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Retail's game of musical chairs is likely not over

Sitting in a room with the leaders of the country's largest retailers would look decidedly different today than it did two years ago as CEO shakeups have rocked the industry.

Target Chief Executive Gregg Steinhafel's sudden departure, announced Monday, was just the latest addition to a long list of executives caught in a nasty game of musical chairs: J.C. Penney. Lululemon. American Eagle. The list of companies that have undergone recent leadership changes goes on. And given the weakness expected out of the sector's first-quarter earnings, it likely isn't over.

Gregg Steinhafel, Target's former CEO.
AP
Gregg Steinhafel, Target's former CEO.

"This quarter is going to be particularly bloody for a lot of retailers," said Craig Johnson, president of Customer Growth Partners. "We would not be at all surprised to see a couple of other management changes occurring over the next few weeks."

Read MoreTarget's breach: Swiped cards and golden parachutes

Johnson said the recent shakeups within the industry have been more dramatic, as a number of them have been performance related and without a planned successor. One of the more high profile oustings came from fellow discounter J.C. Penney, which gave Ron Johnson the boot in April 2013 following a botched attempt to remake the retailer.

American Eagle's Robert Hanson was also booted from the company earlier this year, after only two years on the job and another one left on his contract. Also in the teen sector, Abercrombie & Fitch earlier this year separated the roles of CEO and chairman of the board, in a move that usurped some power from controversial leader Mike Jeffries.

Best Buy and Lululemon have also seen management changes following respective scandals. Hubert Joly became CEO of the consumer electronics store after Brian Dunn resigned in April 2012 over an investigation into his "personal conduct."

At the athletic-wear maker, Chairman Chip Wilson announced that he would resign his position earlier this year, following a statement he made that Lululemon pants weren't fit for all women's bodies. That remark came after reports that the company's pricey luon pants could pill and become see through, and following news that CEO Christine Day would resign.

Read MoreAs Target upgrades credit cards, it may stand alone

More stable transitions were recently seen at Wal-Mart, which tapped the president and CEO of its international arm, Doug McMillion, as CEO earlier this year, and Bloomingdale's, which handed the baton from 22-year company veteran Michael Gould to President and Chief Operating Officer Tony Spring in February.

Burberry also chose an internal candidate following CEO Angela Ahrendts' departure for Apple, the company's creative director Christopher Bailey. And in 2012, Craig Jelinek was named CEO of Costco after nearly three decades with the warehouse store.

Elsewhere in the industry, Marigay McKee started her new role as president of Saks in January, following Hudson's Bay's acquisition of the company last year. Sears veteran Eddie Lampert became CEO of the struggling department store again in February 2013, after Lou D'Ambrosio resigned citing health reasons. The Bon-Ton Stores also announced that CEO Brendan Hoffman will exit the retailer for personal reasons in February.

Johnson attributed the industry's shakeups to the pressured retail economy, which is suffering a "persistent overcapacity of supply versus demand," and some poor decisions in wake of these pressures. Not only is retail an "intensely competitive business," but it's particularly hard to fill executive roles in the industry because it's difficult to find someone who is both a good merchant and has the right tools to be a CEO.

"The skill sets needed to be a good merchant are often different than the skill sets needed to be a CEO," he said. "Merchants tend to be right-brain people, and good [CEOs], particularly nowadays, tend to be someone a little more left-brained. … You don't find [that] combination of skills that often."

Read MoreTarget chairman and CEO ousted

Les Berglass, CEO of retail placement firm Berglass + Associates, said, "Target needs to bring in leadership that returns to the innovation that its consumer has come to expect and at the same time can respect the DNA of such a powerful and proud brand."

He added that the retail industry today is different, because "for the first real time in America you're fighting a share war as opposed to a growth war."

SW Retail Advisors analyst Stacey Widlitz sounded a similar note about the changing industry.

"Things have changed. The consumer has changed. It's all about omnichannel and delivering to the consumer the way they want it," she said. "A lot of the old guard in some of these larger cap companies really has just been not dynamic enough to change with the times."

JD Sherry, vice president of technology and solutions at Trend Micro cloud security firm, said, "Other CEOs may share Steinhafel's fate if they don't learn from the Target debacle."

Read MoreTarget boosts credit card security; names new CIO

"To me, the lesson is simple: The responsibility of a modern CEO includes relentlessly and tirelessly guarding the security and safety of their customer's data," he said.

In Target's case, Widlitz and other analysts agreed that an internal hire would be viewed negatively, and the company should seek an outside talent to take over the role. Wells Fargo analyst Matt Nemer suggested Gap CEO Glenn Murphy or a senior executive from a leading department store chain could be a good choice. He and Cowen Group analyst Faye Landes also viewed Wal-Mart's U.S. leader Bill Simon, who was overlooked to become the company's new CEO in favor of McMillion, as a possible candidate.

"On the other hand, we would argue the company's greatest challenge of the next decade is Amazon and a CEO with deep domain experience in technology and e-commerce would be asset," Nemer wrote in a research note.

Berglass suggested Neiman Marcus CEO Karen Katz, or Diane Neal, former CEO of L Brands' Bath & Body Works. A CNBC poll of analysts and contributors also added HSN CEO Mindy Grossman, Ahrendts, Hoffman and Macy's president Jeffrey Gennette to the list of retail's rising stars.

Speculation abounded following Steinhafel's announced departure, which came in wake of the massive data breach that affected up to 110 million shoppers, a downturn in traffic and sales following the breach, and a disappointing debut in Canada.

Some experts worried the abruptness of Steinhafel's departure signaled a condemning internal investigation, or perhaps a failure of stabilized shopping trends in wake of the data breach. But other analysts said the fact that Target did not revise its guidance lower is a signal that the company is still expecting an adjusted earnings per share of 60 to 75 cents, on flat or declining same-store sales of 2 percent. The first quarter will be the first time Target includes its Canadian operations in its adjusted earnings per share.

According to Thomson Reuters estimates, the retailer is expected to earn 72 cents a share on revenue of about $17 billion when it announces earnings later this month.

Last week, the company named Bob DeRodes to the role of chief information officer and said it would tighten its in-store security measures by upgrading its store-branded cards with Mastercard's chip-and-PIN technology starting early next year.

"We view [Steinhafel's departure as] a positive, but who they hire is critical," Janney Montgomery analyst David Strasser said. "There is a lot that has gone wrong at Target over the past few years, and it is critical that the company looks for an outsider to come in, and revisit several strategic mistakes."

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