Target taps Cornell of PepsiCo as CEO, chairman

For the first time in its history, Target Corp. is tapping an outsider as CEO, a step widely seen as a bold statement by the giant retailer to reshape its culture and improve its fortunes.

On Thursday, Minneapolis-based Target named former Sam's Club and PepsiCo executive Brian Cornell as its next chief executive and board chairman. Cornell will be charged with boosting Target's U.S. sales, repairing its new Canadian operations and regaining consumer trust after last year's massive data breach.

Even before he starts his new role on Aug. 12, Cornell already represents a sea change for the retailer, which has long been known for its insular culture and mostly promoting from within.

"They needed someone with a fresh perspective to come in with a whiteboard and say: 'Here's what's working and here's what's not,'" said Brian Yarbrough, an analyst with Edward Jones.

Target's board of directors had been talking to Cornell for several weeks and was unified in its choice that he was the right leader, said Dustee Jenkins, a Target spokeswoman.

"He can drive results," Jenkins said. "He's also very approachable. That's also very important. We wanted a dynamic leader that the team could get behind."

Cornell becomes the fourth CEO of Target since the early 1980s, when the business became the biggest operating unit of the then-Dayton Hudson Corp. Target did not make Cornell available for an interview Thursday.

Analysts upbeat

Target's search began in May, but Cornell had not been among the top contenders rumored to be in the running for the job. Still, retail analysts were mostly upbeat about his appointment, pointing to his long track record in retail that includes his tenure at Sam's Club, where he was credited for boosting sales.

Cornell has a "well-rounded résumé to revitalize and re-energize Target," said David Strasser, an analyst with Janney Capital Markets.

Some analysts, however, pointed to Cornell's lack of home and apparel experience — a key sales driver for Target, which helped the retailer earn its distinctive cheap-chic reputation.

"It's not necessarily a daring choice," said Carol Spieckerman, president of retail consultancy newmarketbuilders, noting that some were hoping for a leader with more of an e-commerce or technology background to help boost Target's digital operations.

Target's stock dropped 2.9 percent on Thursday — its largest decline since the day after Target fired its previous CEO, Gregg Steinhafel, in early May.

Since Steinhafel's departure, acting CEO John Mulligan has shaken up the executive ranks by appointing new leaders for Target's Canadian business, a chief technology officer and a data security chief. He also began to move the company's top executives onto one floor at the firm's downtown Minneapolis headquarters building to improve communication and hasten decisionmaking.

Mulligan will stay on as chief financial officer, the company said.

Gerald Storch, a retail consultant who previously served as CEO of Toys R Us and vice chairman of Target, said Cornell has a reputation for being a team builder. He added that Target's board was wise to pick a successor quickly, especially before the all-important holiday season.

"It's very smart that the board hired someone rapidly and didn't allow the period of limbo to extend too long," he said.

Some analysts wondered if Cornell's appointment was a sign that Target would further emphasize its grocery offerings, which it has expanded in many of its stores in the last several years.

Cornell resigned Wednesday as CEO of PepsiCo Americas Foods, where he had led food and snack brands such as Quaker, Tropicana and Gatorade. He was considered to be a possible successor to PepsiCo CEO Indra Nooyi.

Before that, he was president and CEO of Sam's Club. When he left the Wal-Mart division, he had a two-year noncompete agreement that expired this March.

Meet-and-greet

On Thursday, Cornell met with Target executives and had an impromptu meet-and-greet with employees, some of whom took selfies with him. Cornell, who lives in Connecticut, has begun house hunting in the Twin Cities.

Cornell will not take on the title of president as Steinhafel did. Target is keeping that position open, and there are no immediate plans to name someone to that post, Jenkins said.

Yarbrough, with Edward Jones, wondered if Cornell would name another outsider to that No. 2 position who may have more of a background in such areas as e-commerce and merchandising. And Yarbrough said there's likely to be more turnover in the next six to 12 months as Cornell puts his team in place. "Anybody in a management position right now is probably a little nervous," he said.

'Let's go'

Cornell takes over at a time when big-box retailers are struggling with declining sales and traffic. They are fighting for every dollar with online retailers such as Amazon, and smaller-format dollar stores and drugstores are siphoning off some traffic.

Further, Target is still trying to regain the trust of some shoppers following the data breach, in which tens of millions of customers' payment card and personal information was stolen. In May, about 33 percent of households said they had shopped at Target in the previous month, a 14 percent drop compared with the year before, according a survey by Kantar Retail ShopperScape.

"These are long-term issues that Target has: How do you get shoppers excited about the merchandise?" said Amy Koo, a Kantar analyst. "How do you retool Target to be omnichannel and seamless? And what do you do about Canada?"

While Target hasn't been idle on those fronts, the waiting period for a new leader to come on board to make big decisions is now over.

"There's a permanent person in place — so let's go," said Koo. "They really need to go."

Kavita Kumar • 612-673-4113