Target CEO Brian Cornell sees turnaround as 'still in early innings'

Growing up in Queens, N.Y., Brian Cornell saw early on a real-life example of a turnaround: the 1969 Mets.

He was 9 years old, and Cornell was glued many days to the small black-and-white TV in his kitchen. Like most of the other kids in his neighborhood, he was mesmerized by what became known as Cinderella season of the New York Mets.

The Mets started off that year, as they often did, losing lots of games. But then something clicked and they began to win. And win. And win. They went to the World Series — and won.

"But here's the thing: For that team, there was no single game, no series, no pitch, not an at-bat, no individual player, call or decision, no definitive moment that turned the tide that year," he said. "It was a series of moments, one after the next that created the momentum that they needed to get on top. And for us, this is no different."

Cornell, who is now 60 and has just finished his fifth year as CEO of Target Corp., told that story to a roomful of suppliers back in 2015. It was a model, an aspiration, a road map, of where he wanted to take Target.

While Cornell would be the first to say Target still has a way to go to get into the World Series — "It's still early innings" and "We still have a lot of work to do" are some of his catchphrases — there's no doubt the Minneapolis-based retailer has pulled together an impressive winning streak of late.

It's a stark contrast to the string of bankruptcies, store closures and tumbling sales and share prices that have befallen some other national retailers that haven't been able to respond as well to changing consumer demands and the rise of Amazon.

Target's momentum did not have a winning edge when Cornell first arrived in August 2014. He was hired as Target's first outside CEO as the company was still recovering from a massive data breach the year before. Sales were flat or negative. People were coming to Target stores less often. And the company was losing hundreds of millions of dollars in a disastrous expansion into Canada.

Under Cornell, sales improved at first, but then they turned worse in 2016.

Then the tide began to turn. In the past two years, Target has posted consecutive years of robust sales growth, including a 5% jump in comparable sales last year, its biggest gain since 2005. Traffic to its stores has been on the rise — a feat when people also are shopping more online. And its shares, which have jumped around, are back up in the $80s, up from the $50s when Cornell arrived five years ago.

"You've got to give him credit," said Brian Yarbrough, an analyst with Edward Jones. "Things are getting better. They've done a lot of impressive things. There were a lot of doubters, including me, asking 'Why are you investing in stores? Everything should be about online.' "

But the billions spent reinvigorating stores and making them into mini-distribution centers for online sales have been paying off, he acknowledged, noting that Target has also benefited from strong consumer spending and has picked up sales from shuttered retailers such as Toys 'R' Us.

"Over the last several periods, [Target's] performance has turned many skeptics into potential believers," Michael Lasser, an analyst with UBS, wrote to clients last week.

Besides remodeling 500 stores — with several hundred more on the to-do list — Target has launched more than two dozen new private-label brands, with more in the pipeline. It has opened 100 small-format stores in cities and near colleges and continues to open 30 more a year. And it has added new services such as curbside pickup and same-day delivery while also upgrading its website and mobile app.

"It's really been the sum of the parts that I think has revitalized the company and created a growth company again at Target," Cornell said.

Before arriving at Target, Cornell hopscotched around the world, spending a few years at a time at companies such as Michaels, Sam's Club and PepsiCo, living in places like Singapore, Brussels, northern California and Connecticut.

Some initially wondered if Target also would be a quick stop on his journey, but it hasn't turned out that way.

"I've lived here longer than any place in my adult life," he said of Minneapolis. "So I'm right at home now."

Cornell spent his first several months at Target as a student of the business.

Then he made drastic cuts, laying off more than 2,000 headquarters employees in the Twin Cities, selling its increasingly unprofitable pharmacies to CVS and shutting down its Canadian stores less than two years after they first opened.

As it has now been well documented, Target moved too fast in Canada, opening 133 stores almost overnight along with new distribution centers.

"I think a lot about if I could have been here earlier, I would have loved to have been part of the team that thought about entering Canada," Cornell said. "We would've gone slowly and learned the marketplace, understood the consumer. Because I do think our brand could have and should have been successful in that market."

Yet what went wrong in Canada has guided him and other Target leaders in the decisions they have made since then, he said. It drilled into them the importance of testing and learning before rolling out initiatives chain wide.

