The news the retail industry has been anticipating for months was finally announced on Wednesday: Target CEO Brian Cornell is finally stepping down after 11 years at the helm and will be replaced by his operations chief Michael Fiddelke in February.
But another piece of news the industry is looking for—Target returning to sales growth—will have to wait. Target reported yet another quarter of weak financial results, with comparable sales down 1.9%, and the cheap-chic retailer reaffirmed its expectation that sales will decline by a low single-digit percentage this year, projecting a third year in a row of declines.
In recent years, after a torrid run that included Target making massive market share gains during the pandemic, the retailer has stagnated even as archrival Walmart has soared. Analysts say that Target has lost some of its magic touch. That is, the hip but affordable merchandise; fun, well-kept stores; and attentive customer service that helped it stand out and steal a lot of market share from rivals, notably department stores, in the not too distant past.
“Target, which used to be very attuned to consumer demand, has lost its grip on delivering for the American shopper,” Neil Saunders, managing director at GlobalData, wrote in a research note. Those problems have included a resurgence of out-of-stocks (a problem that was plaguing Target when Cornell took the reins in 2014 but had been overcome); long wait times at checkout registers; and what Saunders says are increasingly messy stores. Adding to Target’s woes were its flip-flops on the DEI (diversity, equity, and inclusion) issue. The retailer attracted the ire of conservatives who threatened boycotts, but then angered many shoppers and employees when it curtailed some of its efforts.
Fiddelke, who started at Target two decades ago and went on to become finance chief and then COO, acknowledged those problems on a call with reporters on Wednesday, according to CNBC. He has three main goals: reestablish the “Tar-zhay” magic with customers, improve customer experience, and make better use of technology to make operations more efficient and less costly. He’ll also have to rally the troops: The Wall Street Journal recently reported that a companywide survey in June found that 40% of Target workers didn’t have confidence in its future.
Though Fiddelke, 49, extolled the value of knowing Target deeply, shares fell 10% in morning trading on the news of his appointment. Citi analyst Paul Lejuez said investors were “hoping for an external CEO” with fresh eyes. Meanwhile GlobalData’s Saunders said Target needs a CEO who can cut through the groupthink he says has impeded innovation. Target’s stock is down 64% since its all-time high four years ago. (During that time, Walmart shares have more than doubled.)
Cornell, who took the reins in 2014, will stay on as executive chairman. For a number of years, Cornell was wildly successful in modernizing Target by integrating its e-commerce with its physical stores to turn it into a massive online player, upgrading its stores and overseeing teams that always seemed to know what fun items shoppers might want, with launch after launch of wildly popular store brands like Cat & Jack.
Under Cornell, Target also successfully navigated the turmoil of the pandemic, with revenue rising from $78 billion in 2019 and peaking at $109.1 billion in 2022 before slipping ever since. (Meanwhile, Walmart, Costco, and Amazon continue to thrive.) It will be up to Fiddelke to figure out how to put the “zhay” back in Target.
