The company said it hired recruiting firm Korn Ferry to help the board find a new CEO, indicating it is open to finding an outsider to guide it out of its current malaise, rather than pulling its next CEO from its executive ranks as it did when it promoted Steinhafel from president.
FBR Capital Markets analyst Daniel Ives said he believed Steinhafel, who will stay on in an advisory role for a while, is the first CEO to be removed following a major data breach.
The timing of the sudden change in leadership, given all the problems that Target is facing, is hardly ideal, said Moody's Investors Service, the credit rating firm.
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"We believe this to be a very inopportune time for a change at the top of Target, given the challenges the company is facing on multiple fronts," Moody's Vice President Charles O'Shea said.
The most pressing tasks facing Steinhafel's successor include fixing Target's Canadian operations. Last year, it opened 124 stores along with three distribution centers in Canada, its first market outside the United States. No retailer has ever opened this many stores at one time in Canada. Nine more stores are planned for 2014.
While the ambitious launch gave Target a hefty market presence immediately, it also created major logistics headaches.
Expenses soared as Target over staffed stores and grappled with what it described as supply-chain congestion. That left many stores with barren shelves and complaining consumers, many of whom have been spoiled by less-expensive choices offered in Target stores just across the U.S. border.
For 2013, the company reported a loss of nearly $1 billion in Canada on sales of $1.3 billion. Overall, the company reported a 34 percent drop in net profit last year to $1.97 billion.
"Clearly, they just weren't prepared," said Maureen Atkinson, senior partner at Toronto-based global retail consultancy J.C. Williams Group.
Target Canada President Tony Fisher was unavailable for comment, but a spokeswoman said the company is making progress.