Walmart vs. Target: Who Wins the CEO Shuffle? (WMT, TGT)

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It’s no secret that Walmart (WMT) and Target (TGT) have had a challenging year so far as sluggish sales, hotter competition and PR nightmares have weighed on WMT and TGT stock. When the going gets tough at publicly traded companies, top executives often get going — that’s why it comes as no surprise that Walmart and Target recently have shaken up the C-suite.

Walmart WMT stock TGT stockTarget recently named former PepsiCo (PEP) executive Brian Cornell as its new CEO, taking over for Gregg Steinhafel, a 35-year TGT veteran who resigned in May after a misstep in its Canada expansion and a massive data breach in December compromised credit card numbers and personal information of as many as 40 million Target credit cardholders.

The impact of that data breach caused TGT to revise its second quarter guidance last week to 78 cents a share, down from the 85 cents to $1 per share it had forecast earlier. Target now expects to take a $148 million hit to settle claims related to the breach, including those from payment card networks. TGT said the costs would be partially offset by a $38 million insurance payment.

Last month, WMT announced that Walmart Asia CEO Greg Foran would take over the company’s critically important U.S. operations. Walmart has battled a series of scandals and PR disasters in recent months, ranging from a Mexican bribery investigation to the sale of tainted donkey meat in China.

But which leadership change has the best chance of overcoming recent scandals and restoring the big box retailers’ fortunes? Let’s break it down:

Walmart: Greg Foran, CEO, U.S. Operations

Foran takes over the Bentonville, Ark.-based company’s high-profile U.S. operations from Bill Simon. Simon, who had been CEO of U.S. operations since 2010 and served as chief operating officer from 2007 to 2010, is “transitioning out of the company,” according to a WMT news release. The move is logical because Simon had been a contender to replace Mike Duke, who was retiring as CEO of the entire company; however, Doug McMillon, who has close ties to the Walton family, got the nod in February. Foran, who hails from New Zealand, is a 35-year retail industry veteran who McMillon hired back in 2011 and promoted to head up Walmart’s China operations in March 2012.

Walmart’s U.S. division is the largest jewel in the Walmart crown, but the company has struggled with lower same-store sales and earnings misses over the past year. Foran, who once headed up Australian supermarket chain Woolworth’s grocery operations, has considerable strengths in supply chain management, marketing and merchandising.

He’ll need all that street cred and much more to transform WMT’s U.S. operations, which are feeling a trifecta of pain with digital commerce growth, competition from neighborhood dollar and drug stores, and sustained weakness in spending by lower-income buyers. Foran must find a way to make smaller-format Walmart Express stores a success, boost e-commerce sales and reinvent the big-box retailer’s flagging image and reputation.

Target – Brian Cornell, Chairman and CEO

By hiring PepsiCo’s CEO of Americas, TGT is bringing in an outsider to replace the ultimate insider, the 35-year TGT veteran Gregg Steinhafel.

In fact, not only is Cornell the first outsider to take the helm at TGT, he is a former Walmart veteran who turned the then-struggling Sam’s Club into a private-label powerhouse that could compete with warehouse rival Costco (COST).

A high-energy, motivational leader, Cornell did two separate stints at PepsiCo and spent a little more than a year as CEO of Michaels Stores, a Texas-based crafts chain.

Cornell must hit the ground running to fix three huge challenges: Boost sales in its 127 Canadian stores, develop an effective omni-channel strategy that enables TGT to grow digital and mobile commerce and undo the brand damage stemming from last December’s data breach.

While Cornell will have no easy days righting the ship in Canada — which lost $1 billion last year — and polishing up the tarnished brand, digital will be Cornell’s toughest challenge because he does not bring that experience to the table and TGT’s omni-channel strategy is fragmented. Cornell must decide whether Target’s point man for omni-channel strategy will be Multichannel chief Casey Carl, former Gilt Groupe Japan CEO Peter Glusker or someone else entirely — and time is not an asset TGT has in abundance.

Bottom Line

There are no sure things in retail leadership — JCPenney’s (JCP) experiment with former Apple (AAPL) Store wunderkind Ron Johnson (a disaster that led to former CEO Mike Ullman’s return) is a cautionary tale for a sector threatened not just by brick and mortar competitors ranging from low-price leaders like Dollar Tree (DLTR) and designer discount chains like TJX Cos.’ (TJX) T.J. Maxx to e-commerce giants like Amazon (AMZN).

Both new CEOs face multi-front battles and shareholder expectations that would be daunting for the Great and Powerful Oz.

Nevertheless, Cornell probably is best positioned to perk up TGT stock in the short term for two reasons — he’s a well-respected outsider who was wooed by JCPenney as a successor to Ullman, and his high-energy attitude should at least win a two-quarter honeymoon from analysts and investors.

Foran’s task is tougher — WMT’s image has been tarnished by scandals, and the big-box behemoth has drawn fire over low wages, allegedly unsafe working practices and environmental concerns. Comedian Tracy Morgan, critically injured in an accident with a speeding Walmart truck in June, has filed a lawsuit against WMT that is likely to give the company another black eye. Foran, who headed up Walmart’s China operations, also may have some baggage resulting from the donkey meat scandal in that country, which is the world’s largest grocery market and a key component of the big-box retailer’s future growth.

That said, I don’t think either WMT stock or TGT stock are buy-and-hold picks now because their core business models are under severe stress, as InvestorPlace Editor Jeff Reeves explains.

If you’re in WMT or TGT now, it’s a good time to put both of these retail stocks back on the shelf.

As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/08/walmart-target-wmt-tgt-ceo/.

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