WAUKESHA, Wis. — Target Corp. is unlikely to change its grocery strategy now that it has beaten back a challenge by a major shareholder to add five new members to the discounter's board.
However, some industry analysts said they believe the proxy challenge may raise awareness about potential weaknesses at Target.
Target said last week the company's four directors up for re-election had been returned to the board at the annual meeting here, with “more than 70%” of shareholders voting in their favor, based on a preliminary vote count.
According to Gregg Steinhafel, chairman, president and chief executive officer of the Minneapolis-based company, “Today's outcome demonstrates the confidence Target shareholders have in our board's qualifications, diversity and experience to provide effective and independent oversight and direction to the company.”
Last week's vote ended a challenge by William Ackman, the principal at New York-based Pershing Square Capital Management, which owns 7.8% of Target's stock — the third largest stake in the company. Ackman launched a proxy fight in March after Target rejected his proposal to spin off the land under its stores into a real-estate investment trust to boost the chain's stock price.
Ackman's slate included Jim Donald, the former chairman and chief executive officer of Pathmark, who subsequently helped Wal-Mart expand its grocery operations before being named CEO of Starbucks. He left Starbucks early last year.
In an interview with Bloomberg.com prior to the Target meeting, Donald said Target's interest in attracting more shoppers with food offerings “kind of fits what I call my sweet spot.”
Leon Nicholas, director of retail insight for Cambridge, Mass.-based Management Ventures, said in a report last week that although he believes Target “has not successfully leveraged consumables to drive traffic over the past several years, this does not mean it should … merely try to become a price-driven discounter by taking on Wal-Mart's supremacy in grocery.”
“In many ways the American shopper has not given Target ‘permission’ to compete on price alone,” he said. “Its place in the retail ecosystem is more complex.
“Once the economy revives itself, Target will be in a significantly better place to rebound,” he added.