Why New Target CEO Michael Fiddelke Must Put The Fun In Fundamentals

Target Corp. is entering one of the most critical chapters in its history, with long-serving insider Michael Fiddelke confirmed to take over as chief executive on Feb. 1 next year.

Currently, Chief Operating Officer Fiddelke, who has also acted as Target’s CFO, will succeed 66-year-old CEO Brian Cornell, who will become Executive Chair of Target’s board of directors.

Fiddelke’s appointment comes at a time when the Minneapolis-based retailer, once a darling of middle-class U.S. consumers for its affordable-but-chic image, has struggled amid sluggish sales, a faltering brand identity, and a sharp drop in investor confidence. That was not helped by the recent conclusion of its deal with Ulta Beauty, which will officially end in August next year.

Discouragingly, shares fell as much as 10% following news of Fiddelke’s appointment, underscoring skepticism facing the incoming chief. Yet the 48-year-old executive, a 20-year company veteran, insists he has a plan to restore Target’s popularity.

However, the turnaround will require more than operational tweaks. Target has leant on its reputation as a stylish and fun alternative to behemoth Walmart, but while the latter continues to roll over all comers, Target’s reputation has eroded. Consumers have complained that stores feel less distinctive, private labels have multiplied to the point of confusion, and online shopping options lag those of competitors.

Fiddelke promised to re-establish Target’s “merchandising authority” during a call with journalists, insisting that his long tenure with the business is “an asset”. Critics of Target were hoping for a fresh injection of new ideas from an outside hire.

Fiddelke In As Target Beats Expectations

Somewhat lost in the hand-wringing over the CEO announcement, Target actually topped Wall Street expectations for sales and earnings during its fiscal second quarter. It reiterated its full-year forecast, which it had cut back in May, and said it expects a low single-digit percentage decline in sales and adjusted earnings per share, excluding gains from litigation settlements, to be about $7 to $9.

After the combination of the new CEO announcement and trading projections hit its stock value by around 10%, there was a small claw back, but more worryingly shares are down over 29% year to date and nearing 65% of its 2021 peak.

“It starts with retail fundamentals,” Target CEO Brian Cornell told analysts on an earnings call in May when he was asked about a turnaround plan moving forward.

“We know we’ve got to be reliable. We’ve got to be consistent. We’ve got to make sure we are managing inventory effectively in this environment. We’ve got to continue to make progress with shrink. Those are fundamentals each and every day that are embedded in our business.”

Fiddelke Banks On Fun 101

Central to Fiddelke’s effort is: Fun 101, an initiative aimed at revamping categories such as toys, electronics and books and simplifying ranges. But if merchandising is one piece of the puzzle, in-store execution is another. Empty shelves, inconsistent service and tired layouts are denting customer satisfaction.

While the termination of the Ulta Beauty partnership, which was around for about five years, feels like a step backward, it may actually be advantageous as the business strips back to the basics.

Fiddelke acknowledged the issues facing Target on a call with analysts, pointing to improvements in on-shelf availability but admitting more needs to be done. He has pledged to make the in-store experience more reliable and welcoming, while investing in staff training and improving morale.

At the same time, Amazon and Walmart have set a high bar for online shopping and Target needs to up its game.

Fiddelke plans to expand investments in AI, automation and supply chain technology to create a more efficient, data-driven backbone. That could help Target cut costs, personalize shopping experiences and improve margins squeezed by inflation and tariffs.

Fiddelke Faces DEI Missteps

But Fiddelke also inherits a reputational crisis. Earlier this year, Target rolled back several diversity and inclusion initiatives under political pressure, but the decision prompted a consumer boycott that dragged on for 40 days and cost the company an estimated $12.4 billion in market value.

For a retailer that has long cultivated a progressive image, the retreat was jarring and to regain trust Target will need to clarify its stance and re-engage with communities, while store closures blamed on shoplifting also hit its reputation.

Another looming question is capital allocation. Target recently paused stock buybacks, citing economic uncertainty and tariff-related costs, and there are clear arguments that the capital should be focused on modernization, store upgrades, improved digital tools and improved merchandising, rather than financial engineering.

The stakes are high. Walmart and Amazon continue to march on while specialty retailers are nibbling at the edges of its business. Fiddelke only needs to look at the fate of a roster of America’s department stores and big box retailers to see the risk of failure and he needs to put the fun back in fundamentals fast.