Steinhafel, 59, also resigned as chairman of the board of directors. John Mulligan, Target's chief financial officer, will serve as interim president and CEO, while current board member Roxanne Austin will take over as interim chair.
"Today we are announcing that, after extensive discussions, the board and Gregg Steinhafel have decided that now is the right time for new leadership at Target," a company statement posted on its website Monday morning says.
Steinhafel, a 35-year veteran of Target, will serve as an advisor during the transition. In an SEC filing Monday, Target said Steinhafel is entitled to severance pay but that the board "has not made a final determination on other compensation-related aspects" of Steinhafel's departure.
In a letter to the board of directors, posted to Target's website Monday, Steinhafel, who was named CEO in May of 2008, said, "The last several months have tested Target in unprecedented ways. From the beginning, I have been committed to ensuring Target emerges from the data breach a better company, more focused on delivering for our guests."
Target hired executive recruitment firm Korn Ferry to assist in finding its next CEO.
Some say Steinhafel's resignation should have come sooner.
"It would have been better to start the year with fresh eyes and a fresh approach," says Brian Sozzi, CEO of Belus Capital Advisors. "I think this reflects the very slow-moving nature that is inherent of Target's culture."
Sozzi says Target should now take the opportunity to look for a leader outside the company and one with international business experience who could help salvage the retailer's unsuccessful launch in Canada. Target opened 124 stores across Canada last year and announced in January that it plans to open nine more in 2014.
Sozzi characterizes Target's Canadia! n expansion as a "giant failure," adding that the company opened too many stores at once and has failed to connect with Canadian shoppers who still see more value going to Walmart and Costco.
"They didn't have the operation of the store properly thought out," he says. "We've seen consistent merchandise out of stock. Prices are too high."
Target's Canadian operation lost $329 million in its fiscal fourth quarter and $941 million for the year ended Feb. 1. In contrast, its U.S. segment earned $1.4 billion in the quarter and nearly $5 billion for the year.
Target said in February that its Canadian stores lowered its unadjusted fourth-quarter earnings per share by 40 cents to 81 cents a share and sliced $1.13 per share from its full-year unadjusted earnings of $3.07 per share.
In fact, Steinhafel's resignation may have as much to do with the aftermath of the data breach as the company's overall strategic initiatives, including its Canadian segment.
"The board may just believe that it's time to find somebody else who can take the reins and maybe take them in a different direction," says Ken Perkins, an equity analyst with Morningstar. "I think that they really will want somebody who can take an objective look at the Canadian operations and help turn those around."
Mulligan, who is taking over for Steinhafel for the time being, is another Target veteran; he first joined the company in 1996 as a financial analyst. But Target has shown that it's willing to reach outside the company as it works to rebuild its image. Last week, the retailer announced that Bob DeRodes would take over as chief information officer after former CIO Beth Jacob resigned in March. DeRodes comes to the company after working for payments processor First Data. He also formerly served as CIO at The Home Depot, serves on the board of transaction company NCR Corporation, and was a government adviser on information technology.
Target said in December that hackers stole credit and debit card information! from 40 ! million customers. In January it revealed that personal information like email addresses and phone numbers may have been stolen from up to an additional 70 million customers.
In the months since, Target adopted a faster timeline for switching to more secure chip-based credit and debit cards, and the payment terminals that accept them. As part of the $100 million effort, Target announced last week that it all of its store-branded cards would be reissued as MasterCard chip-and-pin cards in 2015.
Target shares were down $1.92, or 3.10%, to $60.09 in afternoon trading.
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