As we enter the end of the third quarter, several prominent CEOs have either been shown the door or resigned, indicating just how difficult it is to hold on to the top job at a major corporation.
First, it was embattled WeWork CEO and co-founder Adam Neumann, who stepped down from the top job September 24, to become non-executive chairman.
One day later, Juul Labs CEO Kevin Burns stepped down after the vaping controversy forced the e-cigarette company to end all of its U.S. Advertising.
In all three cases, it probably wasn’t the CEO who made the decision, but rather the board made it for them.
It’s tough being a big-time chief executive officer. That said, there are still some good ones out there.
Here are the 10 best CEOs of the third quarter.
Calvin McDonald, Lululemon (LULU)
When Calvin McDonald was named CEO of Lululemon (NASDAQ:LULU) in July 2018, I’m not sure a lot of Americans knew much about the company’s new boss except that he had been the head of Sephora North America.
Having spent a lot of time working in Canada, I knew a fair bit about the one-time Sears Canada CEO and was absolutely convinced Glenn Murphy and the rest of the board had hit a home run. And let’s not forget that LULU is based in Vancouver, making the Canadian-born retail executive an easy fit.
In recent quarters, as McDonald’s got more comfortable hosting earnings conference calls, he’s become much more animated about the company’s future potential. One merely needs to go to Lululemon’s new 20,000 square-foot flagship store in Chicago to know he’s playing for keeps.
“Looking at our second quarter results. Momentum in the business remains strong across product categories channels and regions,” McDonald stated September 5 in its Q2 2019 conference call. “We’re now two quarters into our 5-year vision, and I’m pleased with the strong execution and passion across the business to continue to deliver on our growth priorities.”
Up 58.7% year to date through September 25, LULU continues to drive on all cylinders and a lot of the credit goes to McDonald, who’s brought a much better work culture to a company that was desperately in need of a reset.
Onward and upward for McDonald et al.
David Weinreb, Howard Hughes (HHC)
Howard Hughes (NYSE:HHC) is a real estate company that got its in 1950 as a developer of the Summerlin master-planned community in Las Vegas. Several mergers later, it was spun-off from General Growth Properties — now a subsidiary of Brookfield Property Partners (NYSE:BPY) — to operate as a separate, publicly-traded company.
David Weinreb has been Howard Hughes’ CEO since it was spun-off in November 2010.
HHC stock has generated a total return of 34.8% year to date through September 25.
Most of these gains are a result of the company’s announcement in late June that it’s hired bankers at Centerview Partners to explore strategic alternatives including a possible sale.
Bill Ackman is chairman of the real estate company and owns almost 5% of its stock. Ackman believes that Howard Hughes’ true value is more than its current market cap of $5.6 billion.
“Our business continues to perform extremely well across our three core segments, with price per acre of land sold, net operating income, and condo sales all exceeding our expectations; however, our stock continues to languish below its net asset value per share,” Weinreb stated in its June 27 press release. “The Board and management are determined to close the significant gap between our share price and the company’s underlying net asset value.”
If investors can’t appreciate the value of Howard Hughes’ assets, Weinreb and the board will will find someone who will.
Brian Cornell, Target (TGT)
When Target (NYSE:TGT) CEO Brian Cornell joined the company in August 2014, it was like a wounded dog with very little hope. Slowly, but surely, Cornell chipped away at the retailer’s weaknesses while reemphasizing its strengths.
Today, it’s got a swagger that it hadn’t had for some time and shareholders are benefiting nicely. TGT stock has a total return of 64.5% year to date through September 25, more than one-third of the gains in the past three months.
How good a job has Cornell done?
On September 16, Twin Cities Business named the Target CEO as its 2019 Person of the Year. The magazine rightly suggested that Cornell has led “a successful turnaround” of the Minneapolis-based Fortune 100 retailer.
“The company is now in the habit of delivering better-than-expected results. When it reported second quarter fiscal 2019 numbers in August, Target showed second quarter comp sales were up 3.4 percent and traffic in stores was up 2.4 percent,” Twin Cities Business stated in its press release. “The company noted: ‘Comparable sales have grown approximately 10 percent over the last two years — the best performance in more than a decade.'”
I, for one, believe Cornell has become one of the top five retail CEOs in the country — as well as one of the best CEOs overall. With his leadership, investors can expect TGT stock to hit $200 sooner rather than later.
Gary Friedman, RH (RH)
While RH stock is up 41.9% year to date through September 25 and 53.4% over the past three months, it’s been an incredibly volatile year for the company.
In March, it announced its fourth-quarter results, which included a revenue miss and a cut in its 2019 forecast, sending RH stock down almost 20% on the news.
In the first quarter of fiscal 2020, RH reported strong earnings in June, which sent its stock higher; it hasn’t looked back. Three months later, RH reported another strong quarter, sending its stock higher once more.
“Looking forward, we continue to see a clear path to $4 to $5 billion in North America revenues, with mid-to-high teens operating margins and ROIC in excess of 50%. Additionally, we now believe there is an opportunity to more than double those revenues as we begin to expand globally, and move the brand beyond creating and selling products to conceptualizing and selling spaces,” the company stated in its Q2 2020 press release.
Friedman continues to drive RH to new heights. As long as he’s CEO, its business will prosper.
Randy Garutti, Shake Shack (SHAK)
While the New York-based burger chain has had its ups and downs as a public company, Garutti’s done a good job growing the business. Today, it has 248 locations around the world. When it went public, Shake Shack had just 63 locations, many of them in New York.
