Target Needs More Than Pep Rallies to Turn Its Business Around

While Target's almost 2,000 stores still sell a ton of stuff and the company remains profitable, some observers say it has long had a culture of high self-regard, which can be dangerous in an industry as rapidly evolving as retail. Some would say this explains what they have seen as a lack of urgency in addressing its current difficulties. In November, the company said in a quarterly earnings call that sales and profits had fallen yet again compared with the previous year. For investors, shareholders and employees, too, the question is stark. Can incoming CEO Michael Fiddelke, a 22-year Target veteran and senior member of the executive team that presided over the company's recent decline, make Target cool again? Bloomberg Businessweek Senior Global Business Writer Devin Leonard joins Bloomberg Businessweek Daily to discuss. He speaks with Carol Massar and Tim Stenovec.

Let us stipulate that Target knows how to throw a party. On a Tuesday morning in September, the Target Center in downtown Minneapolis is bathed in red, and the seats are filled with 14,000 crimson-clad employees of the discount retailer. They’re here today for a pep rally that’s part of Target Together, the company’s annual four-day corporate jamboree. An 11-piece R&B ensemble serves up a catalog of hits like Uptown Funk. The screens above the stage flash with multiple-choice questions, reminding the crowd of the company’s glory days in the aughts. Who was Target’s “bedrock design partner” during that era? Isaac Mizrahi, of course. Who played a Target employee on Saturday Night Live? Why, Kristen Wiig. There’s a dance cam spotlighting employee booty-shaking, previews of holiday gift items like Kendra Scott-branded Bose earbuds with her signature sparkle, and a reminder that the latest door-busting Taylor Swift album, The Life of a Showgirl, will soon be released in multiple versions, each with a poster available only at Target. Later, there will be an appearance by Kris K., the hunky, dimwitted “Hot Santa” who made his debut in Target’s holiday ad campaign last year. He’d gone viral, providing a welcome dollop of good cheer at a company that’s lately been plagued by political controversy, employee dissatisfaction and slumping sales.

But first, here comes Chief Executive Officer Brian Cornell, striding out of the audience and onto the stage like a game-show host, wearing a khaki suit, red T-shirt and bright red leather shoes. If the suit seems a little tight, that’s because it’s the same one he wore to the event 11 years ago, after being named CEO. “It still kind of fits,” he says, getting some chuckles.

This year’s rally, however, will be Cornell’s final one as CEO. He launches into a retrospective of his time at Target Corp., dwelling as you might expect on the high points: His decision in 2015 to pull the company out of Canada, where its 133 stores were losing money. His $7 billion commitment in 2017 to refurbish hundreds of stores even as doomsayers were forecasting—wrongly—the demise of physical retail. (“We knew better,” Cornell tells the audience. “We talked with the consumer, and they told us they still loved stores—especially Target stores.”) The increase in the number of Target’s house brands, which now account for $30 billion a year in sales. And reaching $100 billion in annual revenue. “That’s still a very exclusive club,” Cornell says with evident satisfaction.

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