes led to stocks underperforming the index by 2% the first year and 6% after two years. CEO transitions not linked to activists saw the companies' stocks outdo the S&P 500 by 2.5% the first year and 4% after two years. And again, EPS beats heralded outperformance of 3% in the first year of a new activist-led CEO regime, while EPS misses presaged a lag of 10%.
"In short, winners keep winning and losers keep losing, in the absence of a clear strategic inflection tied to the leadership change," Ma concludes.
In other words, it's yet another example of earnings growth being the most important metric -- no matter who the boss is.
Write to Teresa Rivas at teresa.rivas@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 10, 2026 14:36 ET (18:36 GMT)
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