Target CEO Steps Down
Target Corporation’s Chairman and CEO Gregg Steinhafel has stepped down as he becomes the latest victim of the recent data breach; stock price is down about 3%
Target Corporation (TGT) has said that the company’s Chief Executive Officer and Chairman, Gregg Steinhafel, will be stepping down from his position, apparently a casualty after the company got hit by a data breach last year, which hampered profits and damaged customers’ confidence in the third-largest retailer in the US. Target also had to face Congressional hearings as a result of the data theft. The stock price of the Minneapolis-based company is currently down about 3%.
59-year-old Steinhafel, who was appointed as CEO in January 2008, was a 35-year company veteran. During his early career he was challenged by activist investor Bill Ackman, so he added a fresh food section in most Target stores to keep up with competitors.
To replace him, John J. Mulligan, who is the current Chief Financial Officer, will be appointed as interim CEO of the $40 billion company. Roxanne S. Austin has been named as the retail giant’s interim chairwoman. Steinhafel’s departure suggests that the company is trying to start with a clean slate as it makes a comeback from the theft of 40 information from over 40 million credit and debit cards.
In March, Beth Jacobs, who was Target’s CIO, had also stepped down. The company told the Senate panel that it had clues about the hackers’ attack weeks before it occurred. Moreover, it took a long time to react to the data breach. The aftermath of the breach was clearly reflected in the fourth quarter, as same-store sales decreased 2.5%.
In December last year, Target fell prey to data theft that involved the financial information of around 40 million US credit and debit cards. Later, reports suggested that the retailer could have prevented the attack. Since the data breach, the company had to face 90 lawsuits and has spent around $61 million, as of February 1, to settle them. The company is expected to report revenues of $17.04 billion and adjusted EPS of $0.72 for the first quarter of its fiscal 2014 (1QFY14) on May 21.
Since his arrival in 2008, Target’s revenues have compounded at 3% annually to $73.3 billion by the end of FY13. In 2009 amid the financial crisis, revenues had dropped to $62.9 billion. From 2008 to FY13, the company’s adjusted earnings per share compounded at 7.4% to reach $4.76. During the same period, Target’s stock price increased only 18.9%, underperforming the Consumer Discretionary ETF (XLY), which soared 94.6% respectively.
Currently, 32 analysts cover the stock. Only 12 analysts have given a Buy rating, while 17 analysts recommend holding the stock till the data breach problems are sorted out. The average of the 12-month target prices given by these analysts is $63.04, which amounts to an upside of 4.9%. However, Target’s stock price has declined by 12.6% in the past one year. Dustee Jenkins, Target’s spokesperson, refused to comment on possible new candidates for the post of CEO, but said the retailer would search outside the industry for a viable candidate.