Target Falls as Sales Decline Again, New CEO Named

This article first appeared on GuruFocus.

Target (TGT, Financials) reported fiscal second-quarter earnings that beat Wall Street estimates but posted another sales decline, underscoring ongoing struggles at the Minneapolis-based retailer. Shares fell 9% Wednesday after the company also named Michael Fiddelke as its next CEO.

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Fiddelke, Target's chief operating officer and former CFO, will succeed Brian Cornell on Feb. 1. Cornell, 66, will move to executive chair of the board. A 20-year company veteran, Fiddelke outlined priorities of restoring Target's design-led reputation, improving customer experience and leveraging technology for efficiency.

Quarterly results showed profit of $935 million, or $2.05 per share, down from $1.19 billion, or $2.57 per share, a year earlier. Revenue slipped to $25.21 billion from $25.45 billion. Comparable sales fell 1.9% as store traffic and transaction size both declined.

Margins were pressured by higher markdowns and customers shifting to lower-margin categories such as electronics and toys. Digital sales rose 4.3%, and nonmerchandise revenue, including advertising and membership programs, jumped 14.2%.

Target reaffirmed its full-year outlook for a low single-digit sales decline and adjusted earnings per share of $7 to $9, excluding litigation gains. Annual sales have been flat for four years, with traffic falling nearly every week since January. Shares have dropped about 60% from their 2021 peak.

Fiddelke said the company must recapture strengths in categories like home goods, where it lost ground to competitors. He pointed to recent additions of Disney and Marvel-themed kids' items as examples of how Target can regain momentum.

Investors will watch whether Target can reverse declining traffic while navigating the CEO transition and winding down its in-store Ulta Beauty partnership next year.

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