Appointing a seasoned executive with merchandising experience to replace outgoing Target Canada president Tony Fisher is a step in the right direction, but Target needs more Canadian expertise on its management team, said retail analysts on Tuesday.
Mark Schindele, senior vice president, merchandising operations, will assume the role of Target Canada president, effective immediately, Target Corp. announced Tuesday.
“Target is committed to making more rapid progress in Canada and I am personally very excited about working alongside the team to improve operations and deliver a Target experience that will earn us the trust and loyalty of our Canadian guests,” said Schindele, who has 22 years of retail experience, including 15 at Target.
“We are grateful to Tony for leading Target’s first international launch. One of our key priorities is improving performance in Canada more rapidly, and we believe it is important to be aggressive,” said John Mulligan, Target’s interim president and CEO.
Mulligan, the company’s chief financial officer, took over as CEO after Target Corp. veteran Gregg Steinhafel stepped aside May 5.
Target opened 124 stores in Canada in 2013 and lost nearly $1-billion.
The discount retailer also announced plans to name a non-executive chairman in Canada, a newly created advisory role to provide counsel and support to the president of Target Canada to ensure all strategies and tactics align with the Canadian marketplace.
“Obviously, it’s clear that Target is not exiting the country, putting to rest that crazy notion,” wrote CIBC analyst Perry Caicco, in a note to investors.
“But in appointing another American in-house solution, it is not clear (Target) really understands the massive disconnect it has with Canadian consumers,” Caicco wrote.
“However, the new guy is a merchant, and pricing has been identified as a problem, so we would expect much more aggressive pricing in the second half of the year.”
Caicco predicted that the new chairman role will likely be filled by a Canadian big name, and depending on who it is, the role could become increasingly executive.
“Our guess is that Target will soon produce a reduced ‘new outlook’ for Canada. It will contemplate more price investment but much less capital investment. The focus will be on store productivity rather than expansion,” Caicco wrote.
Schindele played a key role in launching new store formats at Target, including PFresh, CityTarget, and Target Express,” according to Target’s release on Tuesday.
In his current role, he leads a global team and provides senior-level oversight to Target’s merchandising operations, including systems, global sourcing, and product development.
Price wasn’t the only problem dogging Target Canada. Consumers were too often met with long empty shelves as the retailer struggled with delivering product across a vast geography. Savvy Target U.S. shoppers complained that Canadian stores did not carry the same breadth of assortment found in stores south of the border.
Target should have been sharper on price when they opened, said Toronto-based retail analyst Wendy Evans. They should have had the logistics in place to keep store shelves stocked. Senior management should have included Canadians.
“We find that one plus one equals three,” when it comes to putting U.S. and Canadian executives together in retail, said Evans, pointing to companies including Gap, LensCrafters, Home Depot and Hudson’s Bay Company as examples of successfully uniting Canadian and U.S. corporate cultures to drive successful expansions.
“I think they really misread the Canadian market.”
Evans believes that Target’s problems run deeper than flawed execution in Canada.
“The fashion edge they have had in the past has deteriorated, particularly with respect to women’s fashion and accessories and home fashion,” she said.
Retail analyst Wayne Hood of BMO Capital Markets Corp. pointed out in a note to investors after Steinhafel stepped down that in addition to stumbling out of the blocks in Canada, Target has not stayed ahead of the curve in e-commerce – which Hood said is especially concerning given the demographics of the company’s customer base. Hood also pointed out that Target has posted disappointing results during the fourth quarter over the last few years.
Target is suffering from self-inflicted wounds, said Michael McLarney, president of the North American Retail Hardware Association and editor of the industry magazine Hardlines. McLarney worked with suppliers in the hardware sector in Canada to prepare for the arrival of Target.
“To bring a U.S. guy in here and say ‘Yeah, I put my kids in hockey, I have a cottage now, I understand Canada, just doesn’t do it,’ said McLarney.
“They could never live up to the expectations Canadians had of them. First of all, when you’re on vacation, you’re always in a better mood and everything seems like a better deal,” McLarney said of the cross-border shoppers who sing Target’s praises.
“It’s an adventure if you’re doing cross-border shopping.”
Anthony Karabus, CEO of Hilco Retail Consulting, said bringing someone in from merchandising, with an understanding of supply chain, out-of-stocks and pricing, is an excellent step.
But he too said Target needs more Canadian input. He pointed out that when Walmart took over Woolco stores in Canada, it kept on key senior managers.
Walmart also kept on all Woolco employees, which Target did not do when it took over the Zeller’s store leases from HBC.
“This is the advice I would give Target, to have someone Canadian, who knows the market really well, who understands the regional needs and demographics,” said Karabus.
“I think the last thing they want is more people with potential. Deep experience is what they need now.”
Schindele will report to Kathee Tesija, chief merchandising and supply-chain officer, whose responsibilities include Target Canada.
In a memo sent to Target employees after Steinhafel’s departure, Tesija told employees that Target has no plans of closing doors or even slowing down in Canada, saying it was “‘all hands on deck” to determine the best way forward.
Other additions to the Canadian team include Janna Adair Potts, senior vice-president, stores and distribution; John Butcher, senior vice-president, merchandising; Livia Zufferli, vice-president, human resources; Tiffany Monroe, vice president, human resources and Mark Wong, general counsel.