It is nearly a miracle that Target CEO Brian Cornell still has his job. In a world where Target Corp. (NYSE: TGT) investors should be able to rely on good board governance, his mistakes have gone uncriticized and his job appears completely secure. When Target announced terrible quarterly results, it said its near-term future is troubled, and Cornell’s mistakes continue to compound themselves.
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Target’s stock dropped 13% when the quarterly figures were released. That puts the shares down by more than 30% this year. By contrast, Target’s largest rival, Walmart, has shares up 3% over the same period, against an overall market that has dropped 16%.
Before the earnings announcement, investors faced the trouble of Cornell’s choice of inventory midyear. Because of this fumble, Target had the wrong items at a time when it might have gained ground with optimistic consumers. That ship sailed long ago.
Target’s comparable store sales crept up only 2.7% in the quarter. Per-share earnings plunged by 49.3% to $1.54. Cornell blamed the problems on consumers plagued by inflation, rising interest rates and “economic uncertainty.” For some reason, larger rival Walmart did not run into these walls.
Target’s revenue rose only 3.4% to $26.5 billion. The operating income margin dropped from 7.8% in the year-ago period to 3.9%.
Cornell dropped top-line and bottom-line expectations for the fourth quarter to make matters more challenging for investors.
Target’s board of directors extended Cornell’s contract in September. The board must have known at the time that Target was in trouble. Nevertheless, his contract was extended by three years. Lead independent director Monica Lozano said at the time, “In discussions about the company’s longer-term plans, it was important to us as a board to assure our stakeholders that Brian intends to stay in his role beyond the traditional retirement age of 65.” She has been on the board since 2016, which makes her a part of Target’s long-term problems.
Cornell’s job is cemented for three more years unless the board comes to its senses.
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