Like a proud father, Target chairman and CEO Brian Cornell pulls out his iPhone to show off photos of the new Disney department at Target. It’s the Monday after Target debuted Disney shops in 25 stores around the country. Cornell stopped by the Maple Grove store over the weekend to gauge the reaction. He lights up, recalling the scene: “Look at that,” he says, enlarging a snapshot with two fingers. “Kids with moms. Watching movies.”
Analysts laughed when Cornell said he would invest billions to make stores into destinations in the digital era. They aren’t laughing anymore. Target’s stock is holding above $100 per share, nearly double where it was when he joined the company in challenging times five years ago, and Cornell is finally affording himself a victory lap. Albeit a brisk one; he’s due back at his office in 20 minutes to meet with Target’s innovation team.
On a weekday, the downtown Minneapolis Target store, just steps from headquarters on Nicollet Mall, can feel more like a corporate laboratory than a typical retail outlet, with teams of buyers and vendors standing around pointing at shelves. Staff members here know Cornell, and many walk up to shake his hand or share a story. He engages with all of them, to the chagrin and amusement of his publicity team. “It can be difficult to get him through the store here,” chief communications officer Katie Boylan says, glancing at her watch.
College stores pay dividends for years to come.—Brian Cornell
Cornell claps his hands together. “What should we see today, Marshall?” he asks the red-shirted Target employee stationed by the store entrance. Cornell leads the way to the grocery department, where the new Good & Gather brand has just hit shelves. He points to the brighter lighting, the wood beams, and the hardwood floors. “It all communicates freshness, assortment, variety,” Cornell says. An endcap filled with brightly colored bags of frozen fruit catches his eye—some of the packages sit slightly askew in the freezer case. Cornell hesitates for a moment but opts not to straighten the merchandise. “Not while I’m with a reporter,” he jokes.
Heading over to the updated beauty department, which features tables and lower displays to invite interaction, Cornell plays with the beard oils. “When we test something, it doesn’t take long to understand if it’s working or what needs to change,” he says. “A big part of my career was in consumer packaged goods, where it can take months, if not years, to bring something to market and get feedback. Here, we can do something down the street, and by tomorrow we’ll get a lot of feedback on whether the consumer likes it, how the team reacts, and what changes we need to make. I love that constant energy of retail.”
Continuing down the aisle, Cornell walks through the steel-framed house-style display of the Hearth & Hand with Magnolia brand. “We went above and beyond in creating this store within a store,” he says. “It’s a destination now for our shopper.”
Destinations. Experiences. That brings Cornell back to touting Disney. “The magic of Disney, the joy of Target—there’s a lot of overlap. We view Disney as a premier partner. We’re being really selective about partnerships like that.” Target plans to add another 40 Disney shops in 2020. In 2021, Target will open a store near the Walt Disney World Resort in Orlando.
That’s not even the most surprising place Target is showing up as the company pushes forward with smaller-format stores on college campuses and in dense urban areas. The big box isn’t dead, but it’s no longer enough. Playing to younger, trend-forward consumers was all part of Cornell’s focused plan to put the “Tarzhay” cachet back in Target.
Who’s the new guy?
A little more than five years ago, a classified ad from Minneapolis-based Target Corp. could have read something like this: “Help wanted: Legacy but stumbling American retailer seeks new CEO. Must be able to deal with massive fallout from data breach, money-losing expansion into Canada, the end of building more big boxes as a growth strategy, and what the heck to do about this internet thing. Knowledge of retail helpful.
Starting date: as soon as you can get here.” It’s not much of an exaggeration; that was the spot Target was in at the time. The previous CEO, Gregg Steinhafel, a Target lifer, had effectively been thrown out the window.
The selection of Cornell was a surprise: He was the first outsider ever tapped to lead the company in its more than 100-year history; he arrived at Target in August 2014 after 2 years as CEO of PepsiCo Americas Foods. But that has proved to be a tremendous asset in working to rewire the company’s culture.
