Target CEO Brian Cornell will step down in February, COO will take his place

CBS News

8 hours ago

Target CEO Brian Cornell, who helped reenergize the company but has struggled to turn around weak sales in a more competitive retail landscape since the COVID pandemic, plans to step down Feb. 1.
Minneapolis-based Target Corp. said Wednesday that Chief Operating Officer Michael Fiddelke, a 20-year company veteran, will succeed Cornell. Cornell will transition to be executive chair of the board.
Cornell, 66, took the helm at Target in August 2014. In September 2022, the board extended his contract for three more years and eliminated a policy requiring its chief executives to retire at age 65.
Cornell said the appointment followed several years of board vetting of both internal and external candidates. Fiddelke has overhauled Target's supply network and expanded the company's stores and digital services while cutting costs.
"Mike was the right candidate to lead our business back to growth," Cornell told reporters. "As I arrived at Target, I consistently relied on Michael's strategic insights and sound judgment when making decisions. Michael has developed a deeper knowledge of our business than anyone I know."
Fiddelke told reporters he's stepping into the role with "urgency" to reclaim the company's merchandising authority.
"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," he said.
In May, Target announced that Fiddelke would lead a new office focused on faster decision-making to help accelerate sales growth.
The change in leadership was announced Wednesday at the same time that Target reported another quarter of sluggish results. The company's stock was down more than 8% in pre-market trading.
Target reported a 21% drop in net income in the quarter ended Aug. 2. Sales were down slightly and the company reported a 1.9% dip in comparable sales — those from established physical stores and online channels. Target has seen flat or declining comparable sales in eight out of the past 10 quarters, including the latest period.
Target, which has about 1,980 U.S. stores, has been the focus of consumer boycotts since late January, when it joined rival Walmart and a number of other prominent American brands in scaling back corporate diversity, equity and inclusion initiatives.
Target's sales also have languished as customers defect to Walmart and off-price department store chains like TJ Maxx in search of lower prices. But many analysts think Target is stumbling because consumers no longer consider it the place to go for affordable but stylish products, a niche that long ago earned the retailer the jokingly posh nickname "Tarzhay."
In fact, out of 35 merchandise categories that Target tracks, it gained or maintained market share in only 14 during the latest quarter, Fiddelke told reporters Tuesday.
Meanwhile, Walmart gained market share among households with incomes over $100,000 as U.S. inflation caused consumer prices to rise rapidly. Lower-income shoppers have driven customer growth at Target, suggesting it may have lost appeal with wealthier customers, according to market research firm Consumer Edge.
"It's probably not the best sign, especially because higher-income consumers continue to hold up a little bit better" during times of economic uncertainty, said Consumer Edge Head of Insights Michael Gunther.
The company also recently ended a longstanding price matching policy that allowed customers to request a price match if they found an identical item with a lower cost at competitors Amazon or Walmart. The new policy only lets shoppers price match Target's in-store prices with its own online prices.
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 to store shelves. The moves would help the company stay close to trends, executives said.
"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, Cornell spent more than 30 years in leadership positions at retail and consumer-product companies, including as chief marketing officer at Safeway Inc. and CEO at Michaels, Walmart's Sam's Club and PepsiCo America Foods. He came to Target when the company was facing a different set of challenges.
Cornell replaced former CEO Gregg Steinhafel, who stepped down nearly five 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.
Cornell reenergized sales by having his team rev up Target's store brands. It now has 40 private label brands in its portfolio. And even before the pandemic, Cornell spearheaded the company's mission to transform its stores into delivery hubs to cut down on costs and speed up deliveries.
Target's 2017 acquisition of Shipt helped bolster the discounter's same-day, store-based fulfillment services. Cornell also focused on making its stores better tailored to the local community
The coronavirus pandemic delivered outsized sales for Target as well as its peers as people stayed home and bought pajamas, furnishings and kitchen items. And it continued to see a surge in sales as shoppers emerged from their homes and went 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.
Moreover, Target started losing its edge as an authority on style by focusing too much on home furnishings basics, and not enough trendy items, Fiddelke said.
A customer backlash over the annual line of LGBTQ+ Pride merchandise Target stores carried that year further cut into sales.
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.
Earlier this summer, Target announced its commercial unit employees were being asked to return to the office at least three days a week starting in September.