- Associated Press - Tuesday, May 20, 2014

NEW YORK (AP) - Target is having an identity crisis.

The nation’s third-largest retailer was once high-flying, but now it’s struggling to find its place in the minds of American shoppers.

Once known for its cheap chic fashions and home accessories, Target faces competition from trendy chains like H&M.; The discounter also hasn’t been able to ditch the image that its prices on staples like milk are higher than rivals like Wal-Mart. And it’s battling the fallout from a massive data breach that has hurt its reputation.

Meanwhile, Target on Tuesday fired the president of its Canadian operations following some missteps in that country. The ousting comes two weeks after the Minneapolis-based discounter announced it was looking for a new leader after the abrupt departure of its CEO.

All of Target’s challenges come as the broader retail industry is dealing with a slow economic recovery that hasn’t benefited all Americans equally and a move by shoppers away from buying in stores and toward shopping online.

As a result, Target reported its first annual profit decline in its latest fiscal year in five years. Target’s first-quarter results, which are slated to be released Wednesday, will offer more insight. And its shares have fallen 10.5 percent this year.

“The nature of the retail landscape has changed,” said Brian Yarbrough, a consumer products analyst at Edward Jones. “I don’t think Target has addressed the changes well.”

Here’s a look at the four big issues Target faces:

THE PROBLEM: CHEAP CHIC STRATEGY

Target was the first low-price retailer to team with designers to create affordable lines when it forged a partnership with Michael Graves in the late 1990s. But that niche has been copied by traditional stores and foreign imports like H&M.; Analysts say Target took its eye off the ball on its trendy offerings when it focused on expanding its food business since the recession.

Target also has tripped up on some of its designer collaborations. During the holiday 2012 season, its collaboration with posh retailer Neiman Marcus turned out to be a dud as the merchandise was criticized for being too expensive, among other things.

THE SOLUTION:

Target says it’s moving more quickly to test the latest items in stores. It also made some personnel changes on Tuesday that are aimed at making it more nimble. “We’re getting back to what we were known for,” said John Mulligan, Target’s chief financial officer and interim CEO said in a recent interview with The Associated Press.

THE PROBLEM: PRICE

Since the economic downturn, Target has battled the perception among tight-fisted shoppers that its prices are too high when compared with rivals. That challenge only increased as Wal-Mart, the world’s largest retailer, has pushed its lower prices even more lately.

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