With CEO gone, Target looks to fix image
MINNEAPOLIS — With CEO Gregg Steinhafel forced out, who can help Target Corp. regain its mojo?
“Now is the right time for new leadership at Target,” the company’s board said Monday, as it announced that Steinhafel — its chairman, CEO and president — had resigned. Still, analysts agreed that Target’s challenges run deeper than one person.
“There’s a broader sense that Target’s glory days as a cutting-edge merchandising organization seem to be behind it,” said Richard Seesel, a Milwaukee retail analyst. “Somebody needs to be able to fix that.”
Target’s slowing growth and increasing layoffs are a real concern in the Twin Cities, where it reigns as Minnesota’s most visible corporation, a huge employer and an economic powerhouse. That status fueled waves of speculation Monday about who would take Steinhafel’s place and whether he or she could restore its magic.
Among the surprising names floated: Target’s retired CEO Robert Ulrich, who led the company during its boom years of the ’80s and ’90s; and Ron Johnson, a superstar at Target and Apple, but whose recent run at J.C. Penney was a disaster.
Others names seem less of a long shot: Michael Francis, the marketing whiz who left Target in 2011; and Kathee Tesija, Target’s current executive vice president of merchandising.
But for the first time in its history, Target hints that it’s looking outside the company to fill its top job — and many analysts think it needs to.
“Target right now is not suffering from needing to get back to its roots,” said Carol Spieckerman, a retail analyst. “If anything, its roots have grown deep. The bigger opportunity is to set a new direction.”
That new direction includes online, where Target is among the brick-and-mortar retailers that have struggled to adapt. That’s one reason Spieckerman thinks Target would be smart to break the mold.
“Making a bold hire, maybe from outside traditional retailer, maybe poaching someone from eBay, Google, Wal-Mart, Amazon could be an interesting choice,” she said.
Steinhafel is a Target lifer who joined the Minneapolis discounter 35 years ago as a merchandise trainee, and held the top three roles at the corporation. He became president in 1999, adding the CEO job in 2008 and chairman of the board in 2009. He resigned from all three.
Already wealthy, Steinhafel will depart an even richer man. Target’s board said Monday it has “not made a final determination” on Steinhafel’s severance package, but based on his existing pay package, estimates started at about $20 million.
Steinhafel departs at a stormy time, and it may get stormier. Carol Levenson, director of research for Gimme Credit, a bond research service, feared the troubles may reignite warfare between Target Corp. and activist shareholders.
The company already is dealing with fallout from its data breach, when up to 40 million holiday shoppers had their credit and debit card data stolen before Christmas. Target’s corporate response to the crisis was shaky at times — with Steinhafel barely visible.
Its Canadian expansion — the largest in Target history — has been troubled and costly. Its weakening financial outlook already has led to two rounds of corporate layoffs and nervousness about more to come.
And after Steinhafel promised Wall Street years of healthy growth ahead, in October Target scaled back that vision, hinting at a future of leaner staffs at its 1,921 stores and its Minneapolis headquarters.
“The company has been drifting sideways, moving from one misstep to another, without articulating a strong core story for its brand,” retail consultant Max Goldberg wrote Monday.
Steinhafel was paid $23 million last year. Despite his devotion to the bull’s-eye brand, he didn’t always seem comfortable in the public spotlight, even when he donned the trademark red-and-khaki along with most of Target’s 361,000 “team members.”
There were successes on Steinhafel’s watch, too, which pleased the millions of loyal shoppers who regard Target as their go-to store.
Target has continued to innovate, unveiling popular programs such as its 5-percent-off Redcard Rewards and offering fresh groceries in its stores. It navigated the recession more deftly than its larger rival Wal-Mart, as its stock price shows.
Steinhafel wrote a public letter that Target released Monday:
“Looking back on my time as CEO, I’m particularly proud of the gains we’ve made by introducing fresh food in our stores, introducing new store formats, enhancing our Redcard credit and debit-card program, expanding internationally and forging ahead into the digital space,” he said.
No matter who is named Target’s new CEO, that leader will need “the ability to move faster, to adapt, to innovate,” said Twin Cities retail analyst Stan Pohmer, a former Target official. “Target has become a bit slow with that.
“If your business is built on the image of trend and fashion, one of the definitions of trend is being first, being an early adapter,” he added. “That’s something that somebody needs to bring to Target.”
Target has long been pre-eminent in downtown Minneapolis, where its forerunner Dayton’s built a legacy with stylish, well-managed department stores. Under Steinhafel, Target continued its commitment to philanthropy, stylishness and civic involvement, including the Twins’ baseball stadium, Target Field.
Today, Target continues to have about 10,000 employees in downtown Minneapolis and supports thousands more who cluster nearby. It remains such a magnet and market for advertising, digital and marketing professionals that insiders sum it up in a phrase: Target Feeds the World.
Signs of a shakeup
Target’s stumbles have been watched anxiously. Signs of a shakeup first emerged in December when its marketing chief, 10-year Target veteran Shawn Gensch, was fired.
Then millions of shoppers learned their credit and debit cards had been heisted, and grew more alarmed at reports that their data was for sale to thieves on the Internet. Nervous customers overwhelmed Target’s call centers, then took to venting their frustrations on social media.
On Jan. 10, Target disclosed that thieves also had stolen personal information — names, phone numbers, email and mailing addresses — on up to 70 million customers.
Two months ago, Target’s Chief Information Officer Beth Jacobs resigned, and rumors swirled that Steinhafel would be the next to go.
“John Mulligan, Target’s chief financial officer, has been appointed as interim president and chief executive officer,” the Target statement said Monday. “Roxanne S. Austin, a current member of Target’s board of directors, has been appointed as interim nonexecutive chair of the board. Both will serve in their roles until permanent replacements are named.”
There were other controversies involving Steinhafel, too.
In 2010, Target donated $150,000 to a conservative group that was working to elect anti-gay-rights Republicans in Minnesota. Given the company’s long support of its gay employees and customers, the donation drew calls for a boycott, and Steinhafel apologized to Target employees.
“I realize our decision affected many of you in a way I did not anticipate, and for that I am genuinely sorry,” Steinhafel wrote to employees.
More recently, contract janitors who clean Target stores have been picketing the company and its stores, eager to contrast their paychecks with Steinhafel’s $23-million-a-year pay package.
Target shares fell 3.5 percent Monday, or $2.14, to close at $59.87.
The Pioneer Press is a media partner with Forum News Service.