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Retail Trends

What Other Retail Executives Earn

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CEOs get the spotlight. They’re the ones who set the tone, create the strategic blueprint and steer the ship. Yet every last retail chief executive will tell you theirs is a job they couldn’t — and wouldn’t — attempt to do alone. Most endeavor to surround themselves with the best detail-oriented financial types, IT geeks and merchant princes and princesses they can recruit.

This year, in an effort to present a better-rounded picture of executive compensation, STORES worked with Hay Group, a global management consulting firm that does extensive research on executive compensation, to provide additional data about pay. Using survey data compiled from nearly 100 retail companies across several sub-sectors, Hay Group provides median pay levels for several key jobs — starting with the CEO and including the CFO, CIO, heads of merchandising and stores, and buyer.

The data — apportioned to show specifics by department stores, mass merchandise/big box, fashion-oriented specialty stores and hard lines specialty stores — provides a robust view of the incentives and bonus pay that typically round out compensation packages for leading executives.

“Based on our experience with retail senior management and boards, there’s plenty of insight to be gained from studying this data,” says Cory Morrow, Hay Group principal and executive compensation consultant, retail practice. “Retail companies, perhaps more so than other corporations, are people-oriented businesses that thrive based on unique, creative attributes. The way they organize their executive team, and the policies they put in place to reward and motivate these top performers, reflects heavily upon their ultimate success.”

A quick overview of the base salaries paid to c-level and top management in retail companies finds that median CEO salary sits at just about $1 million for all retail and most of the sub-sectors. Only hard lines CEOs received less; median pay here dips to $962,500. Median salary for the CFO, often the No. 2 or No. 3 c-level executive, drops by half to $500,000 across all retail segments, though it is somewhat higher for CFOs at department stores and mass merchandise/big box chains.

A clear indicator of the value this industry places on top-notch merchant skills is the median salary rewarded to those with titles that fall under the umbrella term ‘head of merchandising.’ The median base salary for all retail organizations included in the survey is $467,700, rising to $549,000 for mass merchandise/big box retailers and $600,000 at department stores.

STORES asked Morrow to interpret the compensation data provided for each retail job, distinguishing between the various sectors when warranted.

Retail CEO salaries have been relatively flat over the last few years. The median salary has been unchanged at $1 million.

For 2010, bonuses generally paid at or above target, but Hay Group doesn’t expect to see significant increases over the next two years.

Long-term incentives have fluctuated of late, positively or negatively influenced by stock price. In 2010 stock prices were mostly up; long-term incentive valuations followed. Again, no significant increases are on the horizon.

Tremendous value is placed on the CFO skill set as indicated by median pay. Like the top spot, CFO rewards are based on the challenges and high profile of the position.

Mass merchandise/big box CFOs earn more than other CFOs, pulling down more than double the overall compensation due to managing larger companies that tend to be more complex and multi-divisional. They also have greater reporting responsibilities.

Outside of the mass merchandise/big box space, CFO pay data tends to show little variation by sub-sector.

Head of Merchandising
Increased competition for great merchandising talent drives increased rewards; this is a critical role at retail, imbued as it is with a healthy amount of risk.

Long-term incentive grants can be quite significant for these jobs. There is a very real opportunity for these executives to reap rewards if the company does well.

Fashion merchants tend to be more highly paid than their hard line counterparts (there’s a 10-15 percent difference in salary); salary and bonus opportunities are often used to recruit or retain.

The value of the CIO role continues to increase as the importance of multi-channel retail and overall systems ratchets up. More upward movement in salary is expected in the next two years.

Some companies consider the IT function less strategic; in other instances the CIO is at the table with senior executives and is part of the strategy discussion. Median pay levels reflect those variables.

Long-term incentives are generally lower relative to other senior executive roles.

Head of Stores
Salaries are about half of what the CEO earns.

Target bonuses are similar to the CIO; opportunity ranges to about 50 to 60 percent of salary.

Mass merchandise/big box retailers oversee larger operations and thus are rewarded with higher salaries than other sub-sectors; there are significantly higher bonus opportunities too, up to 80 percent at the median.

Salary levels reflect their critical merchandising role; there is tremendous value placed on getting the inventory right.

Hay Group doesn’t see as much differentiation in pay levels by sub-sector that is apparent in other roles; while mass merchandise/big box buyers may be buying more products, complexity is generally less when compared to specialty fashion retail.

Long-term incentive award values tend to represent a much lower portion of total pay compared to other jobs.

Store Manager
Store manager salary is largely driven by store volume; department stores and mass merchandise/big box have much larger store volumes than specialty retail, for example.

Overall compensation opportunities are largely salary and bonus; very few companies have long-term incentives in place for store managers. Bonuses are typically tied to sales and profits at the store level.