Activist investor could force even more change at Target
The same hedge fund that pushed for change at Kellanova and Tylenol maker Kenvue now has its sights set on Target.
New York-based Toms Capital Investment Management (TCIM) has made a significant investment in Target, the Financial Times reported Dec. 26. It’s unknown how large the stake is or what the firm wants out of Target. The firm had built a stake in Kenvue ahead of its almost $49 billion sale to Kimberly-Clark in November and advocated for the sale of the company, according to Reuters. TCIM had also amassed a stake in food giant Kellanova and had pushed the company to pursue strategic and organizational changes before it was acquired by Mars for about $36 billion in 2024, per CNBC.
Target has faced year-over-year comp sales declines for three consecutive quarters. As previously reported by Modern Retail, many saw last year as when Target betrayed the trust of shoppers and employees with its pullback of DEI initiatives. It was also the start of turnaround efforts such as a CEO change, operational changes and mass corporate layoffs.
TCIM did not immediately respond to a request for comment. A Target spokesperson provided a statement to Modern Retail with no specifics on what the new investment means for the company, other than that it is confident in the strategy previously outlined by incoming CEO Michael Fiddelke.
“As part of our robust shareholder engagement program, we maintain a regular dialogue with the investment community,” the spokesperson said. “Target’s top priority is getting back to growth, and our strategy to do so is rooted in three strategic priorities: leading with merchandising authority, providing a consistently elevated shopping experience and leveraging technology.”
Activist investors buy stakes in public companies to push for changes that they believe will improve a company’s finances, unlock some kind of additional value and, in turn, increase shareholder value. Target previously faced pressure from activist investor Pershing Square in 2009, led by Bill Ackman, who wanted to spin off the retailer’s real estate but was rejected by shareholders, per Reuters. While TCIM’s stake in Kenvue and Kellanova preceded acquisitions, that doesn’t necessarily mean that will happen to Target, as well.
Mike Ross, consumer markets deals leader for PwC, said activist investors can help speed up internal changes, including those that may already have been contemplated. Their demands could include management changes, specific divestitures or a board seat.
“I would expect the management team to be working very closely with the board to understand what the goals of the activist investor are,” he said of any company facing activist pressure. “Activists rarely start with a strategy of: ‘Sell the company.’ They often have a specific objective in mind here.”
Ross declined to comment on Target specifically. But he said that when companies consider private ownership, boards will want to show they’ve run out of options as a public company and can demonstrate greater value to shareholders through such a deal.
“There are not a lot of precedent transactions for anything in the size that we’re talking about here,” he said. “They usually happen only when all other options are kind of exhausted.”
The emergence of TCIM has left some in the retail industry — who were disappointed that Target chose the insider Fiddelke as its next CEO and kept current CEO Brian Cornell as chairman — optimistic that more changes could be made to revive the struggling retailer.
The Accountability Board, a nonprofit activist group, has also acquired shares and urged Target to appoint an independent chairman through a shareholder proposal in October. “To us, [the TCIM stake] signals that investors are hungry for change and means our shareholder proposal likely has an even stronger chance of passing,” Matt Prescott, president of the Accountability Board, told Reuters.
“This is such a dangerous crossroads for them,” said DeAnn Campbell, a store operations and experience consultant. “[Target’s] performance is on the wane, activist investors are at the gates, and they have Walmart evolving into [serving] the type of customer they used to have.”