After a three month search Target (TGT) has found a new CEO. 55-year old Brian Cornell will become only the fourth person to head the company since 1984 and the first outsider to move straight into the top post. It's a smart move by Target's board. The nation's second largest mass-market discounter is coming off years of missteps and a humiliating 2013 full of scandals, revolts and credit card fraud. The place needed new blood and Cornell, with ten years experience at Pepsi (PEP) and three years heading Walmart's (WMT) Sam's Club stores seems like the right man for the job.
That doesn't mean it's going to be easy. I'm sure Brian has a pretty good handle on the situation but as the only person I know who actually gets choked up at the sight of a well-run store I can't help but offer a three step strategy that I think will get the Cornell era off to a bang-up start.
Step 1: End the revolt
Cornell's predecessor Greg Steinhafel was fired only after top company execs reportedly gave the Board an "us or him" ultimatum. Cornell's first move should be offering the mutineers a similar choice: they can either be on his team or leave. Turnarounds only work when there's a dictator at the helm. If that makes the Roman Senators who knifed Steinhafel unhappy they presumably know where the door is.
Step 2: Bag Canada
Target has lost $1.6 billion and counting in Canada. Maybe it can be salvaged with years of effort and focus but what's the expected ROI on that when so much else needs fixing? Cornell will get the standard four quarter pass from Wall Street on any writedowns or expenses associated with fixing Great White North disaster. Salvage what you can and dump the rest.
Step 3: Fix Target.com
This is the biggest opportunity. Cornell needs to fix Target's atrocious online business. Only 2% of company sales come from Target.com. It's not much better than Canada but Target.com is a HUGE opportunity if Cornell has the squash to think big. Rather than trying to replicate what other brick and mortar retailers are doing Target should leapfrog everyone, including Amazon (AMZN), by prototyping same day delivery in select markets. How? By converting a few of its more than 1,200 U.S. stores into distribution centers for local delivery. If you lose the displays and convert the parking lots, a single store will be able to hold ten times the merchandise and be within 20 miles of thousands of customers.
Stop treating online like an afterthought. Minnesota is hockey country so let's put it in those terms. Target.com has spent a decade chasing where the puck once was. Local distribution is where retail is going. Let Amazon build billion dollar death star distribution centers in New Jersey. Target can spend a fraction of that converting under-performing stores and redefine retail in the process.
That's it, Mr. Cornell. Three steps to becoming the unquestioned alpha dog of Target and potentially a retail legend. You're taking over a great company, sir. I truly wish you and everyone at Target all the success in the world.