UPDATE 3-Target replaces president of money-losing Canadian unit

Tue May 20, 2014 3:38pm EDT

* Target replaces Canadian president with 15-year U.S. veteran

* Shakeup comes two weeks after firing of CEO

* Target to announce 1st-qtr financial results on Wednesday

* Shares down more than 2 pct (Adds analyst comment, company background, updates stock price)

By Susan Taylor

TORONTO, May 20 (Reuters) - Target Corp has fired the president of its money-losing Canadian operation and named a long-time U.S. executive with operational experience to try to repair its supply chain woes and win back customers.

The third-biggest U.S. retailer, which will report quarterly financial results on Wednesday, said that vice president of merchandising operations Mark Schindele would immediately replace Tony Fisher as president of Target Canada.

Target shares were down more than 2 percent on Tuesday afternoon, echoing declines from two weeks ago when the company fired Chief Executive Officer and Chairman Gregg Steinhafel, who led the company during a massive data breach in December.

Some analysts said that Target needs to look beyond its ranks to address profound problems in Canada, which lost $941 million before interest and taxes last year, while generating $1.3 billion in sales. It had initially forecast a profit as early as the fourth quarter of 2013.

"This is another example of Target looking from within and promoting somebody who may not necessarily have the overall experience to lead such a dramatic turnaround. The Canadian business has been a failure," said Belus Capital Advisors chief equities strategist Brian Sozzi.

Target said it is acting aggressively to make more rapid improvement in Canada. It also announced the creation of a new nonexecutive post for an adviser to the president of Target Canada, and has not yet named anyone to that position.

"We recognize that we have work to do in Canada, and we felt it was important to get a new leader in place," said Target spokeswoman Dustee Jenkins, referring to Schindele.

Fisher could not immediately be reached for comment and Schindele was not talking to the media, Jenkins said.

Schindele, 45, came to Target from Macy's Inc in 1999. During his 15 years at Target, he played an integral role in introducing such new store formats as PFresh, CityTarget and Target Express, the company said.

"He has a great deal of experience in areas like forecasting, supply chain, distribution," said Jenkins.

Target Canada has been hurt by operational problems after opening 124 stores and three distribution centers last year in its first international venture.

Sales have been weaker than expected as shoppers complained about empty shelves, higher prices and less selection than at U.S. Target stores.

The Minneapolis-based company was overly ambitious and failed to manage expectations, industry experts say.

"We think today's news confirms that Target Canada has not progressed as the company would have liked," Cowen and Co analyst Faye Landes said in a note to clients. "We also wonder why Target did not make an outside hire."

Sozzi, who expects "messy" financial results on Wednesday, said that Target should dramatically scale back its Canadian operations and focus on efficient operations so that it can better compete with Wal-Mart Stores Inc.

"This is Target trying to house clean and hopefully get on this earnings call tomorrow and try to start the discussion that change is coming," he said.

Target shares were down 2.3 percent at $56.95 on Tuesday afternoon on the New York Stock Exchange. (Additional reporting by Allison Martell in Toronto and Shubhankar Chakravorty in Bangalore; editing by Maju Samuel, Lisa Von Ahn and Matthew Lewis)

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