Target losing a third high-level exec

  • Article by: THOMAS LEE , Star Tribune
  • Updated: November 1, 2011 - 9:04 PM

It won't be easy to replace Doug Scovanner, the retailer's chief financial officer, who commands the respect of Wall Street.

Target Corp. Executive Vice President and Chief Financial Officer Doug Scovanner plans to retire from his posts in March 2012.

Photo: Tim Hollatz, Provided by Target

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This one is really going to sting.

Target Corp. said Tuesday that longtime CFO Doug Scovanner will retire next March, the latest in a string of high-level departures.

Scovanner's exit, in particular, will deprive the Minneapolis-based retailer of its de facto chief operating officer and financial brain at a time when Target faces rising costs, shrinking profit margins, and an expensive foray into Canada.

It's somewhat unusual for a top Target official to retire so early. Target executives are eligible for early retirement after age 55; Scovanner turns 56 this week.

Target spokeswoman Susan Kahn, however, said it was "absolutely" Scovanner's decision to leave. Several analysts say they believe that was the case.

Scovanner's exit in 2012 means Target will be down three top-level executives in about four months. Chief Marketing Officer Michael Francis recently departed for J.C. Penney Co. and Target.com President Steve Eastman left to "pursue other opportunities" after a series of embarrassing problems with the newly revamped website. As two of the company's eight executive vice presidents, Scovanner and Francis served on Target's senior leadership team as top lieutenants to CEO Gregg Steinhafel.

"It's unfortunate that two executives leave" in such a short period of time, said Colin McGranahan, an analyst with Sanford Bernstein & Co. Inc. in New York. "Certainly, it's a loss. Both were strong executives with incredible institutional knowledge. They got things done."

If Francis, the brains behind many of the retailer's iconic advertising and marketing campaigns, represented Target's flash and sizzle, then Scovanner was the oil that greased the company's wheels.

Scovanner joined Dayton Hudson Corp. in 1994 as senior vice president for finance after a long career at Coca-Cola and Fleming Cos. He became chief financial officer later that year and was named to his current role in 1999.

A familiar and respected face to analysts and investors, Scovanner led Target's successful campaign to thwart activist investor William Ackman's effort to seize control of the retailer in 2009, the "crowning achievement of his career," said Burt Flickinger, managing director of Strategic Resource Group in New York.

Scovanner also helped deftly manage the retailer's highly lucrative credit card business. Under his leadership, Target greatly reduced the amount of money it devotes to write off bad debt, which significantly boosted profits.

Scovanner was paid well for his efforts. Since 2007, he has collected more than $36 million in total compensation, including the exercise of stock options.

But Target today faces a number of financial challenges. The retailer has already spent millions of dollars renovating its stores in the United States and expanding into Canada. The rising cost of raw commodities has forced the retailer to raise prices on its products. As a result, Target must continue to generate strong sales growth in order to maintain profitability.

Scovanner's retirement "is not giving any investors comfort but even after this news is put behind us, we think investors will still have other issues to consider," including a weak sales climate, Daniel Binder, an analyst with Jefferies & Co. Inc., wrote in a research report. Target's many efforts to boost store traffic have so far produced only modest results, he said.

Though Target has said it will look both outside and within for replacements to Francis and Scovanner, the retailer made a point in Scovanner's case to note that its "reputation for attracting and developing exceptional talent throughout its organization has resulted in a strong leadership bench."

Kahn said it is the company's "strong desire" to hire Scovanner's successor before he leaves in March.

It might be difficult to find an outside candidate who can effectively replace Scovanner's operational and financial stewardship of Target, know-how he acquired from his many years at the company. In any case, Target is right to pursue all kinds of candidates, McGranahan of Sanford Bernstein said.

"Internal candidates have more institutional knowledge of the company, but the absolute best candidate may not always be the guy/gal already working there," he said.

Thomas Lee • 612-673-4113

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