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May
20

Target CEO Leaves the Building

Originally published May 5th 2014

Target (TGT) announced its CEO will head for the exit after 35 years with the company.

The reality is someone’s head had to roll for the company’s less-than-stellar handling of a data breach during the all-important holiday season. But the delayed and poor response to the customer data breach was just the icing on the cake when it comes to Target’s problems.

Let’s start with Target’s Canada fumble. Rewind to when Target announced it would head north in search of growth. Optimistic expectations for a new avenue of growth actually had investors looking beyond less-than-inspiring traffic trends in the U.S. Just one year after the Canada launch, we are now looking at dilution that is greater than 2x original estimates.

To make matters more confusing, the company will no longer break out dilution from the Canadian venture. Make no mistake, this fumble was an execution issue as Target misread the all-important consumables business.

Where does Target go from here? While guidance for 2014 was disappointing, you still may want to question whether or not the company has cleared the expectations deck. Don’t forget Target falls in to the back-half weighted story camp. In this case, investors may not be willing to wait that long.

For Target, this year’s headlines may continue to be tough traffic, rising costs, margin pressure and a big Canada question mark.

That is a combination that can’t be hidden by the weather blame game.


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