Target CEO Ulrich to retire

Target Corp. said Wednesday that President Gregg Steinhafel would take over for retiring CEO Bob Ulrich, a long-expected handoff that comes just as the nation's second-largest retailer hits a rough patch.

Target said Ulrich would step down as CEO on May 1, soon after he turns 65. He will remain as chairman through Jan. 31, 2009.

Steinhafel, 52, has a reputation for being a frequent visitor to Target stores, and for a sharp eye for the style factor in the goods they offer. He has been with Target's predecessor company since 1979, became executive vice president of merchandising in 1999, and, in a signal that he was on his way toward the CEO's chair, was named to the board last year.

Target already had a reputation for stylish-but-cheap goods when Steinhafel became an executive, but he perfected the strategy, said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a retail consulting and investment banking firm in New York.

"He was a key player in building one of the greatest retail machines in the United States. He was a key in one of the finest executions of a focused strategy" in retail, Davidowitz said.

He said Steinhafel helped Target thrive in the face of Wal-Mart's growth during years when most other discounters went under.

"Wal-Mart destroyed everybody. Destroyed them. Now who is left standing? Nobody's left, except Target," Davidowitz said.

Ulrich started as a merchandising trainee in 1967 at Target's predecessor, the Dayton Corp., which had opened its first Target discount store five years earlier. Ulrich held the chairman and CEO posts for 14 years. The company said that during his tenure, it has nearly tripled its sales and U.S. stores, and profits have jumped almost ninefold.

The company didn't make either Steinhafel or Ulrich available for interviews.

"During Bob's tenure, Target has achieved outstanding financial results and become one of the most recognized and valuable brands in the world," Steinhafel said in a prepared statement. "I am fortunate to have had the opportunity to learn from one of the best leaders in the retail industry."

Target and its share price have stumbled in recent months, though. Activist investor Bill Ackman has been increasing pressure on Target to boost its share price. Sales in the first week after Thanksgiving were disappointing, and it has said that December sales "are likely to fall well short" of the level needed to grow fourth-quarter profits above last year's. Target is due to report official December sales numbers on Thursday.

Burt P. Flickinger III, managing director of New York-based retail consulting firm Strategic Resource Group, said Ulrich missed some opportunities to buy up stores as other discounters failed. As a result, he said Minneapolis-based Target has fewer East Coast stores than it should.

Steinhafel, on the other hand, has focused on making Target's supply chain more efficient, and keeping items in stock. Steinhafel prodded Target to get into groceries with its SuperTarget stores. Some saw that as risky because food brings more customers into the stores, but groceries carry lower profit margins. Steinhafel also switched food distributors when its first one didn't work out, Flickinger said.

"Target seemed to have lost its way in the last few years of Ulrich's tenure," he said. "In the history books he'll go down as a very good but not great CEO. Steinhafel, I think, will go down as a great CEO."

Target shares rose 97 cents to close at $49.92 on Wednesday, before the CEO announcement. They're at the low end of their 52-week range of $47.25 to $70.75.