Target taps former Sam’s Club exec as its new CEO

Big box retailer Target chose Brian Cornell as its newest chairman and CEO after a long search following the company’s security breach and lackluster results from the previous year.

Cornell, 55, comes to Target from Pepsico, where he served as CEO of Pepsico Americas Foods division since March 2012. Between 2009 and 2012, Cornell was the CEO of Sam’s Club and an executive vice president at Wal-Mart Stores.

“I am honored and humbled to join Target as the first CEO hired from outside the company. I am committed to empowering this talented team to realize its full potential, lead change and strengthen the love guests have for this brand,” said Cornell. “As we create the Target of tomorrow, I will focus on our current business performance in both the U.S. and Canada and on how we accelerate our omnichannel transformation.”

Cornell is replacing John Mulligan, who had been acting as interim chief executive since May. Mulligan had stepped into the temporary post after former CEO Gregg Steinhafel resigned following a large data breach during holiday shopping season in 2013.

He will earn a base annual salary of $1.3 million and be eligible for a pro-rated annual cash incentive based on company profitability. The anticipated payout for this benefit is $3.75 million for 2014.

The board has also agreed to grant stock-based awards worth an estimated $9 million to Cornell for fiscal 2015, according to the release filed with Securities and Exchange Commission on Thursday (July 31).

Cornell will take the helm at Target on Aug. 12. The board also agreed to pay Cornell $19.3 million in equity grants and a $1.35 million bonus to make up for what the exec would have received at PepsiCo.

“As we seek to aggressively move Target forward and establish the company as a top omnichannel retailer, we focused on identifying an extraordinary leader who could bring vision, focus and a wealth of experience to Target’s transformation,” said Roxanne S. Austin, interim non-executive chair of the board. “The board is confident that Brian’s diverse and broad experience in retail and consumer products as well as his passion for leading high performing teams will propel Target forward.”

Retail analysts are mixed on whether or not Target did a solid job with the hiring. Analysts with Hedgeye warn that the “Cornell has adequate retail chops but might lack the digital background to create Target 2.0.”

Janney Financial analyst David Strasser applauds the move.


“Although Cornell was not at Wal-Mart for a long time, during that period, we did get to know him, and were impressed with where he was taking the division at the time. Our understanding at that time is that he left to return to the Northeast. At the time, we believed it was a loss to Wal-Mart. During that period of time, Sam’s club showed improvement. Comps for the three years he ran the division accelerated from the low- to mid-single digits, and he was generally thought to be a solid overseer of the business. While at Sam’s Club, Cornell also introduced the eValue digital couponing program and an enhanced partnership with suppliers to offer value to members…We believe bringing an outsider into the company with product and retail experience provides the right mix and background for Target,” Strasser notes.

Cowen & Co. wasted no time in upgrading Target to “market perform” from “underperform” because of their confidence in Cornell’s leadership.

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Cowen’s Faye Landes notes that “Target is unlikely to underperform during the first phase of Cornell’s tenure.”

He also notes that Wall Street investors have not yet been convinced because Cornell has no real turnaround experience to speak of and his expertise in apparel, home and digital are lacking. These are the three main areas which Target has said in the first quarter that it will focus intensely.

Target shares were trading down 2% in the morning session at $60.17 on the coattails of the a sell off across the broader markets as the Dow Jones Industrials were down 1.18% and the diverse Nasdaq index was down 1.86% on the day.

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