Target’s CFO hire creates some intrigue at PepsiCo and Celsius
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Analysts and investors are reacting to Target (NYSE:TGT) nabbing Jim Lee away from PepsiCo (NASDAQ:PEP) to be the retailer’s new chief financial officer.
Jefferies analyst Corey Tarlowe said the firm was bullish on the development. Lee’s experience in food and beverage with PepsiCo (PEP) will be beneficial for Target (TGT) as the company looks to expand its offering and value in the category. “We note that PepsiCo is a high-margin business (~13% op margin in FY23) and believe Lee’s leadership could help TGT return to its pre-pandemic levels,” highlighted Tarlowe. Of note, Target (TGT) has only seen a partial recovery in its pre-pandemic margin rates amid pressures from higher markdowns, inventory shrink, freight, and more.
One tidbit of interest is that Lee said he is a big fan of Target’s (TGT) own brand products, with Good & Gather French Vanilla Almond Granola a particular favorite.
As for PepsiCo (PEP), BNP Paribas analyst Kevin Grundy emphasized that the news is clearly suboptimal for the food and beverage giant. He noted Lee was beginning to build his profile with investors and was undoubtedly in pole position to replace PEP’s current CFO, Jamie Caulfield, at some point in the future when Caulfield chooses to retire. “Moreover, this comes on the heels of the surprising departure of Hugh Johnston, PEP’s long-time CFO, who left to become Disney’s CFO back in November 2023,” added Grundy.
There could also be some implications for Celsius Holdings (NASDAQ:CELH). Lee’s departure from PepsiCo (PEP) is likely to result in his replacement on the energy drink maker’s board. Grundy thinks the professional profile of whoever PepsiCo (PEP) designates may offer a signal (international, bottling/supply chain, finance, operations, marketing) as to what it deems to best serve PepsiCo (PEP) shareholders’ interests and the most effective path forward for Celsius following the sharp sales deceleration in the U.S.
Target (TGT) was up 2.0% in afternoon trading on Thursday, while PepsiCo (PEP) slipped 0.3%. Celsius Holdings (CELH) was down 0.6%.