MW Target hires a veteran as its new CEO, as it tries to turn itself around. Some say the move lacks 'pop.'

By James Rogers and Bill Peters

Analysts say incoming CEO Michael Fiddelke 'deserves a chance to prove himself,' but that it could take time and more money for Target to get its charm back

Target reported second-quarter results before market open Wednesday.

Shares of Target Corp. tumbled in morning trading Wednesday, after the discount retailer said it was replacing Chief Executive Brian Cornell with current Chief Operating Officer Michael Fiddelke - a move some analysts said lacked the "pop" of an outside hire and implied little change in strategy for now.

The big-box chain's stock (TGT) fell nearly 8%, making it the S&P 500 index's SPX worst performer for the day as of midday.

Fiddelke, a 20-year veteran at the retailer, will take the new job and join Target's board on Feb. 1. Cornell, who has been in charge of the big-box chain for the past 11 years, will move to the board's executive chair position on that date.

The news overshadowed fiscal second-quarter results that beat profit and sales expectations amid a meaningful improvement in Target's store traffic.

"It is clear that Michael is the right leader to return Target to growth, refocus and accelerate the company's strategy, and re-establish Target's position as a leader in the highly dynamic and fast-moving retail environment," Christine Leahy, lead independent director of Target's board, said in a statement.

Still, Sarah Henry, managing director and portfolio manager at Logan Capital Management, told MarketWatch over email that the decision to select an insider to helm the company "suggests minimal strategic changes, at least in the near future."

"Getting the Target magic back in a way that inspires customers will likely take time and possibly greater rates of company spending, especially as new leadership takes over," she added.

The company's leadership change and its quarterly results landed as consumers deal with higher costs for basic priorities and shy away from things like clothing, furniture and electronics, which make up a higher portion of Target's sales. As the United States increases tariffs on imports, adding to the uncertainty, some analysts believe that Target could have to raise its prices more than rival Walmart Inc. $(WMT)$ to cover the costs.

In a note, D.A. Davidson analyst Michael Baker said Wednesday's stock reaction reflected slow progress in Target's turnaround, as well as some hope that an external CEO hire "would be a catalyst for significant change" at the company.

"Instead, [Target] went with an internal promotion as Brian Cornell officially announced long-expected retirement," Baker wrote. "That is not a knock on new CEO Michael Fiddelke, who deserves a chance to prove himself. But, that announcement lacks the pop that a significant external hire would provide."

Speaking during the conference call to discuss Target's results, Cornell described Fiddelke as "Day 1 ready to move into this role."

During the call, Fiddelke said that, while encouraged by the momentum in Target's business, "we're far from satisfied with our current performance."

The incoming CEO said that Target needs to fully recapture its "merchandizing authority and signature style," as well as consistently "elevate the guest experience," both in stores and online. The company also needs to "more fully leverage technology" to help it move faster, he added.

For the quarter to Aug. 3, adjusted earnings per share, which excludes nonrecurring items, fell to $2.05 from $2.57 in the same period a year ago but topped the average analyst estimate compiled by FactSet of $2.04.

Target's net sales declined 0.9% to $25.21 billion, beating the FactSet consensus of $24.94 billion. Comparable sales, or sales in stores open at least 13 months, were down 1.9%. That beat expectations of a 2.9% decline.

The company said that its earnings reflected strong gains in expense management and efficiency, helping offset tariff-related and other cost pressures. The results marked a contrast with last quarter, when Target missed earnings expectations and cut its full-year profit outlook, citing a highly challenging retail environment.

Target's results come as retail-sector earnings are being closely monitored for the impact of the wide-ranging tariffs implemented by President Donald Trump. On Tuesday, Home Depot Inc. $(HD)$ said that tariffs will lead to some price increases on certain products but that they wouldn't be wide-ranging.

Speaking during a conference call, Cornell noted that Target is one of the largest importers in the country. "The prospect of higher tariffs meant we were facing some major financial and operational hurdles as we entered the year," he said, according to a FactSet transcript. "This was further complicated by the multiple changes in tariff policy that had been announced and implemented."

However, Target is making progress in limiting the impact of tariffs, he said, adding that the company was focused on "limiting the impact on our pricing."

"And while we expect this year's P&L will reflect some short-term pressure from tariffs, we expect to end the year in a healthy position and move beyond this period of uncertainty," he said.

Target's chief commercial officer, Rick Gomez, said the company is well-positioned relative to other retailers to handle the impact from tariffs thanks to its size and scale. "What we've said and continues to be our position is that we'll take price as a last resort," he added.

Food and beverage net sales were $5.59 billion, up from $5.54 billion in the prior year's quarter, while beauty sales rose to $3.40 billion from $3.38 billion. Hardlines revenue, which includes durable goods, was $3.52 billion, up from $3.32 billion.

However, apparel and accessories sales declined to $4.09 billion from $4.26 billion, and home-furnishings and decor revenue fell to $3.66 billion from $3.91 billion. Sales of household essentials were $4.42 billion, down from $4.56 billion.

Looking ahead, Target maintained its guidance for adjusted earnings per share of $7 to $9, after cutting it in May. The company also maintained its expectation of a low-single-digit decline in sales.

In a note, Roth analyst Bill Kirk described the challenges facing Target. "We continue to believe Target is poorly positioned," he said, citing an unfavorable macroeconomic backdrop for discretionary spending. The analyst also pointed to "years of underinvestment behind price/technology" and the company's ability to handle cost pressures associated with tariffs.

Fiddelke "will have to consider a [fiscal 2026] earnings rebase to try to ignite growth," Kirk added.

Target shares are down 27.8% in 2025 through Tuesday, compared with the S&P 500 index's SPX gain of 8.6%.

"The CEO transition, while signaling change, has done little to restore investor confidence for now," Ethan Feller, stock strategist at Zacks, said in an email. "We remain cautious on Target's outlook."

"However," Feller continued, "if the stock can hold above its April lows, it may signal that investors are willing to give the new CEO a chance and that valuation has become appealing enough on a risk-reward basis."

-James Rogers -Bill Peters

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August 20, 2025 12:48 ET (16:48 GMT)

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