Target taps outsider as CEO for needed shake-up

NEW YORK - 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.

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. Target's response has included free credit monitoring for affected customers and an overhaul of security systems.

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.

Target shares finished down 2.93 percent at $59.59 a share Thursday.