The Last Word: Putting Change to the Test

Ben Hogan said that the best part of golf is improving, and the most common approach taken to that end begins with adjusting one’s swing. However, there’s a strong tendency to become so absorbed in the swing alone that other parts of the game suffer.

So it goes for Target Corp., which clocks in at No. 16 on our annual Super 50 countdown and which we categorized among those retailers that are adjusting their respective swings. After recently moving to shutter a number of innovation-related projects that it’s been preoccupied with during the past few years, Target CEO Brian Cornell affirmed during a call with investors in late February that the “seismic shift” the retail industry is experiencing is putting tremendous strain on its brick-and-mortar business.

To stem the tide, Target is now prioritizing “a smart network of physical and digital assets,” per Cornell, fueled by a $2 billion investment this year, and $7 billion over the next three years, to power its increased focus on digital, pricing, development and support of new signature brands. As for its food segment — which generates $18.5 billion in annual sales and accounts for one-quarter of its total pie — the Minneapolis-based retailer is bent on leveraging it as part of its overall strategy. A linchpin in this grocery U-turn is the recent arrival of Kroger veteran Jeff Burt, who joined the retailer as SVP of grocery, fresh food and beverage from his most recent role as president of the Cincinnati-based company’s Fred Meyer division.

Burt’s arrival fits well with Target’s plans to open 130 small-format stores by 2019, alongside an aggressive agenda to “reimagine” another 600 of its existing 1,800 national locations, which are currently within a 10-mile-or-less radius of three-quarters of the American population. The density of those large stores, filled with lots of merchandise, are a strong advantage for Target, which is in a great position to fulfill online orders with quick turnaround. Without rapidly building a massive network of physical stores or acquiring a conventional retailer, Amazon, grocery’s boogeyman, is facing an uphill battle of its own. So whether Target’s turnaround efforts click remains to be seen, but its willingness to adjust is certainly worth watching.

It’s also been a busy period for the Twin Cities’ other retail swing adjuster, Supervalu Inc., at No. 19, which after completing the complex sale of its Save-A-Lot division, saw its most recent fourth-quarter financial performance adding $577 million to its bottom line, proceeds from which put it in an ideal position to acquire Unified Grocers for $375 million.

The transaction, comprising $114 million in cash for all of Unified’s outstanding stock, plus the assumption and payoff of the Commerce, Calif.-based co-op’s $261 million debt, will fast-track the Minneapolis-based wholesaler-distributor-retailer to return to its wholesale roots by fusing two highly complementary grocery wholesale organizations that had combined sales of roughly $16 billion in 2016.

Another Super 50 contender is 22nd-ranked Modesto, Calif.-based Save Mart Cos., which has been making moves to enhance its game, foremost being the appointment of Nicole Piccinini Pesco to CEO. Most recently co-president and chief strategy and branding officer, Pesco — daughter of Robert “Bob” Piccinini, late owner/chairman of the 207-store regional chain — led Save Mart’s launch of its first new store format in more than 20 years: Lucky California in the Bay Area. In her new role, Pesco is moving to accelerate the market share of the company’s Save Mart, Lucky and FoodMaxx banners via a reinvigoration of each, including investments to modernize and expand them with new features geared toward convenience, service and experience.

Meanwhile, the world of limited assortment is poised for further transformation. With Lidl’s forthcoming U.S. expansion set to unfold, a former executive of its international team has signed on to lead 29th-ranked Save-A-Lot following its spinoff by Supervalu to Toronto private equity firm Onex. Replacing its most recent CEO, Eric Claus — who took the helm of Save-A-Lot in December 2015 from former owner Supervalu — is Ireland native Kenneth McGrath, who exited Lidl in mid-2015 after being named to lead the German discounter’s U.S. effort in 2013. As the first major executive move for Earth City, Mo.-based Save-A-Lot under new ownership, McGrath’s late-April arrival depicts how seriously it’s taking Lidl’s stateside summer entrance.

Indeed, as golfers know, changing one’s swing is complicated. But with determination and ample effort, a resolute change not only improves overall performance, but also makes the game far more enjoyable than being trapped in the bunker.