- Target shares fell 7% after announcing Michael Fiddelke would become CEO, replacing Brian Cornell.
- Investors had hoped for an external candidate to address declining sales.
- Fiddelke, the current chief operating officer, will take over after Cornell steps down on February 1.
- Wall Street analysts expressed concern over declining sales and an internal leadership pick.
- Target faces continued operating challenges, including lower sales and customer traffic.
Target announced on Wednesday that Chief Operating Officer Michael Fiddelke will replace CEO Brian Cornell as head of the retail company on February 1. The announcement led to a sharp drop in Target’s stock price, which fell 7% by the end of the day.
Shares traded lower by more than 8% earlier in the session before settling at the 7% decline after the leadership change was made public. Many investors were surprised as they expected an outside hire to bring new solutions to Target’s ongoing sales difficulties.
During the latest earnings report, Target reported a 1.9% decrease in comparable (or same-store) sales and a 21% fall in net income for the most recent quarter. Fiddelke, who has worked with Target for nearly 20 years, acknowledged the company’s challenges and stated, “When we’re leading with swagger in our merchandising authority, when we have swagger in our marketing and we’re setting the trend for retail, those are some of the moments I think that Target has been at its highest in my 20 years.”
Market analysts have questioned the move. Stacey Widlitz of SW Retail Advisors said, “The Street was looking for a fresh pair of eyes that might bring a solution to two years of stumbles.” Gerald Storch, a former Target vice chairman, commented, “The stock price reflects that there won’t be change when change is needed. The sales are negative and they are bleeding market share.” Neil Saunders from GlobalData Retail noted, “While we think Fiddelke is talented and has a somewhat different take on things compared to current CEO Brian Cornell, this is an internal appointment that does not necessarily remedy the problems of entrenched groupthink and the inward-looking mindset that have plagued Target for years.”
Target has reported negative sales in nine of the last 11 quarters. The company is also dealing with criticism over diversity initiatives, store cleanliness, and merchandise selection. Customer transactions dropped 1.3% in the latest data, and the average amount spent per visit declined 0.6%.
Fiddelke outlined plans to restore Target’s merchandising leadership, enhance customer experience, and invest more in technology. However, analysts remain concerned about Target’s outlook, with some expressing doubts that promoting from within can address ongoing business challenges. David Silverman of Fitch Ratings added, “Target’s value positioning should be yielding better results than the low single digit revenue decline we expect for Target this year.” The company continues to face strong competition from Walmart and pressure to regain lost market share.
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