The rise and fall of Target
The video chronicles Target’s trajectory from its 1990s "cheap chic" boom under CEO Bob Ulrich to its steep decline by 2026. Ulrich’s strategy combined low‑price basics with stylish design, leveraging designer collaborations (e.g., Missoni, Michael Girdley tea kettle) and the Red Card loyalty program to create a treasure‑hunt shopping experience that propelled the chain from 500 to 1,500 stores, tripled revenue and lifted the stock ten‑fold. After Ulrich retired in 2008, the company shifted to an operator‑focused leadership under Greg Steinhafel, whose decisions—pushing the Red Card, a costly 2013 data‑breach, and an aggressive $1.8 billion acquisition of Canada’s Zellers—triggered massive financial losses ($300 M breach cost, $7 B Canada failure). The headquarters‑driven “push” inventory model left Target unable to react to the COVID‑era demand surge, resulting in $15 B of excess inventory, margin compression (27 %→21 %), and a 90 % profit drop in one quarter. New CEO Brian Cornell (from Pepsi) attempted a turnaround with store renovations, brand partnerships, and the 2017 acquisition of delivery startup Shipt, but Target still struggled against Walmart’s scale, Amazon’s logistics, and the rise of TJ Maxx, which captured the affordable‑luxury niche Target once owned. In 2023 Target entered the culture‑war arena with a Pride collection, sparking boycotts from both political sides and a $15 B market‑cap hit. Store closures in 2023‑24, blamed on organized retail crime, were later revealed to be driven by thin margins and underperforming locations. By 2024 Target’s market value fell from $120 B to $50 B, with flat holiday sales and six consecutive quarters of same‑store sales decline, while competitors thrived. The video concludes that a recurring hubris—headquarters insulation, lack of field insight, and deviation from the original cheap‑chic identity—underlies Target’s downfall.
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50 billion dollars. That's how much the value of Target decreased in just 3 years after it was named America's most beloved retailer.
And if I tell you why they're in so much trouble, you'll say, well, it's probably Walmart being more competitive, Amazon competing from the internet.
But it turns out the root cause of all of it that's causing the problems at Target is a bunch of stuff people don't want to talk about. This video is the rise and fall of Target.
And as with every video I do, if you want to go deeper, I put a cheat sheet on my website that has a lot more about this story, and you can download it for free. girdley.com/youtube. To get to where Target's in trouble today, it actually dates all the way back to 1962. They made a bet that Kmart and Walmart didn't at that time. See, Target actually came out of Minnesota from a, uh, basically retail chain called Dayton's.
And while Walmart and Kmart basically signed up for niches where they were going to compete on having the lowest absolute prices on everything, Target decided they were going to do something different. They wanted to create a discount store that didn't feel like a discount store, that had better lighting, wider aisles, and cooler products. And the Target brand itself was genius. There was a red bullseye on everything. Then in 1994, the CEO at the time was a man named Bob Ulrich, and he had the bright vision to take this whole idea of being a little cooler but still cheap, uh, to an entirely different level. They called it cheap chic.
CHIC.
I can't pronounce— CHIC. You know what I'm saying. Anyway, it was something the retail world had never seen. This idea of cheap chic would come back in a couple decades later, the moment leaders started to stray away from it. But for the time being, it started to propel Target to the stratosphere.
Bob Ulbricht at the time understood something most retailers didn't. It wasn't so much about prices for a lot of consumers.
It was about identity and being part of a story.
As an example of this, in 1999, Target went to a guy named Michael Girdley. He was a famous architect and designer, and he had built buildings for Disney and other people. O'Rourke went to him and asked him to create a $40 tea kettle, which was a lot of money back then. Remember, this is pre-inflation, for Target. He designed something that was almost an art piece, uh, despite being kind of doubtful of the whole idea.
And, uh, crazily enough, the tea kettle became the best-selling tea kettle in all of America. And that was just the beginning.
Target started to do, besides the $40 designer tea kettles, collabs with luxury brands.