“We had become very insular as a company. I think a company’s success can be its own downfall. You can’t see that you’re not successful anymore if you don’t change,” says Roxanne Austin, who has been on the Target board since 2002. She served as interim non-executive chair of the board in 2014 during the search for a new CEO.
In Cornell, she says, the board found someone with both broad experience and a stellar reputation for leadership.
“We looked at a lot of people. We literally did a global search,” Austin says. “We found people that had retail experience, we found people that had brand experience, we had people that had run big consumer packaged goods companies, but what we didn’t find was somebody that had a real breadth of experience like Brian.”
At the time there were reports that Cornell had weighed CEO gigs at both Target and JCPenney. Not true, says Cornell.
“Because they were both open at the same time, people speculated that I was going between Minneapolis and Dallas interviewing for jobs. I never talked to them,” Cornell says of JCPenney.
Cornell didn’t arrive in Minneapolis thinking he had all the answers. He landed knowing that he had to do a lot of listening.
“I’ve worked for several blue-chip companies. I’ve had opportunities to work in different parts of the U.S.; I’ve lived in Asia, in Europe. I spent an extensive amount of time in Latin America, so I’ve worked in different cultures,” says Cornell. “I think that taught me a lot about listening and being a constant learner.”
More than anything, Cornell also brought a fresh eye to the business. “I think the biggest change we made up front was becoming much more externally focused,” says Cornell. “In many cases, our capabilities had started to fall behind. We were certainly slow to embrace digital. We had to really ramp up both our physical capabilities but also build this new digital capability.”
Leadership Lessons from Target Team Member No. 1
Brian Cornell is not a rock star CEO. He’s not issuing incendiary tweets or taking shots at his competition on social media. If you try to dig deeply into his personal life, you won’t get far. He does not star in any business-focused reality TV shows. It’s tough to get him off his script about the many elements of the company’s turnaround.
Cornell was still new to his job as CEO of Minneapolis-based Target Corp. in June 2015 when he returned to his alma mater to give a commencement speech at UCLA’s Anderson School of Management. The talk lasted just over 12 minutes but is chock-full of seasoned management lessons and offers a clear window into his worldview.
“My wife, Martha, could teach a corporate and international relocation class,” joked Cornell, referring to jobs that took him all over the globe.
Cornell didn’t claim to be a business genius or the smartest guy in the world. He described himself as “a poor kid from Queens, New York.”
But he was quick to add, “Someone recently described me as a ‘self-made man.’ And I’ll tell you today, that could not be further from the truth. I can tell you my career success is the result of upwards of a million people that I’ve worked with over the years.”
That reflected a recurring theme of his talk: Regardless of the business school you went to, when you get out in the real world you’ll be working with a wide variety of people.
“I can tell you no matter where you work and what you choose to do, your career progress will depend on how you work with and develop the people around you,” Cornell said.
“Above all, leadership requires engagement. Patience. And often a little human touch. A lot of humility, empathy. And the ability to see strengths and sometimes hidden opportunities in people. Those are all really important leadership qualities,” Cornell said.
Despite his years as the guy in the corner office, Cornell suggested he was still just one guy in the cosmos of any company.
“Organizational success [is] rarely linked to one person. And trust me: CEOs get more credit for results than they deserve. It takes a team to drive performance,” said Cornell. “You won’t get far by commanding. You’ll get far by inspiring and by opening doors for those around you.”
Bidding au revoir to Canada
Target Corp.’s headquarters are, as just about every Minnesotan knows, in downtown Minneapolis. But when he took over the reins as Target’s CEO, Cornell found himself headed up to Toronto during his first week on the job.
Under Steinhafel, Target undertook a big expansion in Canada after acquiring the leases of Canadian retail chain Zellers. The first Target stores in Canada opened in early 2013. To say things weren’t going well is an understatement.
