New Target CFO Will Have to Sustain Retailer's Turnaround Pace
January 10 2019 - 5:59PM
Dow Jones News
By Nina Trentmann
Target Corp. is launching its search for a new finance chief at
a crucial time: After a strong holiday season, the
Minneapolis-based retailer needs to keep the momentum going while
experimenting with new ways to reach its customers to compete with
e-commerce rivals.
The store operator announced Thursday that Chief Financial
Officer Cathy Smith plans to leave the company once a successor has
been named and move on to an advisory role until May 2020.
Ms. Smith, who became Target's CFO in 2015 after stints at
Express Scripts Holding Co., Walmart Inc. and GameStop Corp., said
she intends to spend more time with her family. Target said it has
commenced the search for her replacement.
Target's new finance chief will have to allocate enough capital
for the company's transformation efforts while making sure that it
remains tactical about its investments, analysts said. This
includes spending on the company's digital shopping platforms.
"That person will have to manage the books while being able to
say no to certain spending plans," said Joseph Feldman, an analyst
at Telsey Advisory Group.
Ms. Smith's departure comes after a period of significant change
at Target during which the retailer overhauled its merchandising,
brushed up the look and feel of its 1,850 U.S. stores and expanded
its e-commerce channels. Under Chief Executive Brian Cornell, the
company since 2014 has embarked on a turnaround strategy that has
won the approval of analysts and investors.
Ms. Smith was an important contributor to the transformation
program, and her expertise and leadership have helped position the
company for long-term growth, analysts and executives said.
"The next person in that chair has some big shoes to fill," said
Charles O'Shea, a senior credit officer at Moody's Investors
Service.
Part of the turnaround program was a step-up in capital
expenditures, which were forecast to rise to approximately $3.5
billion in 2018, up from around $2.5 billion the year before. Wages
went up, helping the company improve its hiring and training of
workers. Meanwhile, stores were remodeled, as Target's management
sought to regain lost ground from competitors.
To compete with online-only retailers and other
bricks-and-mortar businesses, Target has developed new formats
beyond the traditional big box. The tactic helps boost the brand in
urban locations such as New York, where the real-estate market
makes it harder to build the kind of wide-ranging, one-story store
that suburban customers have come to know.
The company also is experimenting with new delivery options for
customers, including the option to pickup online purchases at the
store. It also is testing supply-chain enhancements, including how
to best pack a truck.
"We are looking for a customer-focused business leader who can
partner effectively in strategy and operations to build the
business and drive continued growth, profitability and commercial
success for the company," Target said.
The company is well-positioned to gain market share from other
retailers, including J.C. Penney Co. and bankrupt Sears Holding
Corp., said Edward Yruma, an analyst at KeyBanc Capital Markets
Inc. "Ms. Smith's successor steps into a Target that is much better
positioned," Mr. Yruma said.
But changes don't happen overnight. "You cannot spend all at
once," said Mr. O'Shea of Moody's, adding that the Target
management needs to continue executing on its strategy.
"The next CFO will need to focus most on managing the return on
investment on digital capability builds, finding the right point on
the curve to drive innovation without destroying returns," said
David Schick, managing partner at Consumer Edge Research LLC.
Similar to rivals Walmart, Costco Wholesale Corp. and Bed Bath
& Beyond Inc., Target reported higher sales during the crucial
Christmas shopping period. Sales rose 5.7% between Nov. 4 and Jan.
5 in stores and through company websites, up from 3.4% sales growth
reported during the same period last year.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
January 10, 2019 17:44 ET (22:44 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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