Retail
Target Hires New CEO From Pepsi -- Why Did He Leave?
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Target Corp. (NYSE: TGT), desperate due to falling sales and a data breach that exposed personal information from tens of millions customers, hired a PepsiCo Inc. (NYSE: PEP) executive to be its new CEO. The challenges of e-commerce and smaller big-box retailers may be more than the new chief can reverse.
Target Corp. is bringing in PepsiCo Inc. executive Brian Cornell as its new chief executive, turning to an outsider for the first time in its history to repair a battered corporate culture and navigate a sea change in Americans’ shopping habits.
It is worth noting that Cornell may have feared he would not become the new CEO of Pepsi, which may be a primary cause for his departure. He has only been at Pepsi since March 2012, but also held several management positions there earlier in his career.
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The turnaround of Target may have to do more with industry trends than reversing the effects of the credit card breach. The second is a short-term problem, the first a permanent one. Target and larger competitor Wal-Mart Stores Inc. (NYSE: WMT) continue to face challenges from Costco Wholesale Corp. (NASDAQ: COST) and large department store operations. Of course, Amazon continues to eat away at store retail results. In the most recent quarter, Amazon’s revenue rose 23% to $19.34 billion, although it did post a loss. By way of contrast, Target’s revenue in its most recently announced quarter was $17.1 billion, up 2%. Its net profit was an extremely modest $412 million.
One of Target’s other challenges is that it lags far behind Amazon in website traffic, robbing it of a means to compete with the huge e-commerce company. According to the most recent comScore data about U.S. website size, Amazon ranked sixth with 49 million visitors. Walmart ranked 22nd at 25.3 million and Target 25th at 23.4 million. Consumers not only browse retail stores and then buy products online to pay the lowest prices. They also shop among e-commerce sites, which means to gain Internet-based customers, Target has to undercut Amazon’s prices.
Cornell’s new job may be a better one that he had at Pepsi, but it is harder by an incalculable factor.
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