After Canada, that's just what Target spent the next couple years doing. It opened a handful of small-format stores, figuring out how to replenish stores in busy cities without big loading docks for trucks to pull into. It began refreshing its brands, starting with two — a kids' home brand, Pillowfort, and a children's clothing line, Cat & Jack, which became a $2 billion blockbuster. And it brought all of its ideas for new merchandising displays and store remodels together in 25 stores in the Los Angeles area. Target's leaders killed some of the ideas and tweaked others.

"We've taken a very measured approach, a really surgical and disciplined approach," Cornell said. "We were testing and changing and iterating until we had confidence that we knew we were going to get the right response and the right returns. We went really slow in order to go faster."

Though some critics grew impatient while rivals such as Walmart made big bets such as acquiring Jet.com for $3.3 billion, Cornell took his time to make sure he was making the right chess moves.

He and John Mulligan, Target's chief operating officer who has become Cornell's right-hand man, would often remind and comfort each other that their time would come.

"We would say, 'If we can just get to 2018,' because we knew that's when we were going to start doing things at scale," Cornell said.

In February 2017, they were ready to unveil their plan and felt really good about it. They told analysts in New York that Target would spend $7 billion to accelerate store remodels, roll out new private-label brands, open new stores, make price cuts and launch other initiatives that would lower its profits by $1 billion. Wall Street shook its head, sending Target's shares tumbling in its worst day in nine years.

Then the executives came back to Minneapolis and spent two days debriefing with a couple hundred officers at headquarters, some of whom were not shy about expressing their doubts.

"People asked hard questions and you appreciate it," Mulligan said. "They're putting their future, their family, their career in the hands of Target. Is this going to work? So sure, they had doubts."

It was a great leadership moment for Cornell, Mulligan added, as the CEO sat on a stage and answered their questions. "That level of transparency with the team — it was good," he said.

In addition to transparency, Mulligan said Cornell has pushed Target to move faster in vetting ideas to get them to the testing phase. In the past, Target was sometimes paralyzed by perfection, making it slow to innovate.

Cornell also has gotten Target back to making decisions centered around what's best for consumers — such as rolling out services such as curbside pickup and same-day delivery. Before, other concerns such as efficiency or cost sometimes came first, Mulligan said.

"Brian has made it about, 'Look, the guest is going to be the decider and we take our cues from her or him,' " Mulligan said. "Then we'll figure out the rest. That's our job."

Cornell has modeled this approach by making visits to consumers' homes along with other top executives in order to gain deeper insights into what they are looking for and how they live.

And he decided Target needed a corporate purpose — something it didn't have before. Leaders settled on "to help all families discover the joy in everyday life."

It was rolled out a couple of years ago and has been a "galvanizing mechanism" that has helped provide further clarity and focus for employees, said Melissa Kremer, who was promoted to Target's chief human resources officer earlier this year.

Another common criticism about Target was that it had become too insular, finding itself a bit flat-footed, for example, during the rise of online shopping. Cornell has pushed Target to be more externally focused. One way he has done that is by recruiting executives from the outside, who now make up about 40% of his C-Suite.

That has trickled down the chain, too. Target, which has historically been known for developing and promoting from within, will continue to do so, Kremer said. But the company also has been more aggressive in hiring from outside to fill roles in data and analytics, engineering and supply-chain management.

Target's recent success and some key hires have made it easier to do so.

"People want to be part of a winning team," Kremer said. "So not only are we able to able to retain top talent, we're also able to attract top talent in the marketplace. If I'm perfectly honest with you, that was different five or six years ago when the strategy wasn't as clear."

Still, Target isn't out of the woods.

Amazon and Walmart remain formidable competitors. Investors continue to closely watch how its profit margins have been squeezed from online sales. Current and looming tariffs have created question marks. And there are some signs the economy may be slowing.

Target's next scorecard, its second-quarter results, comes out on Wednesday.

"For the next couple of years, we're going to continue to focus on executing our plan," Cornell said. "And each and every quarter, we want to put more proof points down for our investors, build more market share, and build momentum."

Kavita Kumar • 612-673-4113