Target Replaces CEO Steinhafel After Holiday Data Breach -- Update

By Dow Jones Business News, 
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By Paul Ziobro

Target Corp. replaced Chief Executive Gregg Steinhafel, removing a 35-year lifer who won plaudits for his merchandising ability but whose tenure was marred by a massive data breach over the holidays.

The embarrassing computer attack and weak sales at a critical time shined a harsher light on other stumbles under Mr. Steinhafel's six years as CEO, including a money-losing expansion into Canada and a persistent weakness in traffic as shoppers moved online.

Mr. Steinhafel's resignation leaves a void at the top of one of the largest U.S. retailers at a time of deep change in shopping habits; a weak economic recovery, especially among low-income shoppers; and questions over whether internal failures at Target made it an easy target for the data thieves.

Mr. Steinhafel, 59 years old, will step down immediately and be replaced on an interim basis by Chief Financial Officer John Mulligan while Target seeks a new chief, the company said. Roxanne Austin, a current board member, will take over Mr. Steinhafel's chairman role, also on an interim basis.

The company's shares were down slightly at $61 in early trading.

Target spokeswoman Dustee Jenkins said Mr. Steinhafel's decision to step down was just made recently after extensive discussions.

The retailer's board stepped up its involvement after the data breach, in which 40 million credit and debit cards and personal information of 70 million people was stolen, a person familiar with the matter has said.

Directors have met monthly, most recently two weeks ago, Ms. Jenkins said.

"The last several months have tested Target in unprecedented ways," Mr. Steinhafel said in a letter to Target's board Monday, adding that the company has already taken steps to improve its data security.

Mr. Steinhafel rose through Target's merchandising ranks on the strength of his skill at stocking shelves with stylish but inexpensive goods.

Early in his tenure as CEO, which began in 2008, Mr. Steinhafel successfully defended the company in a proxy fight with activist hedge fund manager William Ackman and remodeled Target's stores to add fresh food in most locations, a necessary change to keep up with competitors.

But Target has lately had a hard time attracting shoppers to its stores, as more people shop at online-only retailers like Amazon.com. Target rung up 2.7% fewer transactions in 2013 versus 2012, including a 5.5% decline in the key fourth quarter, the worst result since Target started reporting that metric in 2008.

The data breach hit as Target was struggling with its first major international foray, a more than $4 billion bet on Canada. The first stores opened in March 2013, but traffic has been weak, and Target lost more money there than it expected to in the first year. At times it has had to cut prices by up to 90% to clear products.

Mr. Steinhafel and the board decided now is the right time for him to step down after the retailer beefed up its handling of data security following. Monday, Bob DeRodes, a former senior information technology adviser to the U.S. federal government, started as Target's new chief information officer. The former CIO, Beth Jacobs, stepped down in early March.

Mr. Steinhafel, the son of a Milwaukee furniture-store owner, was the handpicked successor to Bob Ulrich, an icon inside Target who led the company to rapid growth in the previous two decades, and was groomed for the position for several years.

Mr. Steinhafel will stay on in an advisory role.

Target has hired Korn/Ferry International to conduct the CEO search and will consider internal and external candidates. Potential candidates include two female executives at Target-- Kathryn Tesija, head of merchandising, and Tina Schiel, who heads up the store operations--who since the data breach have taken on more of the day-to-day responsibility at the retailer while others have focused on dealing with the fallout.

Ms. Jenkins, the spokeswoman, declined to comment on possible candidates, but said the company would also look outside the retail industry.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

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  (END) Dow Jones Newswires
  05-05-140952ET
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This article appears in: Technology

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