“When I got to Canada, I encountered a business that was clearly troubled, that had fallen well below the plans we had established,” Cornell says. “Unfortunately, we were seeing very poor performance. We had challenges with the assortment that we had provided the Canadian consumer, we had some supply chain issues, some technology issues, and we really disappointed the Canadian guest.”
As Cornell huddled with his leadership team, they quickly came to the sobering conclusion that it would be 2021 or 2022 before the company could even break even in Canada. Cornell was moving fast. On Jan. 15, 2015, Target announced that it was exiting Canada with the full support of its board—just five months after Cornell had arrived. Hanging onto the struggling Canadian business would have been a drag on the entire company, Cornell says.
I’ve actually now lived in Minneapolis longer than any place in my adult life. This has become home for me.—Brian Cornell
“It really came down to focus. We were recovering from the data breach, we were managing a Canadian business that was falling behind, but the real issue was the state of our business in the U.S. and the fact that we had been losing share and losing traffic and losing momentum,” Cornell says. “I don’t think we’d be where we are today in the U.S. if we were still also trying to manage a Canadian business.”
It takes more than a day to save the world
1982-84 Gallo Wine Co.
1984-98 EVP sales and marketing and managing director for Asia Pacific, Tropicana Products
1998 Tropicana acquired by PepsiCo
1999-2001 President, Tropicana International
2001-03 President, PepsiCo Beverages for Europe and Africa
2003-04 President, PepsiCo Foodservice
2004-07 Executive vice president and chief marketing officer, Safeway
2007-09 CEO, Michaels Stores Inc.
2009-12 President and CEO, Sam’s Club
2012-14 CEO, PepsiCo Americas Foods
2014-current Chairman and CEO, Target
Turnarounds take time. Target posted disappointing, negative comp sales from second-quarter fiscal 2016 through the first quarter of 2017. Cornell says the company was laying the groundwork to overhaul its business from top to bottom.
“In 2016 we had to slow down a bit. It was back in ’16 we were talking about our remodel program and the importance of investing in the in-store experience,” Cornell says. “We started with 25 stores in Los Angeles. We had to test and learn. We had to rebuild our design and construction capabilities because we had effectively stopped remodeling stores in the U.S.”
Cornell had been CEO for two and a half years before he dropped the bomb. In February 2017 he unveiled the plan to spend $7 billion over three years in its stores and technology. The plan called for remodeling stores, speeding the pace of small-format store openings, significantly improving digital operations, enhancing the supply chain, and reinventing its owned brand portfolio. It immediately faced skepticism on Wall Street.
But today there’s no argument: The gamble hit the jackpot. Target’s business is reenergized and revitalized, sales are steadily increasing, and it is now ranked among the strongest brick-and-mortar retail survivors.
The payoff started to show up in the fourth quarter of Target’s fiscal year 2017. Comparable sales, a key barometer of retail performance, increased a solid 3.6 percent. The rebound was not a blip on the radar; it’s been a sustained recovery. Target has now posted nine consecutive quarters of comp sales growth and seven straight quarters with increases of 3 percent or more. Full-year comp sales, which had been negative in 2016, were up a robust 5 percent for 2018—its strongest performance since 2005.
“Brian is bold and decisive. He knows how to respect the integrity of the brand while guiding it into the next phase,” says Caribou Coffee president and CEO John Butcher, a 20-year Target executive who reported directly to Cornell before leaving in 2017.
But Cornell suggests that observers can hold their applause.
“There’s a lot we should be proud of, and the team has made enormous progress, but we still have a lot to do,” Cornell says. “We’re still in the early stages of executing our strategy and making sure that this iconic company has a meaningful role, a significant role, in retail for decades to come. There’s a lot more to do and, in many cases, we’re just getting started”
Tory Gundelach, vice president for retail insights with global consumer research firm Kantar, says Cornell has restored an elemental but ineffable ingredient to Target’s success.
He’s “getting some of the ‘Tarzhay’ back,” Gundelach says.
But what defines “Tarzhay”? The faux-French pronunciation of the retailer’s name makes it sound more upscale or exclusive.
