The new CEO of Target, Michael Fiddelke, faces challenges

When the new CEO of Target, Michael Fiddelke, entered the role in early February, he will inherit a company faced with falling sales, customer loyalty and skeptical investors.

Its budgetary budgetary results published on Wednesday illustrated the main challenges of the retailer. Sales fell again from the period of the previous year. Customer traffic has decreased. And buyers have passed less on average during their trips to the Target website and stores a year ago.

These results extended a Rocky for several years for Target, who tested the faith of many investors. Target’s market value increased from a summit of $ 129 billion in 2021 to around $ 45 billion on Wednesday.

Fiddelke, announced Wednesday as the successor of the CEO of Target, Brian Cornell, will soon lead the retailer’s return efforts and will have to show that he can revitalize a business where he spent about two decades. During a call for results on Wednesday, he admitted that Target was not short and described the priorities, in particular to refresh the goods of the company and improve the experience of buyers.

Fiddelke described his long term with the retailer as “an asset” and said that he knew what target may be at his best.

“I know that we are not making our full potential right now, and therefore I am going into the role with a clear and urgent commitment to create new impetus in the company and to return to profitable growth,” he said.

The 49 -year -old increased in the target ranks after starting as an intern. He held positions through merchandise, finances, operations and human resources, including a recent passage as a financial director and his current role of the chief of operation. He was also tapped to direct the company’s acceleration office, a new effort that Target announced in May to launch his turnaround.

However, the decision of the minneapolis retailer to hire Fiddelke, instead of an external candidate, obtained a cold reception. Investors responded to the choice with a stock sale on Wednesday.

The shares have dropped more than 6% on Wednesday, so far bringing its losses this calendar year to around 27%. This drags well behind the gains of more than 8% of the S&P 500 during the same period.

Wall Street had favored a foreigner for employment, according to an investigation in June with 51 investors from Mizuho Securities, a research company in equity. About 96% of investors questioned an external rental for the next CEO of Target, he revealed.

Manny Chirico, the former CEO of Calvin Klein and Tommy Hilfiger Parent PVH, said that investors were hungry for greater change.

“I think the market wonders if the internal candidate, with Brian [Cornell] Staying as an executive president is a fairly daring move in the future? “He said in an interview on” Squawk Box “on CNBC on Wednesday.

One of the first major challenges of Fiddelke will be to convince investors and buyers that Target can take over the magic that has transformed it into a company that other retailers have emulated and poache for talent.

Customers and former employees told CNBC that the retailer had lost some of its best known features, including its clean and well -garnished stores, its friendly staff and its goods that attract attention. Some customers have also decided to shop elsewhere in response while they were protesting on its collection of pride, their subsequent decision to withdraw certain articles from this line and their decision to reduce diversity, equity and inclusion efforts

Target became known as “Tarzhay”, a nickname with French consonance, because of its strength to offer trendy and often exclusive clothes, interior decoration and more at lower prices. He transformed his stores into an experience similar to a shopping center by adding Starbucks and small Ulta Beauty stores. And that led to excitement thanks to collaborations with fashion designers.

The company’s ability to push buyers to blow up the budget – or at least buy more than the articles in their shopping lists – has become the subject of social media videos and memes. Buyers joked about entering the store for an article, while leaving with dozens.

“There was a time when Target was at the top of the world,” said David Bellinger, detailed analyst for Mizuho Securities on Wednesday.

Target sales increased by more than $ 15 billion during the fiscal year after the cocodid pandemic start. Its actions climbed to a fence top of $ 266.39 in 2021. On Wednesday afternoon, its shares were negotiated more than 60% below this level, ending the day at $ 98.69.

Bellinger said Target had obtained a boost not only from his cheap chic reputation, but also stimulus money during the cocovated pandemic. While the crisis was, Target’s retail trade too.

Target annual sales have been almost stable for four years. Target said that he expects total sales to drop a low -digit percentage of this exercise.

Other factors harm the target after the pandemic. Customers have paid restaurants, concerts and holidays. Buyers have become more selective on spending because they have been faced with inflation of decades. And the retail supply chain has been faced with new tests, including conflicts in the Middle East and, more recently, the higher prices of President Donald Trump on imports from dozens of countries.

Target has also lost ground with competitors. Commercial Director Rick Gomez said Target’s profit call in May that the retailer had held or gained market share in 15 of his 35 goods divisions in the first quarter. In other words, he has lost ground in the majority of the categories she sells.

While Target was faced with problems with his power, many of his problems Was self-inflicted, Stacey Widlitz, president of SW Retail Advisors, said Wednesday “Squawk Box” by CNBC.

“These were clean and exciting and fresh brands,” she said. “It has simply changed in the past two years, and we have heard them talk about how they will repair it, and we haven’t seen it.”

Bellinger said he had seen changes during trips to his nearby target store. The street collection is fast and practical. But inside the store, he said that many goods are locked to prevent theft, that customers are waiting in long lines to check and that the cashier area is in the short term.

“It’s just not an easy shopping experience,” he said.

In one of the new challenges, Fiddelke will have to face, Target and Ulta next August will end their partnership, which had helped stimulate beauty sales for Target.

Fiddelke launched its charming offensive on Wednesday when Target’s results call. Although he was not yet in the role, he said that Target did not wait until his start date in February to make changes.

He is committed to traveling urgently to bring the business back to sales growth. And he presented his three main priorities, saying that he would focus on the victory of Target’s reputation as a strong merchant, improving customer experience in stores and using technology to improve his business.

Even before the CEO’s announcement, Target presented his plan to return to his image of Tarzhay. Its leaders highlighted the signs that the strategy works.

Target limited collection with Kate Spade,, Who was launched in mid-April and included colorful dresses, accessories and more, was its strongest creator partnership in a decade.

Gomez has described his new range of sportswear and champion’s sports items, which made their debut this month, like “really the quintessence of Tarzhay”.

And Wednesday, Target said he had new evidence. The sales of the company improved in the first quarter in the second quarter, said Fiddelke, even if they were negative from year to year. Sales trends in the six key goods categories in Target have improved compared to the previous quarter, he said. And the retailer improved in the fight against stocks, with the best availability at the shelf of items he has had for years, he said.

The work will continue, said Fiddelke. For example, he said he was revising his line of line lines, which includes articles such as televisions, laptops, toys and cards to exchange.

Target also wants to reverse lower sales in its home product category. His new bedding and decoration on the theme of Disney and Marvel in the welcome line of her children, her eagerness oreys and new colors, patterns and fabrics in Casaluna, her premium bedding line, were popular, said Fiddelke.

“Now, what the team must do is to say” okay, we have to do more that, more regularly, more frequently, in larger parts of the “”, he said.

He plans to make changes next year In Surchold, his biggest brand of house goods, he said.

Beyond the fixing of its brands and the launch of new goods, Fiddelke’s ability to straighten the business may depend on a critical task: restoring the identity of a retail that loyal customers knew and loved.

“If Target has disappeared tomorrow, you would have a lot of disappointed consumers, millions of consumers,” said Bellinger. “There is a real basic customer who loves Target, and there is a ton of increase here, if they can understand it.”