Investors Misunderstand Target’s Food Strategy: CEO

As Target Corp. begins testing expanded food assortments at its general merchandise stores, a proxy fight has raised the issue of how much larger that assortment should be.

MINNEAPOLIS — As Target Corp. here begins testing expanded food assortments at its general merchandise stores, a proxy fight has raised the issue of how much larger that assortment should be.

The proxy fight — in which Pershing Square Capital Management, a New York-based hedge-fund sponsor, is putting up four candidates to challenge the four Target directors whose terms expire this year — is expected to reach a climax next Thursday at Target's annual meeting.

Speaking with analysts yesterday during a conference call to discuss financial results for the first quarter, Gregg Steinhafel, chairman, president and chief executive officer, said the Pershing Square executives have little understanding about Target's food strategy.

“For example, [they] point to the fact the mix of food in our assortment is much lower than Wal-Mart's,” he said. “This misses the point that Target's differentiated assortment is a key aspect of our strategy that has created so much value over time.”

Other differences between Target management and the Pershing Square group involve whether the discounter should sell its credit card portfolio, Steinhafel said. In an interview with Bloomberg News, William Ackman, principal at Pershing Square, said his nominees — including Jim Donald, former president of Starbucks and, earlier, of Pathmark Stores — bring specific expertise in retail, real estate, credit card management and corporate governance that the company's nominees lack.

“These new directors will bring fresh ideas and not be afraid to challenge the status quo,” he said.

For the quarter, which ended May 2, Target's net income slipped 13.3% to $522 million, while sales rose by 0.4% to $14.4 billion. Comparable-store sales dropped 3.7%.

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