Target CEO Resigns in Data Breach Aftermath - Analyst Blog

Shares fell nearly 3.5% yesterday after Target Corp. TGT announced that CEO Gregg Steinhafel has stepped down in the aftermath of the massive data breach last holiday season. As per Target, Steinhafel held himself responsible for the security lapse and has stepped down to make way for better leadership.

Meanwhile, CFO John Mulligan will serve as the interim president and CEO whereas Roxanne S. Austin, a member of the board of directors, has been selected as interim non-executive chair of the board. Target has appointed recruiting firm Korn/Ferry International KFY to find a new CEO for the company.

Steinhafel's resignation comes at a time when the retailer is battling numerous problems. Apart from security breach, the company's tepid foray into the Canadian market, weak e-commerce sales and subsequent dismal quarterly performances has put Target on the back foot. Rising online competition from Amazon Inc. AMZN has posed a serious threat for this brick and mortar retailer.

Moreover, the breach has shaken the consumer confidence resulting in lesser footfall and a public relations nightmare for the company.

Target faced its worst security breach when credit and debit card data of approximately 70 million customers were stolen by hackers. The theft occurred during the holiday season, from the day before Thanksgiving up to Dec 15. The company publicly acknowledged the breach four days later on Dec 19, 2013. Ever since, the company is on a public relations improvement drive.

Last month, the company announced a switch over to chip-and-PIN technology across its REDcard portfolio in collaboration with MasterCard Inc. MA, along with the appointment of Bob DeRodes as its new Chief Information Officer. As a part of the endeavor, Target has already invested $100 million for the conversion as well as installment of support software at all its stores. The company is likely to complete the installation of the support software by Sep 2014, six months before schedule.

After the security fiasco, Target is desperately looking to improve its dented reputation. However, without any potential candidature in sight, a vacant top position might do Target more harm than good.

Currently, Target has a Zacks Rank #3 (Hold).