Turnaround of Target: Will it Bring Back Lost Momentum?
| Case Code: BSTR470 Case Length: 14 Pages Period: 2013 - 2014 Pub Date: 2015 Teaching Note: Not Available |
Price: Rs.400 Organization : Target Corporation Industry : Retail Countries : US,Canada Themes: Turnaround |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Problems
Target’s loyal shoppers had nicknamed it Tar-Zhay (meaning creative leeway) since it was a pioneer of “cheap chic” home goods and apparel. It was known for selling designer clothing and fashion apparels at affordable prices. Over the years, Tar-Zhay formed the DNA of the retail chain and helped it compete with Wal-Mart on level terms despite the latter offering its products at very low prices.
Target’s ‘cheap chic’ edge attracted guests to spend at least US$ 20 on everyday basics. Often, they ended up making US$ 100 worth of impulsive purchases. However, during the US economic slowdown in 2009, customers were reluctant to spend money on non-essential items. Hence, Steinhafel in a bid to reverse the slide in sales, introduced groceries at Target stores. Criticizing this move, investor activist, William Ackman, said, “Target is not Gucci. It should be a business that does well even in tough economic times.”
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The Turnaround
Consequent to the data breach, Steinhafel was asked to step down in May 2014. In addition to the data breach, Target had performed badly during his six-year tenure of Target (Refer to Exhibit III for a stock chart depicting Target’s declining comparable store sales). Mulligan took over as the interim CEO of Target..
Results
Target’s turnaround efforts began to show some positive results. According to a basket pricing study by Kantar Retail , in August 2014, Target Canada’s pricing was 3.9 percent cheaper than Wal-Mart Canada for a basket of 33 branded retail items, including food and health and beauty products (Refer to Exhibit IV for overall basket results). Target had lowered its prices as a means of drawing traffic to its Canadian stores, according to the Kantar’s study..
Looking Ahead
Target’s turnaround plan received mixed response from industry analysts. David Strasser, an analyst with financial services firm, Janney Capital Markets, said after visiting Target Canada stores that the initiatives outlined “highlight a path forward.” He added, “We are somewhat optimistic that Canada will get better, perhaps not returning to the profile that had been originally forecast, but one that is acceptable.” On the other hand, Brian Yarbrough, an analyst with financial services firm, Edward Jones, felt that though the initiatives laid out by Target were being channelized in the right direction, it remained to be seen whether Canadian customers, who were initially turned off, would come back..
Exhibits
Exhibit I: Target’s Milestones
Exhibit II: Target’s Five-Year Financial Summary
Exhibit III: Target’s Stock Chart
Exhibit IV: Overall Basket Results (August 2, 2014 study by Kantar Retail)
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