New Target CEO aims at bulls-eye
The retail giant's new CEO Gregg Steinhafel has been well-groomed for the job, but he faces a tough road ahead.
NEW YORK (Fortune) -- For decades now, Target Corp. has done a fantastic job of getting investors and shoppers alike to focus more on its ads featuring its perky English Bull Terrier than it has on Robert Ulrich, the CEO and chairman of the $63 billion company.
Famously private, the cowboy-boot-clad, deeply competitive Ulrich, who has led the retailer since 1994, has preferred to let actions speak louder than words. That was pretty easy, since he engineered Target's transformation from a regional discounter to a taste-making, national behemoth that has, for much of the last decade, made rival Wal-Mart seem like a granny that could never get groovy.
"He's a genius," says Bob Thacker, senior vice president at Office Max, who worked at Target until 1997.
Filling those cowboy boots would be tough for anyone, but if anyone is ready for the job, it should be Gregg Steinhafel, Target's president, who, the company announced Wednesday, will take over as CEO in May, the month after Ulrich turns 65 (Target's board requires that senior executives step down at that age).
Steinhafel, 52, a straight-talking, fair-haired Midwesterner who grew up in retail - his family owns Steinhafel's Furniture in Milwaukee - is hardly a surprise choice. The two have worked together since 1984, when Ulrich came to Target and Steinhafel was a toy merchant there. Target watchers say he has been groomed for the job for years; a $6 million restricted stock grant in 2006 hinted at what was coming. "We've worked together for such a long time that we almost can finish each other's sentences," Steinhafel says.
Although the transition had been anticipated, it is not the easiest time for anyone to take over the reins.
Target (TGT, Fortune 500) has had a rough few months, with a slow holiday and lackluster apparel sales contributing to a series of disappointing numbers that have dropped the stock almost 30 percent in the past six months. On Thursday, Target reported that December sales at its stores open at least a year fell 5 percent, a steeper decline than analysts had anticipated. Year-to-year comparisons this season are skewed by the fact that November had an extra shopping week relative to previous years. On that basis, Target's same-store sales were actually up 0.6 percent in December.
At the same time, long-maligned Wal-Mart (WMT, Fortune 500) seems to be making something of a comeback, surprising analysts with better-than-expected same-store sales. The world's largest retailer announced on Thursday that same-store sales rose 2.4 percent in December, above analyst estimates.
Adding to the pressure is the fact that activist investor William Ackman has taken a 10 percent stake in the company and has reportedly urged the company to sell its credit card operations - a difficult challenge in an environment that has put a chokehold on credit altogether.
But Steinhafel also has a lot going for him, starting with the fact that he is well-liked by his direct reports, who find him inspiring and as open to new ideas as Ulrich has been. Not only is he a skilled merchandiser, but investors say that he is also more comfortable dealing with the outside world than Ulrich, who, despite the heft of his job, managed to stay almost unrecognizable in a world of celebrity CEOs.
While he is not the architect of Target's incredible success story - that role will always belong to Ulrich - he may end up being, to use a Target phrase, a bit more "Fast, Fun and Friendly" than the reserved Ulrich.
"Gregg's much less intense than Bob, but he has all the right values," says George Jones, President and CEO of the Borders Group, who worked at Target with both men from 1984 to 1991. "He is the right person to take over the company."