Something about Bill Ackman’s Target (TGT) talk today on Bloomberg really bugged me after I listened to it. Took a while but it sunk in.
Watch it again:
So, does Target take its best shoe associate and place them in electronics without any training? Would they take the head of marketing and give them the job of CFO? Of course not.
So, why then, as their business grows and expands into different areas, do they lack those who have extensive knowledge in those areas on their Board? It makes no sense. For Target’s board NOT to have expertise on it that covers the major areas of its business is just irresponsible at best, negligent at worst.
Selling groceries is not the same as selling shoes. The fact that the food is at the front of most Target stores is a mistake. Food is something folks need to buy. People will make more trips there to buy milk than socks. Put it in the back or in the middle and force people to walk past cloths and through homegoods to get to it (like Wal-Mart (WMT))does. Ackman is right that people there for food will pick up other items, but let’s make them go buy them for the impulse buy.
Target execs are making a huge mistake buy just saying “no” to Ackman. As their sales and stock price deteriorate, shareholders are going to take an increasingly close look at whatever he proposes. Last year it was just the TIP REIT idea. Now it is board seats. Eventually even the most management loyal shareholder is going to look at it and say, “Ummm, why are this guys ideas so bad? What have you done to turn things around?”
Last time I checked “doing nothing” was not really an action plan.
Note to Target management: Hole dug…
Disclosure (“none” means no position):None
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