Target company announced that it is replacing CEO and president Gregg Steinhafel with CFO John Mulligan, a year after massive data breach that exposed the personal information of 70 million customers.
Steinhafel is a 35-year veteran of the retail chain who came to Target back in 1979 as a merchandise trainee and soon started climbing to the top of his career. The company said it will appoint a new CEO as soon as possible, meanwhile Mulligan will fill the role.
Steinhafel’s resignation follows what is considered to be one of the largest data breaches of any consumer business.
Between Nov. 27 and Dec. 15, hackers lauched a special virus that provided them with access to data of Target stores, stealing debit and credit card information from customers. Those credit cards later flooded the black market.
The company faced plenty of criticism for its failure to deal the breach, waiting almost a month before notifying its customers that their personal information had been stolen.
“Consumers voiced disapproval with their spending, too. Target announced in February that sales for the fourth quarter declined by 5.3% compared to the same quarter a year earlier — largely due to the security breach,” Mashable reports.
The company’s decision to replace its president and has triggered concerns among investors of the No. 3 U.S. retailer.
The board of directors ousted the soon-former to be ex-CEO on Monday, saying it wants new leadership to help restore consumer confidence in the No. 2 U.S. discount retailer.
“You got to wonder what prompted it now. What else will come to light,” said Dieter Waizenegger, executive director, of CtW Investment Group, which advises union pension funds with about $250 billion under management, including those owning about 3.3 million Target shares.
The massive data breach and last year’s misguided push into Canada have already hurt profit and revenue. Analysts and shareholders expect to hear more of the same when the company reports results May 21 for the quarter ended May 3 and worry that the company could disclose other problems as well.
“We would hazard a guess that first-quarter sales continued to be hurt by the data breach aftermath and that the Canada expansion is still in trouble,” Carol Levenson, an analyst with bond researcher Gimme Credit, said in a report.
“Target’s shares fell 3.5 percent to close at $59.87 on Monday, a sign investors were not convinced a change at the top alone would solve the problems facing the company. In the year up to Friday’s close, the stock fell 13.8 percent, while the S&P 500 rose 15.6 percent,” reports Reuters.
“We believe this to be a very inopportune time for a change at the top of Target, given the challenges the company is facing on multiple fronts,” Moody’s Vice President Charles O’Shea said.
Maureen Atkinson, senior partner at Toronto-based global retail consultancy J.C. Williams Group, said of the news: “I think they will get it right in the long run, but they’ve got a lot of fixing to do. Unfortunately, for customers, it’s harder to forget than remember.”