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Diving into CFO Resignations

While scrolling by the news, one common topic grabbed my attention. It was quite normal to read about the career gap announced by a Chief Financial Officer (CFO) of a major corporation. However, interestingly, it didn’t stop there. In the next 20 minutes, I read three similar news pieces with different reasons, where CFOs of various other companies had stepped down. It was something that, as a professional, could not be ignored. Let’s take a look at it: 

1) Spotify’s Shakeup: There is a notion that a CFO is responsible for delivering and maintaining a high-performing revenue model in the company. Although various other factors contribute to how CFOs are evaluated, revenue is still the bottom line. But what if a company is growing at a fast pace and still decides to replace its CFO? It’s certainly not normal. However, this happened at Spotify, a very popular music company, where the CFO announced their exit. Interestingly, Spotify’s revenue increased by 16% in the quarter ending December 2023, with an operating loss of 75 million Euros. It was revealed that 70% of the company’s revenue is paid towards royalties to the music industry. Spotify has been struggling since going public in 2018. While the company has expanded its customer base in recent years, the situation is not as rosy as it may seem. In December 2023, the company laid off 17% of its workforce, and the replacement of the CFO was announced in the same month. Management feels that as the company is entering a new phase, it needs a CFO with a different mix of experiences.

Diving into CFO Resignations

2) KFC’s Decline: It tastes great when we order grilled food in restaurants, but of course, grilling revenue and profits are not liked by companies serving these kinds of foods. This is happening at KFC, which has been experiencing low revenue growth since last year. The company has announced the incoming of its new CFO, who is already serving as CFO of Pizza Hut. KFC and Pizza Hut are sister concerns, both being subsidiaries of Yum Brands. The existing CFO of KFC took up this role in January 2023, and in January 2024, she announced her career break. This announcement followed KFC’s quarterly results of December 2023, which showed a decline of 4.8% in sales. It is difficult to understand the career gap announcement, especially considering the company’s performance below expectations. There are higher chances that this is a kind of layoff in this case as well. Management says that the leadership of the upcoming CFO has had a positive impact on driving Pizza Hut’s growth agenda and so what is expected for KFC in upcoming year as well.

3) Popeyes’s Change: It is said that a company without a vision or long-term goal can’t sustain for long. This fits best with Popeyes’s (acquired by Restaurants Brands International – RBI) decision to change their CFO to stay on track in achieving their goal. RBI aims to reach at least 40,000 restaurants, $60 billion in systemwide sales, and $3.2 billion in adjusted operating income by 2028. The new CFO is an internal promotion candidate who has most recently served as president of Popeyes U.S. and Canada, a role he had been in for four years. During this role, Popeyes achieved a record level of sales, unit growth, and profitability, according to the press release. Popeyes U.S. ended Q4 with same-store sales increases of 5.8% and net restaurant growth of 4.5%, according to the company’s earnings call. This seems to be a layoff, as it appears that the existing CFO didn’t play any role in achieving growth, and the upcoming CFO (currently the President) is driving the growth.

4) Funko’s Fallout: “I am leaving because I have done the work for which I was appointed,” this is what the outgoing CFO says. On the other side, the CEO says, “The CFO led our efforts to address our excess inventory, improve our distribution center, negotiate lower shipping costs, right-size our cost structure, and manage our liquidity to improve our free cash flow.” The positive remarks by the CEO do not provide any hint as to why the CFO is leaving, especially considering the CFO was appointed just a year back. Now, let’s have a look at the financial data as well. Funko reported net sales of $291.2 million for the quarter, compared to $333 million for the prior year period, according to its earnings results. For the full year, Funko reported net sales of $1.1 billion, as opposed to 2022’s $1.3 billion. It is not wrong to say that the position deteriorated after the appointment of the new CFO. Although it is wrong to say that if a company is somehow not achieving the desired results, then the CFO is responsible for the same. There are plenty of factors that play an important role in shaping the company’s financials. It seems the CFO is laid off just within a year because of the undesired financial results.

5) Beleaguered’s Woes: Whenever a company is acquired, sooner or later, the top management is changed. This happened at Beleaguered, a smart window manufacturer, but not exactly due to acquisition, but due to improperly planned acquisition. The company started facing difficulties after going public in 2021 via a special purpose acquisition company merger, with View Inc. conducting multiple rounds of layoffs and seeing its stock price drop significantly. During the acquisition, there were several fraud allegations as well. The company couldn’t control the situation and couldn’t convince the investor to stay with the company. This scenario led the CFO to resign when the company told him that they couldn’t pay him as a CFO. Although the company asked the CFO to stay as an Independent Consultant, the truth can’t be denied that the CFO is laid off.

Conclusion: These examples underscore the complex factors that can lead to a CFO’s departure, ranging from strategic realignment to performance issues and external challenges. It’s clear that the role of a CFO is multifaceted and dynamic, requiring adaptability and strategic vision in an ever-changing business landscape.

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The author, CA. Atul Khurana is a seasoned Chartered Accountant, boasts over three years of expertise in Statutory Audits, complemented by over nine years of experience in research and writing across a diverse range of accounting topics.

You can reach out to him at [email protected] or 9888855340 (Only Whatsapp)

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Author Bio

1) I am a qualified Chartered Accountant with over 3 years of experience Indian as well as UK and US Statutory Audits. Also, a qualified Social Auditor registered with the Institute of Social Auditors of India. I have written more than 50 articles on various professional topics which were published View Full Profile

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