Target Names New CEO in Bid to Lure Back Customers
Beleaguered retailer Target (TGT) named former PepsiCo and Walmart executive Brian Cornell as CEO and chairman as it tries to regain customer confidence following a devastating data breach last year that hit earnings.
Cornell, the first outsider to lead Target, has his work cut out. The company's comparable store sales have declined in three of the last five quarters, while store visits have fallen for six straight quarters.
An ambitious expansion into Canada last year has stumbled. The company opened a record 124 stores, but couldn't keep shelves full due to delivery bottlenecks and customers complained of steep prices.
The No. 3 U.S. retailer has also been late to embrace e-commerce, lagging Walmart Stores (WMT) and Amazon.com (AMZN).
From 2009 to 2012, Cornell led a turn-around at Sam's Club, Walmart's slowest growing business at the time.
In May 2012, he joined PepsiCo (PEP) to head the company's largest business, Americas Foods unit, which makes Frito-Lay chips and Quaker Oats.
"He did a very solid job at Sam's," Cowen & Co. analyst Faye Landes said, citing that same-store sales growth at the membership-only stores jumped to 5.1 percent from 1.4 percent during Cornell's tenure.
The 55-year-old, who takes the top post at Target on Aug. 12, had been a contender to succeed PepsiCo CEO Indra Nooyi, according to The Wall Street Journal, which reported Cornell's appointment earlier Thursday.
Before joining Sam's Club, Cornell held the top job at arts and crafts chain Michael's Stores for two years.
%VIRTUAL-pullquote-His experience at large retail and consumer product goods organizations should be instrumental in guiding Target.%"His experience at large retail and consumer product goods organizations should be instrumental in guiding Target," Morgan Stanley (MS) analyst Simeon Gutman wrote in a note.
Under previous CEO Gregg Steinhafel, Target focused on low-margin grocery items to entice frugal customers, turning away from its popular home and apparel products, which gave the company its cheap chic appeal.
"I think the bottom line now is to renew merchandise with fresh styles," Edward Jones analyst Brian Yarbrough said.
Refocusing on home and apparel will expand margins and widen its customer base, helping Target avoid a price war with Walmart, Yarbrough said.
Walmart gets about 60 percent of its total U.S. revenue from selling groceries.
Steinhafel was removed in May, after Target lost nearly $1 billion in Canada in 2013 and the data breach in the key holiday season led to the theft of at least 40 million payment card numbers and 70 million other data.
CFO John Mulligan has led Target in the interim and will now return full-time to his CFO duties after Cornell's appointment.
The company's shares were down 2 percent at $60.20 in afternoon trading.
The stock fell 11 percent in the weeks following the breach, but has made up for most of those losses since then to close Wednesday at $61.38 on the New York Stock Exchange.
-Additional reporting by Supriya Kurane and Arnab Sen in Bangalore.