NEW YORK (AP) — Target is bringing in an outsider as its CEO for the first time as the retailer fights to redefine itself to American shoppers.
The Minneapolis-based company said Thursday that it named PepsiCo executive Brian Cornell to the top spot, replacing Chief Financial Officer John Mulligan, who had been keeping the seat warm since May.
The announcement comes roughly three months after Target CEO Gregg Steinhafel resigned following a large data breach in the run-up to the holiday shopping season last year.
Steinhafel had been dealing with problems on a number of other fronts too, including persistent perceptions that Target charges higher prices than its rivals and concerns that it had lost its magic touch for cheap chic offerings.
As such, Cornell faces a daunting task, especially when considering how the slow economic recovery has pressured the broader retail industry. With lower-income customers still struggling, Wal-Mart Stores Inc. has pushed low prices even more aggressively to go after penny-pinching customers. For its latest fiscal year, Target reported its first annual profit decline in five years.
Still, the infusion of new blood is a signal to Wall Street that Target is serious about addressing its internal issues.
"Outside perspective is what Target needs, in our view, given the need to rebuild trust," said Greg Melich, head of consumer research at ISI Group.
PepsiCo Inc., which is based in Purchase, New York, said in a statement it expects to announce Cornell's successor soon.
On Thursday, Target said Cornell's top priorities will be to ramp up its performance and help it evolve into a retailer that seamlessly incorporates online and brick-and-mortar experiences for its shoppers.
Target is looking to start anew after announcing in December a data breach in which hackers stole millions of customers' credit- and debit-card records. The theft badly damaged the chain's reputation and profits and spawned dozens of legal actions that could prove costly. Target's response since the theft has included free credit monitoring for affected customers and an overhaul of security systems.
The company's expansion into Canada, its first foray outside the U.S., has also been a disappointment. Analysts have said that Target botched its Canadian expansion by moving too aggressively. The company opened about 120 stores in the latest year and lost nearly $1 billion in the Canadian business.
In May, it fired the president of its Canadian operations, Tony Fisher, and replaced him with Mark Schindele, a company veteran.
Target must also work to restore faith among its investors. In June, at its annual shareholders meeting, the final shareholder vote tally showed a rise in dissent against key board members. All 10 nominees were elected to the board but the rise in votes against several directors shows how uneasy investors remain following the data breach.
Cornell, who is set to become Target's CEO on Aug. 12, will receive a base salary of $1.3 million, according to a filing with the Securities and Exchange Commission. He will be eligible for a bonus of up to $2 million and stock-based awards with a target value of $3.8 million, according to the filing. For fiscal 2015, the board also agreed to grant him stock-based awards with a target value of $9 million.
To make up compensation from PepsiCo that Cornell will be forfeiting, Target said it would pay him up to $19.3 million in equity grants, according to the filing. Any amount he is able to retain from PepsiCo will be subtracted from that amount.
The appointment was first reported by The Wall Street Journal.
In an interview posted on Target's corporate blog, Cornell said he has a "deep respect for the challenging retail environment" and noted his ties to Minnesota as a board member for Polaris Industries, a company based in Medina.
"I'm already shopping for a new warm coat for next winter," Cornell is quoted as saying.
Target shares finished at $61.38 per share on Wednesday. They have fallen 3 percent since the start of the 2014.