Target Corporation had big news at the top of their org chart. Michael Fiddelke, now Chief Operating Officer, will become Chief Executive Officer as of February 1. After 20 years at the helm of Target, Fiddelke—in his own words—has become a pretty seasoned veteran. He has served as the company’s Chief Financial Officer. He takes the reins from Brian Cornell, who will transition to the role of executive chair of Target’s board of directors.
This announcement comes amid a tumultuous period for Target as the retailer has struggled financially. The retailer announced a net income of $935 million for the latest quarter, or $2.05 a share. That’s a decrease from last year’s net income of $1.19 billion, or $2.57 per share. For context, Target’s revenue was $25.45 billion in the second quarter of last year. This contraction highlights all of the challenges the company has in maintaining sales momentum.
Customer engagement has plummeted, as Target has experienced a 1.3% decrease in transactions from last year. Not only are shoppers making fewer trips to the store but they are spending less each time they visit one. Average spending per transaction has decreased by 0.6%.
And looking at data from Placer.ai, store traffic has been trending downward since late January. Fiddelke has an uphill battle as he starts his new endeavor. He has a short period of time on hand to refresh customer excitement and increase sales numbers.
All that said, Target still pulled off a sizable surprise on Wall Street’s bottom line for the quarter, beating sales and earnings expectations handily. Fiddelke expressed optimism about the retailer’s strategy moving forward, stating, “Now, we need more of those examples across the category, but they give me a ton of confidence that we’re on the right path there.”
From a performance metric standpoint, Target’s same-store sales were down -1.9% y/y. The retailer reported improvements in sales trends across all six of its key merchandise categories compared to the previous quarter. More impressively, non-merchandise sales were up 14.2% over last year’s first quarter.
The firm has reaffirmed its full-year guidance, even if that was cut in May. As of now, Fiddelke’s biggest challenge will be finding the financial wherewithal to address these challenges and develop initiatives that will arrest this financial spiral’s downward trends.
As the retail landscape shifts and changes at an unprecedented pace, Target’s leadership change heralds a new era—a time for new ideas and priorities to emerge. Fiddelke’s long history with the company places him in a unique position. He’s going to have a challenge ahead of him to get Target back on a growth path.