Gundelach says it means “putting the shopper in a position where they know, even if they’ve never heard of a brand, if they see it at Target they know that it’s worth trying out, they know that it’s cool, they know that it’s something up-and-coming. That’s just not a relationship that a lot of other retailers have.”
But Gundelach says there’s still some work to be done in two areas: inventory management and Target’s website.
“One of the downsides to becoming more omnichannel and having digital orders fulfilled out of the store is that it adds complexity to inventory management systems,” Gundelach says. “Target’s not necessarily alone in this, but in-stock has suffered as a result, and shoppers are noticing that.”
Per a Target spokesperson, the company is working on it. “In the past couple of years, we’ve lowered our out-of-stocks as a total company. Improving how we replenish stores remains a priority for us, and we’re focused on reducing the variability of out-of-stocks across stores to offer our guests an even better shopping experience.”
Gundelach also says that the website needs to feel less like an online mirror of the physical store.
“I do think that Target still has some work to do to make their digital platform visuals what I’ll call ‘digitally native,’ ” says Gundelach. “We see other retailers using more infographic-like kind of information on their pages. I think that’s a place where they still could improve a bit.”
Matt McClintock, an analyst with Florida-based Raymond James, has followed Target since 2006. He says Cornell has dramatically changed the retailer.
“He started being an outside person coming into a very insular corporate culture and environment, and he brought necessary change to that culture and environment,” McClintock says. “The company now is willing to hear outside voices. That’s really important at a time when the retail industry is undergoing dramatic change. It’s important to listen to outside perspectives about how you can improve in various ways, and Brian has embraced that.”
McClintock says Cornell has found success by bucking some conventional industry wisdom.
“He is ramping up capital investment in stores at a time when nobody else in the retail industry is investing in physical stores. So when you walk into a Target, it’s actually a nice experience. … The dressing rooms of a Target today are better than the dressing rooms of a Macy’s,” he says.
But it goes deeper than just creating a comfortable retail environment.
“He is taking market share from the upchannel retailers that are supposed to be better experiences than Target,” says McClintock. “Macy’s, JCPenney, Kohl’s, Pier One, you name it—all of those stores today are not enjoyable stores to shop.”
Target ramped up its grocery department under previous management as a way to drive more traffic to the stores.
Cornell views grocery as complementary to the overall assortment. Target recently launched Good & Gather, its largest owned brand, displacing several familiar brands such as Archer Farms. By the end of 2020, the Good & Gather line will have more than 2,000 products. Target’s store and exclusive brands are about 30 percent of its total sales.
“Overall, it’s about the ‘better for you’ positioning of this brand,” Cornell says. “It’s the final touch on the work we’ve been doing from a supply chain standpoint. Presentation, now a great new brand—I think it’s just going to continue to drive traffic and market share. We’ve seen a big uptick in food, beverage, and wine.”
What Difference Does Five Years Make?
What has changed in five years under Brian Cornell? We took a quick look at the company’s 10-K annual filings. In short: more sales, more stores, more capital investment.
Let’s get small
Target began testing smaller urban formats in 2012. In July 2014 it opened a small-format Minneapolis store, a concept initially called TargetExpress. The 20,000-square-foot Dinkytown location, close to the University of Minnesota campus, reflects a format similar to its current generation of small-format openings.
“We knew almost immediately these smaller stores on college campuses and in urban centers were really attractive to the consumer, but we had never operated in a small store before,” Cornell says. “We couldn’t pull a big truck up to the backdoor, because there was no backdoor. We had to learn how to replenish those differently.”
Target still opens a big-box store here and there, but almost all of its new stores are small-format of less than 50,000 square feet. As of October, Target had 1,862 total stores, of which 105 are small-format locations. Target has 22 stores in New York City; of the seven in Manhattan, six are small-format. Target did open a brand-new, 117,000-square-foot store in Goleta, California, next to the UC-Santa Barbara campus in October.
