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Jul
31

Target new CEO; Clear the Decks and Target May Hit a Bullseye

Target new CEO; Clear the Decks and Target May Hit a Bullseye

Target has a new CEO and he has a lot on his plate.

Target announced the company has hired Brian Cornell, formerly CEO of America Foods at Pepsi since March 2012. Previously Cornell was President and CEO of Sam’s Club, a Walmart division as well as CEO of Michael’s Stores for two years after the chain was taken private.

While Target may now get a better deal on Doritos, Cheetos and Mountain Dew Mr. Cornell has his work cut out for him.  Probably the most pressing issue is to stop the pain related to the botched Canadian expansion, which resulted in 2.5x the original forecasted dilution.  Make no mistake this fumble was an execution issue as Target misread the all important consumables business.  So it is good news that Target has gone and hired talent with consumables expertise. The problem is as the saying goes you only make a first impression once.  Changing Targets perception in Canada may take some heavy lifting.  I would not rule out a “pull the plug” on Canada.

The second elephant in the room at Target is winning back the trust of the American consumer after the data breach that hit the company right before the 2013 holiday season.  The matter was addressed at a snails pace and left angry consumers heading into the arms of the competition.  Negative comps followed.  Investing in chip and pin technology to the tune of $100M is a move in the right direction but clearly other traffic driving steps will need to take place to get Target back on track.

Target requires a fresh look to get back in the game.  What happened to the days when the company was a fashion leader and had differentiated merchandising collections?  Simply put the company has started to blend into the discount landscape with promotions and less compelling offerings.

What does all this necessary change mean for investors? Mr Cornell may have to clear the expectation decks and prepare the street for a long term repositioning.  While a turnaround may take some time the old Target may eventually hit a Bullseye

Widlitz has no position in Target


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