One of them was Italian fashion house Missoni. They went in and produced basically cheap chic clothes for Target and collab with the brand, and it was a wild success. People lined up, it crashed the website for Target. It was nuts.
Uh, at Target though, $60, girlfriend. And that is why Target was apparently overwhelmed when its Missoni collection went on sale yesterday. So just one day and people were crazy about it, Jen?
They even crashed the website. People were just jumping on this because they were thinking style, low price. So Target hitting the jackpot here with this new line from Missoni.
Under Ulrich's tenure from 1994 to 2008, the growth of Target was almost unbelievable.
They went from 500 to 1,500 stores.
He had an unbroken string of quarter-over-quarter revenue growth each and every quarter. Revenue tripled and the stock went up almost 10x.
During his tenure. And fundamentally, Target had cracked the code. They would sell products at a discount that still made people feel wealthy.
Here's the thing, the entire strategy depended upon them being cheap and cool at the same time.
And this whole strategy was actually extremely hard to pull off. Like you couldn't be, you know, on one end, they couldn't go down the path of just being a designer Walmart with worse prices.
On the other end, they couldn't go down the path of being basically a boutique with just bad boutique with cheap products. And you see this happen a lot in many businesses. I've seen it too inside of them. Things just get complex and hard. And a lot of times people discount that when you're running a business, a lot of times the best business decision is to find an easy business to be in. And here, Target, well, the success required a really good manager like Ulrik to hold the whole thing together. And when he left in 2008, things started to go wrong. And as Ulrik started to end his career at Target, one of the things they rolled out was a product called the Red Card. And the Red Card was an interesting innovation. It allowed them to make a lot of money because basically it brought a lot of their credit card business in-house. And it also gave the customers a 5% discount off of the shopping they did in the store.
Target Red Card! Target Red Card! Target Red Card! Save 5%! Get free shipping!
It's on!
It's a sale!
Allez, bougez-vous!
Target Red Card!
Allez, bougez-vous! But there was a problem with the Red Card. It started to change customer behavior. And I remember when my mom and my grandmother and everybody would go to Target.
They actually called it Tar-jay because they considered it that cool.
It was kind of tongue-in-cheek at the time. You know, it's Texas. That's how we do. But it was hilarious that you would see ladies and men go into Target with the idea of buying one thing and just making a stop by and leaving with like 30 different things. What the red card did was turn people into kind of specialists of going in to shop, and you would just wait until a moment when you needed something, run into Target and just buy that one thing. It was basically undermining the whole experiential thing that Ulrich had put together. So instead of customers going in with the intention of spending $10 and spending $200 because of the treasure hunt that Target had created for them, suddenly they were just going in, walking in and out with the idea of just saving that small amount of money because of the red card. Bob Ulrich had been a visionary, and in 2008 he retired. And as you'll see with a lot of retailers that go to crap on this channel, they replaced him not with another retail visionary, but with a guy who was an operator. Greg Steinhafel, like many guys, would start to run the company based on spreadsheets, not on kind of an entrepreneurial spirit. And while he was a 30-year Target veteran, he wasn't the same guy Ulrich was. He made two pretty imminent decisions that would start to bring the downfall and the story of where Target is today. The first of those was around credit cards. See, in December 2013, this This was the beginning of kind of the cybersecurity problems for a lot of big companies. And Target discovered right around the holiday season that hackers had been inside of their payment infrastructure for months.
Alright, Jackie, 40 million Target customers may have had their financial information stolen. The nationwide security breach affects anyone who used a credit or debit card at a Target in the last 3 weeks.
In fact, Target's team in Bangalore, India noticed the breaches and started to see what was going on. And they reported that back to Minneapolis, to the headquarters. Target Brass, they did nothing. In the 2 weeks leading up to the holidays, a retailer like Target at the time could do 30% of its annual sales. Meanwhile, because the headquarters did nothing, over 40 million credit cards and 70 million customer information were stolen during this time by hackers.
