TARGET’S REBOUND
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FORTUNE.COM // SEPTEMBER 2019
struggling big-box retailer.
In the release, Target told the world it
would sacrifice short-term profitability to
make its prices more competitive with those of
Walmart and Amazon. It would junk and re-
place some of its best-known brands. It would
overhaul its e-commerce and raise wages for a
large cohort of its 320,000 employees. And—
most unnerving of all to cautious investors—it
would undertake hundreds of extensive store
renovations. Total price tag: $7 billion over
three years.
Cornell and his leadership team were con-
vinced that they had the right plan to reverse
Target’s severe sales skid. But when their
PR crew finally rigged up an iPad to stream
CNBC, it became clear that few others agreed.
A bemused anchor surmised that there must
be a typo in the press release: What brick-
and-mortar retailer would spend billions on
stores in the Amazon era? Shares were down
in premarket: They would go on to fall 14%
that day, as investors concluded that Target’s
profits would take a hit for years.
And when the Target crew finally escaped
the stuffy greenroom and faced their investors
in person, the reception didn’t get any more
sympathetic. “I finish out that morning,” Cor-
nell recalls, “and the final question is, ‘Brian,
how long do you think you’ll be in this job?’ ”
Investors had plenty of reason to be skepti-
cal. Target was already reeling, suffering four
straight quarters of comparable-sales declines.
E-commerce, which Cornell had vowed to
jump-start when he became CEO in 2014, was
growing at barely half the pace he had prom-
ised. Some of the hip-on-a-budget store brands
that had earned the chain the mock-highbrow
“Tarzhay” moniker had grown too stale to lure
new shoppers. Analysts had begun to fear that
the chain was slipping into irrelevance, as
traditional department stores had done. And a
dismal 2016 holiday season, in which Target’s
sales declined while Walmart’s soared, put an
exclamation point on Target’s woes.
The way Cornell’s team saw it, these prob-
lems shared a common root: Target stores
themselves had been better suited to retail in
1962, when the chain was founded, than they
were in the 21st century. Many looked shabby
after years of insufficient upkeep; few had the
infrastructure to support e-commerce well. (It wasn’t unheard-of
for customers picking up online orders to find themselves killing
time at cash registers while employees ran around the store collect-
ing their items off shelves.) The holiday debacle was the final straw,
convincing the C-suite that it was time to bring out the heavy artil-
lery and fix its stores. No matter how badly Target needed to grow
again, Cornell says, “we couldn’t go down that path until we built
some of those capabilities.”
The idea that store improvements would be crucial to a retailer’s
revival may sound like simple common sense. But the alarmed reac-
tion from Target shareholders on that February day indicated just
how strongly the prevailing winds had been blowing the opposite
way. Department stores like Macy’s and J.C. Penney and specialty
chains like Gap and Bed Bath & Beyond have collectively closed
hundreds of stores, seeking growth online to make up for declining
brick-and-mortar traffic—moves their shareholders have backed
because e-commerce expenses are typically less of a drain on profit.
Target, in contrast, saw the potential in doubling down on what
makes a retailer a retailer: stores and merchandise. By the end of
2020, Target will have remodeled 1,000 of its 1,800 stores; it’s alsoTHE HOT SEAT CEO Brian Cornell, photographed in the
home decor section of a Target in Minneapolis. He faced
intense skepticism from shareholders when he unveiled
his store-renovation plan in 2017.