By  on July 31, 2014

Target Corp. may have a new chief executive officer, but Wall Street’s reaction shows the amount of work ahead.

Target’sshares fell 2.9 percent Thursday to close at $59.59 on the New YorkStock Exchange even as the retailer removed a major uncertainty bytapping Brian Cornell, former ceo of PepsiCo Americas Foods, as chairmanand ceo, effective Aug. 12. While Cornell has solid retail experiencewith stints at Sam’s Club and Michael’s, and has fast-moving consumergoods covered through the PepsiCo job, retail experts said he might lackthe digital experience needed to create Target 2.0. Nonetheless, theretailer said Cornell’s top priorities will be accelerating thecompany’s performance and advancing Target’s omnichannel evolution.Target’s profit has fallen for six consecutive quarters.

Theappointment of Cornell, the first ceo to be hired from outside thecompany, caps a fraught four-month search for a new leader afterembattled ceo Gregg Steinhafel left in May. John Mulligan, theretailer’s chief financial officer, has been the interim ceo.

“BrianCornell feels somewhat safe,” said Carol Spieckerman, president ofNewmarketbuilders. “I wouldn’t call Brian Cornell an old-school choice.This hiring from CPG [consumer packaged goods] companies has been atwork for a while at retail. It’s very quickly going to becomeyesterday’s model.”

“He is a very experienced executive sittingon both sides of the manufacturer and retailer equation,” said Amy Koo, asenior analyst at Kantar. “There’s a lot of focus on supply chain andmaking sure things are in stock. Getting somebody so focused onexecution and operations will be good for Target, not only for the foodbusiness and the consumables business, but in general. It’s not clearhow much he understands about updating Target’s ‘Expect More, Pay Less’brand message. How do you make Target exciting for Millennials and momsto shop? The top reason people go into the store is not to pick upconsumable items, but to buy apparel and general merchandise. He needsto keep Target ‘Tarjay.’”

In terms of technology experience, Koosaid Cornell has “done a few things here and there. It’s not the samelevel of transformative change that’s going to be necessary. There’severything from supply-chain management to how to communicate withguests to using mobile to being able to sell and fulfill — it’s amassive amount of change, not just a one-off. He doesn’t seem to havethat depth of experience. They picked an outsider because they knew theyneeded an outsider’s perspective. He’s an insider outsider.”

Koosaid Cornell is “an executor. For a company that relies on pizzazz andmarketing and always looking to the next new exciting thing, this wasnot a revolutionary choice.”

Target’s regimented andrules-oriented culture with a top-to-down hierarchy is hard tounderstand and difficult to manage, said Koo. “Looking at expansion intosmaller stores and a more localized approach, you have to empowerpeople at the local level to make decisions,” she said. “Target needs tolook at its assortments for small boxes and localize and tailor them tothe folks on the ground.”

“Cornell’s experience gives him theability to take the Target business and hit the ground running,” saidKen Perkins, a retail analyst at Morningstar. “It’s understanding themotivation behind consumer trends and the overall value proposition forcustomers, while assembling a team that can execute that strategy. Interms of setting the vision, he has enough knowledge to take the companyin that direction.”

Canada will be a big challenge for Cornell.Target has lost about $1 billion since it ventured north. In the U.S.,Target’s traffic decline is due in part to a massive data breach duringthe Christmas season; the retailer is still trying to win backconsumers. Longer term, e-tailers such as Amazon pose a threat. “How doyou keep customers? You need to have the right platforms and need tocultivate loyalty,” said Perkins.

Target’s Technology InnovationCenter in San Francisco’s financial district has given the company afoothold in Silicon Valley. However, it pales in comparison to@WalmartLabs, which makes frequent acquisitions and operates fairlyautonomously from Wal-Mart’s corporate hierarchy. “You’re not hearingannouncements coming directly out of that entity,” Spieckerman said ofTarget. “It doesn’t have the same autonomy and authority as@WalmartLabs. With Cornell’s hiring, will Target allow the Californiasatellite to work in a more autonomous and authoritative way? It will beinteresting to see if Target continues to be very headquarters focused.

“Targetis at a bit of a crossroads,” Spieckerman said. “Have executives likeKathee Tesija [executive vice president of and chief merchandising andsupply chain officer] been given incentives to stay the course, or isthis going to become a departure point for some of them who’ve beenaround for a while?” Tesija is said to have been a candidate for the ceojob. “We’re wondering if the president position was left open topotentially give to Kathee,” Koo said.

RELATED STORY: Target's CEO Search — It's Complicated >>

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