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As sales trends slow and share value falls, Target Corp. said Wednesday that chief executive officer Robert Ulrich will retire May 1 and be succeeded by company president Gregg Steinhafel.
Steinhafel, 52, has been the discounter’s merchant prince and instrumental in its strategy to be the hippest of the nation’s major discounters, synonymous with “cheap chic.”
With his range of experience — Steinhafel also leads Target’s distribution network, technology services and legal team, and previously had responsibility for stores and global sourcing — he has been the heir apparent to Ulrich for several seasons. Minneapolis-based Target has a history of promoting from within.
Ulrich, who turns 65 in April and established the $63 billion chain as one of the world’s foremost retail brands, will remain as chairman through the end of fiscal 2008.
Steinhafel joined Target in 1979 and ascended the merchandising ranks until being named executive vice president of merchandising in 1994. He became president of Target in 1999 and a member of the board last year.
The new ceo faces major challenges. Sales gains at the 1,600-unit Target chain have been slowing as consumers get pinched by tight credit, high fuel prices and the housing slowdown. The brand’s appeal on Wall Street has slipped, raising speculation that some of the Target cachet also could be fading. The stock closed Wednesday at $49.92, up 97 cents, or 2 percent, though it’s down from the 52-week high of $70.75.
In addition, the number-two U.S. discounter faces tougher competition from chief rival Wal-Mart Stores Inc., which had a stronger holiday season than Target, gaining the upper hand with its industrial-strength price promotions. There has been concern that Target’s fashion and private brands — Merona, Xhilaration, Mossimo and Isaac Mizrahi — are showing less flair. December same-stores sales, to be reported today, are expected to be disappointing. The company projected sales would be up or down 1 percent.
Retail experts indicated that Steinhafel will face the probability of having to dispose of Target assets, including underperforming stores, to maximize shareholder value. Target also is considering selling off its profitable credit card business, which generates $6.5 billion. The retailer recently said it is continuing to evaluate “alternative ownership structures” for the credit card portfolio, and expects the review to be done during the first calendar quarter of this year.
There has been mounting pressure for change from activist hedge fund firm Pershing Square Capital Management, which has accumulated an almost 10 percent ownership interest in the discounter, according to a U.S. Securities and Exchange Commission filing on Dec. 21.
“Gregg Steinhafel has really been the heir apparent for a long time….Target promotes insiders,” said Isaac Lagnado, president of Tactical Retail Solutions. “They like people they have tested and know.”
Lagnado credited the Ulrich-Steinhafel team with effectively pulling off the cheap-chic approach in both fashion and home goods, “as opposed to competitors that have talked about it a lot but never have been able to get it right.”
However, the two men have different styles, experts said. Ulrich has been pointedly low-profile and Steinhafel may be more out front.
Ulrich’s departure as ceo marks the final bow in one of the more enduring and successful runs for a ceo of a major chain, with far more ups than downs.
Under Ulrich, “Target has been a unique success story,” said a senior executive search official who requested anonymity. “He created a bunker mentality, an insulated culture that has been successful in retaining talent.”
The retiring ceo began his career as a merchandising trainee in 1967 at Dayton’s, a former division of Target Corp. Ulrich subsequently held a variety of positions in stores and merchandising. He was named president of Target Stores in 1984 and became chairman and ceo of the division in 1987.
Ulrich was named chairman and ceo of the corporation in 1994. Under his leadership, Target has almost tripled its sales and U.S. store presence, increased its net earnings nearly ninefold and has become one of the most recognized brands in retail.
“The board has tremendous respect for Bob’s exceptional leadership and the remarkable performance Target has achieved under his direction,” Jim Johnson, vice chairman of the executive committee of the board, said in a statement. “His skill and integrity have created a highly successful organization and talented executive team that are admired throughout the retail industry. We are completely confident in Gregg’s ability to continue this legacy.”
Steinhafel said in a statement, “I am fortunate to have had the opportunity to learn from one of the best leaders in the retail industry, and I look forward to building on the company’s success by continuing to create substantial value for our guests, our team members, our shareholders and our communities.”
Ulrich said Steinhafel’s “considerable knowledge of our culture and history after 28 years with the company, his personal commitment to building a world-class team and the innovation and energy he brings to Target every day make him uniquely qualified to lead.”