It’s not easy running restaurants in New York, where regulations are many, but Garutti and his team get it done just the same.
“When you look at chains, they are born out of places that are more tried-and-true American testing grounds: Dallas, Columbus. When you make it there, there’s a chance you’ll make it in other places,” Garutti told Crain’s New York Business in September. “New York is the opposite. One of the secret sauces of Shake Shack is that we’ve broken that mold. We harnessed the power and brand of New York, and we also have a business that works outside New York. Almost no one has been able to achieve that.”
What doesn’t kill you makes you stronger.
Henry Fernandez, MSCI (MSCI)If you invest in passive index ETFs, you’ve probably heard of MSCI (NYSE:MSCI), whose index business has contributed greatly to the growth of ETFs. MSCI stands for Morgan Stanley (NYSE:MS) Capital International.
MSCI CEO Henry Fernandez has been the CEO since 1998. Before that, he worked at Morgan Stanley. Morgan Stanley spun-off the company in November 2007. MS sold off the remainder of its stake in 2009. It’s been independent ever since. MSCI stock is up 874% in the 12 years since it was spun-off.
Fernandez came to an early conclusion about MSCI that investors ought to take into consideration when evaluating its investment potential.
“As time went by, I began to realize this thing could be big. From the get go, it was relatively simple, only equity indices and only equity investments,” Fernandez told Barron’s in June. “I thought, wow, the whole equity universe globally is benchmarked to this index that is embedded in the contract between pension plan and asset manager. You cannot displace us.”
Of course, it’s gone on to do so much more than manage its index business. It also has a significant risk analytics business that helps companies make better decisions.
It’s truly a global business.
Lisa Su, Advanced Micro Devices (AMD)
Anyone who follows the semiconductor and chip business knows how good a job Su has done transforming the company in the five years she’s held the top job. Su’s become so good at her job that rumors have started about where she might end up next.
Su has no desire to leave AMD and her role as CEO.
“Just for the record, zero truth to this rumor. I love @amd and the best is yet to come!” Su tweeted in early August.
However, rumors are a sign of respect. Since taking the top job, AMD stock is up 763%. She’s one of the few CEOs who deserved to get rich as a result of the work she’s done turning around the company.
Although AMD stock and the rest of the semiconductor industry have lost their momentum in 2019 due to fears of a prolonged trade war with China, AMD is still up 60% year to date through September 25.
As far as the best CEOs go, Su has to be at the front of the line.
Brian Niccol, Chipotle Mexican Grill (CMG)
Chipotle Mexican Grill (NYSE:CMG) CEO Brian Niccol hasn’t been at the fast-casual Mexican restaurant chain for a long time like some of the CEOs on this list — he joined the company on March 5, 2018 — but he’s made every second count.
Hedge fund manager Bill Ackman, whose investment in Chipotle was a loser until Niccol turned his magic over the past 18 months, was confident that the former CEO of Taco Bell was the right person for the job.
“He is the right leader to reinvigorate the company and help it achieve its enormous potential,” said Francis McGill, a Pershing Square spokesman when Niccol’s hiring was first announced in February 2018.
Since Niccol’s first day, CMG stock is up 156.0%, with 90% of those returns coming in 2019 alone.
“When I got to Chipotle, the company had tons of ideas — an almost crippling [number],” Niccol told MarketWatch recently. “[But now] I think we’re focused on the right strategies, execution is getting better, the response has exceeded expectations — I think that’s why we’ve seen the response from the financial markets.”
Taco Bell’s loss is definitely Chipotle’s gain.
Best CEOs: John Roberts, J.B. Hunt (JBHT)
J.B. Hunt Transport Services (NASDAQ:JBHT) CEO John Roberts took over the top job on January 1, 2011, after the CEO for 23 years stepped down. Roberts joined the company as a management trainee in 1989.
J.B. Hunt CEOs tend to stay awhile. That’s good news if you own JBHT stock, which is up 30.0%, including dividends, over the past three months and 23.2% year to date through September 25. JBHT is up 178% since Roberts took the helm at the beginning of 2011.
In May, J.B. Hunt was named to the Fortune 500 list for the seventh consecutive year.
“J.B. Hunt is taking on some of the biggest challenges in the industry while maintaining a tradition of providing safe, reliable transportation and logistics services,” Roberts said about the honor. “Our inclusion in this year’s Fortune 500 list demonstrates our commitment to excellence and efficiency as we grow and expand to meet customer needs.”
In the trailing 12 months, J.B. Hunt generated revenues of $8.9 billion and operating income of $660 million.
Gerald Schreiber, J&J Snack Foods (JJSF)
For most investors, neither Gerald Schreiber or the company he runs — J&J Snack Foods (NASDAQ:JJSF) — are household names. However, some of the foodservice brands are.
Icee, Slush Puppie, Superpretzel, and California Churros are just a few of the brands he’s bought off the scrap heap, only to turn them into big-time revenue generators for the New Jersey-based business.
Schreiber bought the company out of bankruptcy for less than $100,000 in 1971. At the time, it had sales of just $400,000. In the third quarter ended June 30, JJSF had sales of $326.7 million, 7.1% higher than a year earlier.
Slow and steady wins the race is the philosophy at J&J Snack Foods and this patience has resulted in significant riches for both Schreiber and his grateful shareholders. It’s got a 15-year annualized total return of 16.7%.
If you’re going to buy a food stock, you can’t go wrong with JJSF, not the least of which is because it’s got one of the best CEOs in America.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.