Gregg Steinhafel has stepped down as chairman, president and chief executive officer of Target Corp., an apparent victim of the company’s massive data breach and stumbles in Canada last year.
John Mulligan, Target's chief financial officer, will serve as interim president and ceo until Steinhafel's successor is appointed.
Roxanne Austin, a member of Target's board, will serve as non-executive chair until a permanent appointment is made for that post.
Target’s board of directors said that “after extensive discussions, the board and Gregg Steinhafel have decided that now is the right time for new leadership at Target.” The board added that Steinhafel has agreed to “serve in an advisory capacity” during the transition.
Steinhafel, 60, has worked for Target for 35 years and was named president in 1999, ceo in 2008 and chairman in 2009. He started as a merchandising trainee in 1979.
The board cited his skills in leading the company “through unprecedented challenges, navigating the financial recession, reacting to challenges with Target’s expansion into Canada, and successfully defending the company through a high-profile proxy battle.”
It also pointed to Steinhafel’s involvement in the response to the company’s data breach in late 2013. “He held himself personally accountable and pledged that Target would emerge a better company. We are grateful to him for his tireless leadership and will always consider him a member of the Target family,” the board said.
Along with the data breach, which compromised the credit and debit card information of 40 million consumers and the personal data of more than 100 million, the difficulties of getting its Canadian operations up and running contributed to a 45.9 percent reduction in Target’s fourth-quarter profits, to $520 million, and a 34.3 percent drop in full-year net income, to $1.97 billion. Hurt by the breach and excessively difficult weather, fourth-quarter revenues slid 5.3 percent, to $21.52 billion, while same-stores sales were off 2.5 percent during the crucial three-month period.
Dilution from its entrance to Canada, originally expected to have a dilutive impact of 45 cents a share in the fourth quarter, instead subtracted about 40 cents from EPS. During 2013, sales in Canada were $1.3 billion, $623 million of which came in the fourth quarter, while the operating loss was $329 million in the quarter and $941 million in the year. The gross margin in Canada was 14.9 percent for the year but 4.4 percent in the fourth quarter as the company worked to clear excess inventory.
As the pressure on Steinhafel built through revelations about the breach, speculation began to grow that his status with Target’s board, once considered rock solid, might be at risk. Several sources speculated that his predecessor, Robert Ulrich, might return to the company despite hitting Target’s age cap of 65 in 2008. A return by Ulrich would parallel the one made by Myron “Mike” Ullman 3rd after Ron Johnson’s problem-riddled tenure as ceo of J.C. Penney.
The company last month appointed Bob DeRodes its new chief information officer, succeeding the ousted Beth Jacobs, and said it was continuing its search to fill two subordinate posts, chief information security officer and chief compliance officer.
The company has retained the Korn Ferry search firm to advise it on finding a successor.
In a filing with the Securities and Exchange Commission Monday, Target said Steinhafel is entitled to severance but will be required to sign an agreement that includes a non-solicitation clause and a release of claims. Severance can be recovered if he is terminated or if he is employed by specified competitors, who were not identified in the filing.
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