In the wake of its leader’s departure, Target Corp. executives will have the chance on Wednesday to elaborate on their plan to fix the business, including turning around its fledgling Canadian division.
The U.S. discount chain will release its first quarter results and speak to analysts for the first time since chief executive officer Gregg Steinhafel stepped down unexpectedly two weeks ago. His departure came shortly after the company scheduled an analyst meeting for May 30 with Mr. Steinhafel. For now, chief financial officer John Mulligan is taking over as interim CEO.
The changes followed a massive data breach at Target during the holiday season, resulting in the theft of at least 40 million payment card numbers and 70 million other pieces of customer data.
But the issues facing Target today “transcend both the credit card data breach and the issues in front of Canada,” said Michael Exstein, retail analyst at Credit Suisse in New York.
“The retailer now has to deal with the sustainability of its franchise domestically, where momentum has stalled as the business lacks a clear merchandising strategy.”
The troubles are expected to pinch the retailer’s first-quarter results, with analysts forecasting that profit-per-share will fall more than 6 per cent to 73 cents (U.S.) from a year earlier, according to Bloomberg.
Mr. Mulligan said in an interview on the company’s website that as interim leader he’s “not simply keeping the ship afloat. We need to accelerate our growth and that means we all have to move faster and empower the people around us to do the same.”
He said he’s “accelerating our transformation” to becoming an omnichannel retailer operating smoothly online and in stores, while ensuring staff is “energized” to serve customers.
Christopher Horvers, analyst at JPMorgan, said Target’s disappointing launch in Canada is an even bigger challenge for the retailer than the data breach.
But he said the leadership change is likely welcome and opens the door for a revival of the retailer’s business.
Target’s execution “has been poor in the U.S. and the high-profile losses in Canada less than one year after the first store opened are a microcosm of execution at the company.”
He said the Canadian troubles are reminiscent of the difficulties the company grappled with when it took over its website from Amazon.com Inc. in late 2012, a shift from which it is still recovering. Target suffers from lagging e-commerce capabilities, low inventory levels, lost market share in key apparel and home categories and uneven results during the crucial holiday period, he added.
Still he pointed to the company’s strengths, including its REDcard loyalty program, its real estate and the potential of the brand. He compared it to Home Depot and the transformation the struggling company went through after 2006 under a new leader.
Target can borrow a page from the giant home improvement retailer’s playbook. It returned to basics by improving its in-stock merchandise levels, introducing new styles with recognized brands and improving customer service, he said.