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MINNEAPOLIS — Taking action to turn its business around, Target Corp. has tapped an outsider to serve as chairman and chief executive officer, and has launched a series of initiatives intended to improve its performance in Canada.
Taking action to turn its business around, Target Corp. has tapped an outsider to serve as chairman and chief executive officer, and has launched a series of initiatives intended to improve its performance in Canada.
Brian Cornell, who took the helm on August 12, is the first Target leader not to have been promoted from within the company. Industry analysts generally praised Target for its choice of an executive with proven success in boosting sales in the food and consumer basics categories, both important to Target’s future.
“Target needed to land a big fish to turn things around and set a future course for the country’s fourth-largest retailer, and it hooked a big one by landing Cornell,” said Sandy Skrovan, U.S. research director at Planet Retail, a consulting company.
On the day his appointment was announced, July 31, Cornell said he was looking forward to creating the “Target of tomorrow,” which includes reinvigorating Target’s fashion and home furnishing lines and expanding its online presence.
“Having worked in multiple large, consumer corporate environments, [Cornell] should feel comfortable at Target and quickly tackle the multitude of issues that have beset this once-venerable retailer,” Mark Miller, an analyst at financial services firm William Blair & Co., wrote in a research note to clients.
Cornell most recently ran PepsiCo’s Americas Foods division, the operating unit that includes the company’s snack business and is home to such brands as Frito-Lay and Quaker Foods.
The unit’s sales rose 5% last year, after increasing by 4% in 2012, the year Cornell joined PepsiCo from Sam’s Club, according to The Wall Street Journal.
Sam’s Club was one of Walmart’s fastest-growing units in 2012, with same-store sales growth of 8.4%, up from a 1.4% decline two years earlier.
But by at least one measure — comparison to sales growth at Costco Wholesale Corp. — Sam’s Club underperformed during Cornell’s tenure (April 2009 to January 2012) compared to the periods immediately preceding and following his reign, noted Miller in his research report.
Cornell, who oversaw new product introductions at Safeway and PepsiCo, will have to reenergize Target’s merchandising, said Miller, who calculates that new items as a percentage of Target’s total assortment shrank from 56% in 2006 to 34% last year.
And Cornell must decide whether, after years of going big in the suburbs, Target’s future lies in smaller stores in urban areas. To date, fewer than 12% of the company’s stores are in urban areas.
The company is experimenting with smaller-format CityTarget and TargetExpress stores, but with just nine stores between the two formats, the retailer is lagging far behind rival Walmart in its push into less uniform retail spaces in more densely populated neighborhoods.
One area where Cornell might be able to build on recent success is in Target’s digital initiatives, especially its Cartwheel mobile app that lets customers select deals that can be redeemed at the checkout lane.
The digital coupon program has been a big hit with shoppers, according to Target, which said more than 8 million customers have used the app to save more than $95 million since Cartwheel was released a year ago. Company officials said the app allows customers to select from some 600 promotions, and that it has increased store visits and spending among active users by 30%,
In the near term, Cornell is likely be consumed by the issues that led last spring to the ouster of president and CEO Gregg Steinhafel, a 35-year Target veteran who struggled to regain the confidence of consumers after a nightmarish 2013 in which Target’s foray into Canada went awry and tens of millions of shoppers had financial and personal information stolen by hackers.
On August 5 Target issued another earnings warning, citing softer-than-expected sales in the United States and Canada.
To address out-of-stock problems in Canada, Target has announced plans for a physical inventory audit at all stores in order to reset its systems and generate more accurate order and shipping data, adjustment of delivery schedules so stores receive merchandise more frequently, and implementation of new training and processes at headquarters and among store-level staff.
Target Canada has devised a new pricing policy that includes matching prices on any competing local retailer’s circular (print or online) and price matching against selected online retailers. And new merchandise assortment initiatives include plans to add more than 30,000 new items between now and Christmas.
