Inside This Issue - Opinion
Targetís underappreciated CEO
January 10th, 2011
by David Pinto, Editor
Fortune magazine recently issued its annual list of America’s 50 leading business executives for 2010. It’s a roster that can easily be picked apart, both for its errors of commission and for those of omission.
Among the latter, one name must be particularly noted and criticized: that of Gregg Steinhafel, chairman, president and chief executive officer of Target Corp. (It should be noted, as well, that Fortune, though naming several retailers to the list of top-performing business leaders in 2010, including Walmart CEO Mike Duke, unaccountably omitted both Costco CEO Jim Sinegal and Dollar General chief executive Rick Dreiling.)
Under Steinhafel’s leadership, Target has reemerged in this year of economic uncertainty and uneven retail results as one of mass retailing’s truly impressive companies. In performance alone, it deserves recognition. For the three-month period that ended on October 30, Target’s earnings grew an impressive 22.6%, to $535 million. The company’s retail sales for the quarter, an especially difficult one for many chains, climbed 3%, to $15.2 billion, while same-store sales inched ahead 1.6%.
Earnings for the fiscal half advanced by 21.4%, to $967 million, while total sales for the period, a number that included credit card revenues, which plunged 16.4% to $1.22 billion, reached $46.7 billion on a 3.4% gain. Retail sales for the fiscal half advanced 4.1%, to $45.5 billion.
But the numbers don’t really tell the story — or matter all that much. What matters more is the fact that Steinhafel mapped out a long-term strategy for Target before the onset of the current economic downturn — one anchored in a commitment to fresh food; more attention to its beauty care, electronics, home, video games and footwear assortments; and a greater emphasis on pharmacy — and remained true to that commitment. He did so despite considerable pressures both within and outside the company to jettison the strategy in the aftermath of sluggish sales at the start of the year; a customer movement to retailers that were perceived, incorrectly, as offering lower prices; and increasingly strong food competition from a variety of retailers.
Then too, Steinhafel chose this period of economic and retail uncertainty to commit Target to an extensive store renovation program — one that has had the retailer remodel 341 stores thus far this fiscal year — while introducing a new credit card-based loyalty scheme.
Despite this impressive agenda and considerable achievements, Target has gone largely unnoticed outside the retail community in which it competes, as Fortune’s slight attests. One reason for the omission is Steinhafel himself, whose self-effacing approach to his status within the mass retailing community and his various constituencies occasionally borders on diffidence. With the exception of the mandatory quarterly conference call with analysts, he is seldom seen or heard in the retail community. Like his predecessor, Bob Ulrich, he insists on keeping a low profile, while encouraging his senior and mid-level staffers to represent the company.
In this effort he has been amply abetted by Target’s corporate communications staff, a group that exerts an influence on the company that, even by today’s retail standard, one that has communications departments protecting senior managers to a degree seldom encountered in the past, appears in some cases to be unnecessarily rigorous.
No matter. Steinhafel has done a wonderful job in leading and managing a retail company that has traditionally been underappreciated and undervalued, as it was under the legendary Ulrich. Indeed, though struggling to regain its former luster, Walmart remains the retailer of choice when it comes to media coverage, while Target, despite its unique positioning as an upscale discounter, undeniable consumer loyalty, irresistible value proposition, strong performance of late and the respect with which it is regarded throughout the retail community, largely remains an afterthought.
Still, Target’s performance speaks for itself. And the future appears brighter than its recent past has been. The retailer plans to accelerate its store-opening program going forward while continuing to aggressively renovate existing stores. Moreover, in a departure from the Ulrich regime, Steinhafel has expressed an interest in exploring off-shore growth opportunities, specifically mentioning Puerto Rico and Canada as possible foreign entry points.
So it needs to be said that the feeling here is that Fortune, perhaps not as well versed in America’s retailing goings-on as it might be, has made a mistake in overlooking Steinhafel and his considerable contributions in leading Target through the treacherous shoals of the past year.
Oh well, there’s always next year.