Target CEO to step down amid company struggles

Key Points

• Target CEO Brian Cornell will step down on February 1, 2024, after nearly a decade in the role, transitioning to the position of executive chair of the board.
• Chief Operating Officer Michael Fiddelke, with 20 years at Target, will succeed Cornell, focusing on reclaiming the company’s merchandising authority amid ongoing sales struggles.
• Target reported a 21% drop in net income and a decline in comparable sales, marking eight out of the last ten quarters of sluggish performance amid rising competition and changing consumer preferences.
• The retailer has faced consumer boycotts due to its recent scaling back of diversity initiatives and criticism over its LGBTQ+ merchandise, contributing to erosion of its brand appeal.

NEW YORK (AP) — Target named an insider as its next chief executive officer Wednesday, a decision that comes as the discount retailer tries to reverse a persistent sales malaise and to revive its reputation as the place to go for affordable but stylish products.

Minneapolis-based Target said CEO Brian Cornell, who has led the company for 11 years, would step down on Feb. 1. The board of directors chose Chief Operating Officer Michael Fiddelke, a 20-year Target veteran, to succeed him.

Target, which has about 1,980 U.S. stores, has struggled to find its footing since inflation caused pinched shoppers to curtail their discretionary spending. Customers have complained of messy stores with merchandise that did not reflect the expensive-looking but budget-priced niche that long ago earned the retailer the jokingly posh nickname “Tarzhay.”

Consumer boycotts since late January, when Target joined rival Walmart and a number of other prominent American brands in scaling back corporate diversity, equity and inclusion initiatives, have compounded its predicament.

Some retail analysts were surprised the board did not pick a candidate from outside the company to turn things around. Target's stock price was down more than 8% in early morning trading after the company announced both Fiddelke's appointment and another quarter of disappointing sales.

“The Street was looking for a fresh pair of eyes that might bring a solution to two years of stumbles,” Stacey Widlitz, president of investment research firm SW Retail Advisors, said while noting that she thinks investors should give Fiddelke a chance.

During a call with reporters on Tuesday, Fiddelke acknowledged many of Target's problems. For example, he said he thought the company became too focused on basic home goods during the coronavirus pandemic, when demand for cozy furnishings and kitchen tools exploded.

Fiddelke said he would step in as CEO with three urgent priorities: reclaiming the company’s position as a leader in selecting and displaying merchandise; improving the customer experience by making sure shelves are consistently stocked and stores are clean; and investing in technology.

“When we’re leading with swagger in our merchandising authority, when we have swagger in our marketing and we’re setting the trend for retail, those are some of the moments I think that Target has been at its highest in my 20 years,” Fiddelke said.

Target has reported flat or declining comparable sales — those from established physical stores and online channels — in nine out of the past 11 quarters. On Wednesday, the company said comparable sales dipped 1.9% dip in its latest three-month period, when its net income also dropped 21%.

In March, members of Target’s executive team told investors they planned to regain the chain’s reputation for selling stylish goods at budget prices by expanding Target’s lineup of store label brands and shortening the time it took to get new items from the idea stage into stores.

“In a world where we operate today, our guests are looking for Tarzhay,” Cornell told investors. “Consumers coined that term decades ago to define how we elevate the everything everyday to something special, how we had unexpected fun in the shopping that would be otherwise routine.”

Before joining Target in August 2014, Cornell spent more than 30 years in leadership positions at retail and consumer-product companies, including as CEO at Michaels, Walmart’s Sam’s Club and PepsiCo America Foods.

He replaced former CEO Gregg Steinhafel, who stepped down months after Target disclosed a huge data breach in which hackers stole millions of customers’ credit- and debit-card records. The theft badly damaged the chain’s reputation and profits.

In September 2022, the board of director's extended Cornell's contract for three more years and eliminated a policy requiring its chief executives to retire at age 65. Fiddelke will become the board's chair when he takes over, and Cornell will transition into the role of executive chair.

Cornell reenergized sales by having his team rev up Target’s store brands. He focused on better tailoring stores to their local communities. Cornell also spearheaded the company’s mission to transform its stores into hubs for shipping or picking up online orders.

The move helped to reduce costs and speed up deliveries, but the in-person experience for shoppers suffered as Target diverted store workers to fulfilling orders placed online, according to some analysts.

The coronavirus pandemic delivered outsized sales for Target as well as its peers as many people bought items to help them work and entertain themselves at home. Sales continued to surge when shoppers first returned to stores. But the spending sprees eventually subsided.

As inflation started to spike, Target reported a 52% drop in profits during its 2022 first quarter compared with a year earlier. Purchases of big TVs and appliances that Americans loaded up on during the pandemic faded, leaving the retailer with excess inventory that had to be sold off.

In July 2023, as shoppers feeling pinched by inflation curtailed their spending, Target said its comparable sales declined for the first time in six years. Its sales continued to languish as customers defected to Walmart and off-price department store chains like TJ Maxx in search of lower prices.

Although Walmart retreated from its diversity initiatives first, Target has been the focus of more concerted consumer boycotts. Organizers have said they viewed Target’s action as a greater betrayal because the company previously had held itself out as a champion of inclusion. In 2023, a customer backlash over the annual line of LGBTQ+ Pride merchandise Target carried also cut into sales.

Many analysts think Target stumbled by losing sight of the winning mix of merchandising savvy and competitive price points that had distinguished it from Walmart, the nation's largest retailer. Walmart gained market share among households with incomes over $100,000 as U.S. inflation caused consumer prices to rise rapidly.

“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,” Neil Saunders, a managing director at GlobalData Retail, said Wednesday.