When word finally got out, the stock dropped 10% in a week. They would end up losing $300 million because of this breach. But things got worse. And remember, Target had spent 20 years building up their brand with consumers, telling people, look, you are not like those Walmart shoppers if you come to Target. It's a smart choice. And suddenly here you were, trusting yourself to a brand that couldn't even lock down their credit card systems or tell you when it happened. Steinhoffel, the operator CEO, he got fired in 2014. His chief information officer, he got fired too.
Target says CEO Greg Steinhoffel is stepping down effective immediately. It comes nearly 5 months after the nation's third largest retailer disclosed a massive data breach.
But it turns out an even worse mistake had been made by Steinhoffel and put into motion just 18 months earlier. And that didn't even involve America.
It involved Canada.
We did another video on this channel about Target's failed foray into Canada.
It was a disaster.
They lost $7 billion because of Steinhoffel's decision.
And Target decided to go into Canada in a pretty aggressive way.
They spent $1.8 billion to buy the assets and locations of a former retailer there in Canada. This place called Zellers had had 220 locations across Canada.
Instead of expanding like you normally would if you're a retailer, incrementally trying to win market by market, learn each place and move on and grow from there, they decided they were going to basically take over the entire country's retail presence all at once.
They went out, targeted, and told the Wall Street analysts what they were going to do. And look, it looked pretty darn good on a spreadsheet.
It showed them getting to $6 billion in revenue by 2017 in Canada.
But here's the deal. Target is not a high margin business. You got to get a lot of infrastructure right to move a lot of product in order to make that kind of money.
But Target moved very quickly without having any of the infrastructure ready.
There was a reason why Zellers was a failing chain. The number one reason a retailer will fail is location, location, location. And here was Target picking up a bunch of crappy locations and just thinking because they were Target, they were going to work. Here was Target trying to build a multi-billion dollar brand on some tired-ass old stores with mismatched stuff and trying to do it all overnight. For years, Canadian customers had crossed the border coming into the United States to shop at Target because the prices were cheaper and the experience was great. They had their act together in America. But when they went to the Target stores in Canada, they were a mess. And while Target projected they would get $1.6 billion in revenue, they got less than a third of that. They were losing money on each and every transaction. And by the time they threw in the towel a few years later, they lost $7 billion. There's an interesting factor behind all this, and when I studied it, it was like, why didn't anybody speak up? It turns out people were so afraid of speaking up that, well, they just basically went along with what the bosses told them, and the bosses were telling them they were ready to move into Canada. But for years, Target had become a pretty insular place.
Remember Steinhafel?
He'd been promoted from the inside. They weren't bringing in fresh new blood. These are people that were basically lifelong employees of Target. The last thing they were going to do in a lot of situations was speak up and risk their ability to pay their families' mortgages and put food on their table. So in January 2015, Target announced they were leaving Canada. 17,000 people were laid off, and it was the biggest retail failure in Canadian history. It didn't have to be this way. When Walmart went into Canada in the 1990s, they had initial teething problems just like Target did, but they did something different. As opposed to Target's plan to dominate the whole country in just a few years, Walmart slowed down, learned their lessons, and got their systems right, and took a decade to expand into the country. Canada plus the breach basically brought down Steinhoffel and his entire team. His interim replacement only lasted 6 months until they brought in an outsider to turn things around.
New guy was named Brian Cornell. He came from Pepsi, and consumer product goods were his background. He basically worried about what was on the shelves and not putting the shelves in there. Well, the board had finally seen the real problem, which was decades of promoting from within had created groupthink and a lack of innovation. It Target. Basically, they decided to bring in somebody from the outside. O'Neill's first move was stop trying to grow so aggressively. If you're building on top of a shaky foundation, the last thing you should be doing is adding more levels to the house. And that's what Target had been doing. O'Neill also saw that during the 2010s, Target had been trying to be something it wasn't. They were trying to be basically Walmart, and Walmart had been rapidly expanding into groceries. Target had been trying to do the same. The problem was Target didn't have any of the infrastructure either in the United States or Canada to do groceries right.
