Target has appointed a new CEO after a drop in quarterly sales indicated internal issues and showed that the retailer continued to lose market share.
The company has elected its current COO Michael Fiddelke to become the new CEO from February, succeeding Brian Cornell as he will transition to the role of executive chair of the board.
Fiddelke has worked at Target for more than 20 years. He began in 2003 as an intern and later held various leadership positions across merchandising, finance, operations and human resources.
Fiddelke was appointed the company’s CFO in 2019 and transitioned to the COO role last year. He has overseen efforts that enabled growth across the business, including investments to build and scale the company’s stores, supply chain, digital capabilities and team.
“Over the last several years, the board has been executing a deliberate and thoughtful CEO succession process, including an extensive external search and assessment of many strong candidates,” said Christine Leahy, lead independent director of Target’s board. “It is clear that Michael is the right leader to return Target to growth, refocus and accelerate the company’s strategy.”
Cornell has been Target’s chairman and CEO since he joined the company in 2014. Prior to Target, Brian spent more than 30 years in escalating leadership positions at leading retail and consumer-product companies such as Sam’s Club, The Home Depot and Yum! Brands.
Sales and profit slump
For the second quarter ended August 2, Target’s net sales were down 0.9 per cent to $25.2 billion, with comparable sales down 1.9 per cent.
Gross margin and operating income margin were both lower than the same period last year, while net earnings fell 21.5 per cent to $935 million.
GlobalData MD Neil Saunders believes there is no external reason for the weakness this quarter, and that the company’s continued loss of market share is “entirely self-inflicted”.
“The company is plagued by internal problems which have caused a significant deterioration in the customer experience. This shows up in issues like out of stocks, long wait times at registers, and increasingly messy stores.
“All these things actively train customers not to shop at Target; especially during a period when the shopper is laser focused on value for money and time,” Saunders said.
According to the analyst, Target’s challenges have dragged on for far too long, while management has appeared both unwilling to acknowledge the problems and incapable of resolving them.
“Target is, in effect, caught between a rock and a hard place, and that has led to boardroom inertia, odd statements, and plummeting confidence among team members.
“To be perfectly blunt, leaders at Target have not been leading. In our view, there needs to be significant change in the boardroom to restore confidence and get Target back on track,” he stressed.
While the appointment of Fiddelke is a partial form of this change, Saunders has “mixed feelings” about the move. “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.”
In addition, Cornell’s transition to executive chairman seems like a reward for failure and also runs the risk of having the person who has not guided Target well having some influence over future policy, the analyst said.
For the full year, Target maintains its expectation of a low-single digit decline in sales.
