Target gets a new CEO amid revenue drop

Target has tapped longtime executive Michael Fiddelke as its next CEO as the retailer warned of another year of falling sales and said it had cut costs because of trade tariffs, underlining the swathe of challenges awaiting its new boss.

Target maintained a full-year forecast of declining revenue, despite beating Wall Street’s expectations for sales and profit, while a second quarter savings drive had partly “offset continued tariff-related and other cost pressures”. Shares of the Minneapolis-based retailer slid about 10% in premarket trading.

Fiddelke, 49, currently the company’s chief operating officer, will take over on Feb. 1, succeeding Brian Cornell, who has led the Minneapolis-based chain since 2014.

He is named new boss with revenue near-flat for the last four years following a strong pandemic. The company has also struggled with eroding customer perceptions of its stores and stock.

Fiddelke referred to this on a Wednesday call with investors, saying: “We have to do better here, especially in the consistency of our experience.”

Tariffs could provide the new CEO with a particular headache. Cornell repeatedly warned that the import levies will lead to higher costs earlier this year, which the retailer would have to pass onto American consumers.

Fiddelke said on the call: “Over the past few months, we've been urgently adjusting our approach to assortment planning amidst a rapidly evolving external tariff and consumer landscape.”

Target reported second-quarter net sales of $25.2 billion, down 0.9% from a year earlier, led by a 3.2% decline in store sales that outweighed 4.3% growth online.

Net income dropped to $935 million, compared with $1.19 billion in the same quarter last year. Diluted earnings per share came in at $2.05, which the company said reflected “strong expense management and efficiency gains” — but it was still down from $2.57 a year ago.

For the full year, the retailer said it is “maintaining its expectation of a low-single digit decline in sales”.

Fiddelke said outdated technology, manual processes and fragmented decision-making that have hampered efficiency were among the internal hurdles slowing the company’s turnaround.

He added the company’s headquarters structure and workflows have “significant opportunities to improve”, adding: “We're evaluating how to best ensure our resources and talent better align with our strategy.”

As part of that, the retailer is expanding its use of artificial intelligence, deploying thousands of new licenses to automate routine tasks and improve forecasting.

“Despite the solid foundation that's been established, our performance over the last few years has not been acceptable,” Fiddelke said. “We have real work in front of us. And to be blunt, we need to move faster, much faster.”

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