And here they were trying to sell milk and compete with Walmart's supply chain. The reason Walmart could kill them on price no matter what they did was Walmart would forever sell 10 times as much milk as Target could ever imagine doing. So Cornell doubled down on what Target had made it great during the Ulrich era. He renovated the stores, doubled down on brands with partnerships with other folks, signing many of those over his tenure. In 2017, he spent hundreds of millions of dollars to buy a startup called Shipt. And Shipt, if you remember, was one of those type of DoorDash-type services that Target believed would help them compete with Amazon, allowing same-day delivery. And that helped for a while competing with e-commerce, but in the end, Amazon just kept innovating, building more and more warehouses and expanding the capability of Prime. But remember how I told you that Target had gotten into groceries and just fundamentally wasn't able to compete with Walmart or grocery stores on it?
Well, that was because Target for years had designed one fatal flaw into their whole model. It was how they put products out into the stores. Walmart used a thing called a pull model, where basically what was consumed at the stores determined what the distribution centers were going to put into the stores. Target did exactly the opposite. Headquarters decided what the store should stock and pushed it out. This meant that the entire system during the COVID era was super frail. It meant that when customer demand started to go haywire with people buying all kinds of different stuff, nesting and creating home offices or webcams or whatever they needed, Target wasn't ready to catch up to that change in demand. Headquarters, being so distracted and disassociated from what was going on in the field, started ordering all kinds of crazy stuff based on the numbers they were seeing, and they made predictions about what people would want. But there was a problem. By 2022, demand was shifting so fast and changing so rapidly in the post-COVID era as the pandemic wound down that Target was stuck with a massive amount of inventory that they just weren't selling. $15 billion of it, in fact. This meant they were stuck with a bunch of stuff that people didn't want to buy because, well, how many, how many, how many more throw pillows and blankets do you need after you already stock up during COVID right? So basically gross margin went from 27% to 21%. The reason was they were having to discount stuff like crazy to get it out of the stores. These markdowns affected profit for the entire chain, plus they were having to pay to sit on that inventory. In one quarter alone, the profit for the corporation went down by 90%. When that happened, Wall Street punished them. The stock went down by 25% in a single day. That's a quarter value lost.
And you can see the same fatal flaw in Target repeating itself over and over again. The hubris of going into Canada thinking they were going to dominate and cheat time, the reluctance to share with people that their credit cards had been hacked, the model where headquarters dictated everything and the stores didn't get to request what they wanted. Over and over again, the same cultural problem was rearing its head inside of Target.
But it was about to get worse.
And Target, like most genius retailers, had tried to stay out of politics. If you're interested in a hilarious video on politics, check out my Bud Light video on this story— oh, on this channel. Drive you crazy. But under Cornell, Target decided they were going to wade into the politics game. In 2023, Cornell led an effort to push out a ton of products around what they called their Pride Collection, which took basically anything the chain had done before and very clearly set a stake in the ground around what Target believed. It wasn't just about alternative lifestyles, it pushed even further than that. They started carrying merchandise with satanic type of imagery, swimsuits with special tuck features.
I mean, they were pushing the limit of what any retailer had done in history.
And Target, well, instead of digging in like one might expect them to do, decided to pull back from this effort when people started to boycott Target. The problem was suddenly now they were basically like pleasing nobody. The left thought they were basically cowards, and the folks who were boycotting on the other side of the spectrum, they kept boycotting. Within weeks, Target would lose another $15 billion in market cap. But as the 2020s went on, something else would come for the chain. This was perhaps the worst of them all, which was other folks started to creep into this cheap chic category. And the biggest of those was TJX. You may know of them as TJ Maxx. 2012, TJ Maxx had gone from doing about $23 billion in revenue. By 2023, they'd more than doubled to over $50 billion. They'd focused on exactly the path that Target had gotten away from: affordable luxury goods and things that felt fancy even though they didn't cost fancy prices. People didn't go to TJ Maxx for paper towels. They went in there because of the feeling they used to get going into Target. And remember how I told you my mom and folks like that would go to Target back in the '90s because they felt like they were on a treasure hunt? Now, people who wanted a treasure hunt didn't go to Target anymore because it felt like a political nightmare to go into that place. They were going into TJ Maxx because they felt like they could do what they always missed—
go find a deal.
