Target CEO exits; board may look outside for successor
Target shares reached a new high last year, but then Target’s revenue fell, its profits missed expectations and its expansion in Canada was executed poorly. The data breach in December was the “last straw,” said one Minneapolis portfolio manager who owns shares of Target.
(Minneapolis) Star Tribune
MINNEAPOLIS — Now that Target Chief Executive Gregg Steinhafel has stepped down, several analysts say the Minneapolis-based retail giant may look outside its own executive suite for a new leader.
“Longer-term, this provides the company with an opportunity to bring a fresh set of eyes to the franchise,” Matt Nemer, analyst at Wells Fargo, said in a report Monday.
The nation’s second-biggest retailer has never been led by someone from the outside.
Early Monday, Target’s board of directors issued a statement announcing that, after “extensive discussions,” it is the “right time for new leadership.”
Steinhafel, a 35-year Target veteran who led the discounter out of the recession but into a series of missteps that climaxed with one of the largest data breaches in U.S. corporate history, said in his own statement Monday that he resigned.
Beyond the data breach, Target faced ongoing issues with its foray into Canada and execution of its online strategy.
The board hired recruiters Korn Ferry to assist in the search for a new leader.
Nemer said hiring Korn Ferry “sends a strong message that the company is in a position to act quickly and will focus on external candidates.”
He speculated that an ideal one would have a strong merchandising background, given Target’s cheap-chic reputation.
Among the potential candidates is Glenn Murphy, current CEO of Gap, or “perhaps a senior executive from a leading department-store chain would fit the bill.”
Nemer didn’t rule out a number of senior executives at retail behemoth Wal-Mart Stores that were passed over for the CEO job there, including Bill Simon, head of Wal-Mart US.
Meanwhile, as Target searches, John Mulligan, its chief financial officer, was appointed interim CEO while the board seeks a permanent leader.
Board member Roxanne Austin, who leads a private investment and consulting firm, was appointed interim chairwoman.
In quickly issued notes, several analysts called Steinhafel’s exit “abrupt.” Just last week, he had scheduled a May 30 meeting with investors and analysts in New York.
Target shares reached a new high last year under Steinhafel’s leadership and the company’s continued profitability stood out in a retail sector that has struggled to emerge from the 2008-09 recession.
But in the past year, Target’s revenue fell, its profits missed expectations and its expansion in Canada was executed poorly. On top of that, the data breach in early December exposed the information of tens of millions of Target customers to cyberthieves.
“It appears to me that the data breach was the last straw in a string of recent missteps by the company, and the board recognized that it needed to make a change,” said Joshua Hill, a senior portfolio manager for Minneapolis-based Windsor Financial Group, a longtime Target stock holder.
“Over the course of the next few years, we expect the company will continue to make steps in earning back its customers’ trust and financial results should improve,” Hill said.
The board said in a statement that Steinhafel “held himself personally accountable” for the data breach “and pledged that Target would emerge a better company.” Steinhafel will stay on to advise the company during the transition and while Target remains the subject of investigations and dozens of lawsuits.
A career Target employee, the 59-year-old Steinhafel started at the company as a merchandise trainee in 1979 and progressed through merchandising and operations positions before being named president in 1999.
He was named CEO in May 2008 and chairman in February 2009, succeeding Robert Ulrich.