Target Corp. (TGT), seeking to fix a money-losing expansion into Canada, pushed out its top executive in the country and announced plans to name a nonexecutive chairman to oversee the effort.
Tony Fisher will step down immediately as Target Canada president and be replaced by Mark Schindele, a senior vice president in charge of merchandising operations, the Minneapolis-based retailer said today in a statement. Schindele, a 15-year Target veteran, helped roll out new store formats for the chain, including PFresh, CityTarget and Target Express.
Target’s year-old Canadian business is confounding the retailer at a time when it’s working to recover from a devastating data breach, which led to the ouster of its chief executive officer this month. The Canadian operation lost $941 million before interest and taxes in 2013, reducing the year’s profit by $1.13 a share.
“One of our key priorities is improving performance in Canada more rapidly and we believe it is important to be aggressive,” John Mulligan, Target’s interim CEO, said in the statement. “We have a committed team who is focused on delivering an outstanding shopping experience to our Canadian guests and getting our performance on track.”
Canadians, who for years had shopped at Target just over the border in the U.S., have been disappointed that prices at the new stores are higher. Local competitors also cut their prices to make Target’s entry more difficult. As the company works on its comeback there, the new nonexecutive chairman will provide support and counsel to the Target Canada’s president.
Target shares fell 2.9 percent to $56.61 at the close in New York. The stock has declined 20 percent in the past year, compared with a 12 percent gain for the Standard & Poor’s 500 Index.
The Canadian woes have been especially troubling for Target because it’s the retailer’s only market outside of the U.S., where it has almost 1,800 stores. By contrast, larger rival Wal-Mart Stores Inc. (WMT) has locations in 27 countries, so it can make up for weakness in one market with strength in others.
Target opened its first stores north of the border in March 2013 and now has 127 locations there.
“They had too many high-level mistakes,” said Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis. “They bit off more than they could chew.”
Target failed to keep shelves adequately stocked, particularly with home goods and clothing, Yarbrough said. Executives also were “too lax in their value message and their marketing and advertising around it,” he said.
Mulligan became interim CEO earlier this month after the board ousted Gregg Steinhafel, who had been in the job since 2008. Steinhafel held himself personally responsible for the data breach, which compromised 40 million credit card numbers -- along with 70 million addresses, phone numbers and other pieces of information -- during the holiday shopping season.
The company announced changes to its U.S. leadership today as well, elevating three senior merchandising leaders to improve performance. Trish Adams will serve as executive vice president for apparel and home, while Jose Barra will hold that role for essentials and hardlines, and Keri Jones will take the position for planning and operations. Separately, Target said that John Griffith will retire on May 31 as executive vice president of property development. He had helped develop store prototypes and Target’s headquarters buildings.
The company plans to report first-quarter results tomorrow, providing an update on how the Canadian business is doing. Target’s northern expansion still has promise, assuming the company can fix some key problems, Yarbrough said. Although Target’s prices in Canada are higher than in U.S. stores because of greater costs, the chain offers good value compared with homegrown retailers such as Loblaw Cos., he said.
Executives should “almost reintroduce the brand, but first, you’ve got to have the stores well stocked,” said Yarbrough, who recommends buying Target shares. “That is job No. 1. If you make them mad twice, you’re probably never going to get them back.”
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