Target currently plans to open approximately 30 small-format stores every year.
“On a sales-per-square-foot basis, they’re our most productive stores in the country,” Cornell says. At Target’s annual Financial Community Meeting in March, Cornell called out the Herald Square store in New York for doing more sales per square foot than any store of any size in the company. “The sales we generate on a square-foot basis are off the charts. But we’ve learned in 33,000 square feet there in Herald Square how to curate the right assortment for that consumer, how to make sure that we replenish that store multiple times a day because of the demand and velocity.”
On college campuses, Cornell sees the company planting seeds for future business.
“One, it’s an opportunity just to serve a need. Two, it’s really that lifetime value. We connect while they’re there [on campus] for four or five years,” Cornell says. “When they graduate and think about furnishing their first apartment, they come to Target. When they have a baby, they come see us for that first stroller. College stores pay dividends for years to come.”
He is ramping up capital investment in stores at a time when nobody else in the retail industry is investing in physical stores. So when you walk into a Target, it’s actually a nice experience. … The dressing rooms of a Target today are better than the dressing rooms of a Macy’s. —Matt McClintock, analyst, Raymond James
Paging: “Startup in aisle three …”
As it looks to the future, Target has plugged itself into the startup community. Ryan Broshar, founder and partner of investment firm Matchstick Ventures, with offices in Minneapolis and Boulder, Colorado, was managing director of Techstars Retail Accelerator in partnership with Target for three years. He says Cornell did much more than just show up for ceremonial events.
“He was an active mentor in the program,” Broshar says. “He set up regular meetings with companies that he mentored and even showed up to some events outside work hours for either Techstars or the startups that he mentored. He was definitely very active considering how busy he is.”
What’s Cornell focused on? “Innovation on things we can apply to our core business. We’re not looking to start new companies that are unrelated to Target. Everything we’re doing from an innovation standpoint is something that could enhance our core. That could be fintech, ways to enhance the website, or improve the speed of our fulfillment.”
Greg Creed became CEO of Louisville, Kentucky-based Yum! Brands Inc., parent to KFC, Pizza Hut, and Taco Bell, in 2015. When he needed a new board member, he knew exactly who to call: Brian Cornell. They first knew each other at PepsiCo, where they were senior executives in different divisions. Cornell joined the Yum! Brands board in 2015 and was named non-executive chairman in November 2018.
“I’ve known Brian for well over 20 years,” says Creed. “I think Brian is a world-class businessman.”
When Cornell started, Target’s stock price was $58 per share. In mid-October it topped $113 per share.
“That’s pretty exceptional, particularly when he’s competing with the likes of Walmart and Amazon,” Creed says.
Despite Cornell’s world-class results, Creed says Cornell does not play the big shot.
“He’s very genuine, he’s very real, he’s honest, he is transparent. … He doesn’t come across as a CEO of a huge company,” Creed says. “He’s very down to earth. People feel very comfortable coming up and talking to him.”
Today he’s a Fortune 500 CEO, celebrated for being the architect of Target’s turnaround. But Cornell will sometimes describe himself as a “poor kid from Queens.”
“I learned early in life, at least for me personally, there were only three areas where I was playing on a level playing field. It was either in school—nobody really cared how much money [you] had if you performed in the classroom. I certainly recognized the importance of work and how to perform in that environment. And then sports. That was always kind of a level playing field for me as a poor kid from Queens who grew up without a dad and [with] a mom who had significant health issues,” Cornell says.
After a career of globetrotting, Cornell himself seems slightly surprised to have anchored himself in Minneapolis. “I’ve actually now lived in Minneapolis longer than any place in my adult life,” Cornell says. “This has become home for me.”
And he says there’s more work to be done. “We’ve changed just about every aspect of our business,” Cornell says. “Our teams have shown the willingness to embrace change, to take a different path, and to build a durable model that I think will be sustained for years to come.”
Burl Gilyard is senior writer at TCB. Allison Kaplan is TCB’s editor in chief.