You wouldn't know what you were going to find until you actually went to the store. At TJ Maxx, you might find a $300 luxury jacket, for $60. Heck, I do it sometimes on a Friday night. You know, when there's nothing going on, go wade in the store and see if you can find something amazing. It's pretty fun as a post-date activity. I highly recommend it. And remember, Target had started to go away with this with the Red Card back in the early 2000s. Fundamentally a chain that from headquarters was forgetting who it was and what made it special. And remember how Target had waded themselves into the culture wars of the early 2020s? Well, in October 2023, they announced they were closing about a dozen or so stores.
Target announced today that it's closing 9 stores in major cities next month because of theft and organized retail crime.
These were closed in areas that were basically impoverished and not doing well economically. And the reason they told the public: theft in these areas was making it impossible for us to run these stores. True. Stores like Target call theft from their stores shrinkage, which basically means somebody put something in their pocket and walked out the door without paying for it. And chains like Target can lose hundreds of millions of dollars a year from theft. But when reports came out about why Target was leaving these markets, they discovered something fascinating. The reporters did. Target had been looking for an excuse to get out of these markets. They were high real estate cost places that were underperforming stores. The whole theft thing had just turned out to be an excuse. Folks dug into it and discovered that, you know, other folks like Walmart, Dollar General, and those types were having just the same amount of theft as Target was. The difference was Target's margins were so compressed that they weren't able to withstand the theft like the other guys were. These stores weren't bringing enough profits to overcome the theft. And, uh, basically Target had to close them down and walk away. And the whole thing turned into a PR nightmare for the company. Today, the stock is down 65% from the 2021 peak. At that point, the company had been valued $120 billion. Today, just $50 billion. That's a $70 billion destruction of value. Sales have been down, same-store sales, 6 consecutive quarters, and sales during the holiday season in 2024 were flat year over year. All the competitors seemingly around Target are thriving. Walmart stock is at an all-time high. Costco is doing incredibly well. Amazon's doing well. TJ Maxx is doing well. You name it, it's everybody but Target. Fundamentally, you look at what is going on with Target and is the hubris and the insulation of the headquarters that caused them to miss what was happening, which was suddenly Target had had a place in the market where they had this cheap chic strategy.
But they let this get eroded away, where TJ Maxx is eating it from the bottom, where they're no longer a trusted brand anymore, and where they've destroyed the essential kind of customer experience that propelled the chain to greatness back in the 1990s and early 2000s.
As I've talked a lot about before on this channel, your chain, your business, has to have something that it stands for. What is the compelling reason for somebody to do business with you? And all those other chains that are doing well in retail business, they all have an answer for that. Walmart has cheap prices. Amazon is convenient. TJ Maxx gives you a bargain hunt.
Target?
It's none of those things. But if you look at the fundamental flaw that allowed them to get to this place of no man's land where they're just not winning, it's this idea of the hubris that happens in headquarters. And you see it over and over throughout the story of the last 35 years. Like I told in the story of Cracker Barrel and many other ones, Great executives spend a lot of time out in the field understanding really what's going on with the customers. And they don't just push things out of headquarters from an ivory tower. And that guy who used to get out of the ivory tower and really understood stuff, Ulrich, well, he retired in 2008. And ever since then, the culture has been totally broken at Target. And great leaders of small businesses and us, like, we want to keep this from happening. And you want to do things and create processes where your people are out in the field and truly making decisions that are the best thing for the customers and your partners. And in this case, you can avoid the fate that Target's had by just doing little things like that, making sure everybody focuses in the company on what really matters, and that is, are your customers happy? All right, that's it for Target. Let me know what you think in the comments below. It is a beautiful day in Texas. Hopefully the weather's nice where you are. All right, talk to you soon.
