Good morning. Target is shaking up its leadership team. The retailer continues to experience lagging sales and foot traffic, due in part to consumer pushback following a pullback on some of its DEI initiatives.
Michael Fiddelke, chief operating officer (COO) and former CFO, will oversee a new, multi-year “enterprise acceleration office” aimed at removing friction and enabling the team to make faster decisions in support of growth, Target said in a Wednesday announcement.
“The work will benefit greatly from Michael’s leadership and his track record of simplifying complexity and championing cross-functional collaboration,” Target CEO Brian Cornell said in a statement.
During Target’s Q1 earnings call on Wednesday, Fiddelke said he’ll work closely with leaders across the organization to more boldly leverage technology and AI, expanding beyond current efforts. “We have some compelling technology projects in flight that will modernize and streamline core inventory management and allocation processes,” he said.
Fiddelke became COO of the Fortune 500 company in February 2024 but also remained finance chief until Jim Lee began his tenure as the new CFO in September. Fiddelke has been with Target for more than 20 years, joining as an intern in 2003.
As CFO, Lee will take leadership of enterprise strategy and partnerships, according to the company. Christina Hennington, chief strategy and growth officer, is leaving Target after more than 20 years. Amy Tu, chief legal and compliance officer, is also leaving the company. Meanwhile, Rick Gomez, chief commercial officer, will oversee Target’s enterprise insights team. And, Prat Vemana, chief information and product officer, will lead the Target in India global capability center.
I asked Morningstar equity analyst Noah Rohr for his thoughts on Target’s enterprise acceleration office. “It’s possible that better execution in digital and merchandising could unlock more growth,” Rohr said. “But Target still contends with ample competition and, at the moment, a weak demand environment for discretionary goods.” He added, “These factors are likely to persist in coming quarters.”
‘We’re not satisfied with this performance’
In the first quarter, Target’s revenue fell nearly 3% year over year to $23.85 billion, as comparable sales dropped 3.8%. Adjusted earnings per share dropped 36% to $1.30. Target also lowered its full-year sales and profit outlook, citing continued weak consumer demand and ongoing cost pressures.
An “exceptionally challenging environment” resulted in declines in both traffic and sales, most notably in discretionary categories in the first quarter, Cornell said on the earnings call. “I want to be clear that we’re not satisfied with this performance, and we’re moving with urgency to navigate through this period of volatility,” he said.
Other headwinds for the quarter included five consecutive months of declining consumer confidence, uncertainty regarding the impact of potential tariffs, and consumer reaction to the “updates” the company shared in January on its belonging practices, he said. “While we believe each of these factors played a role in our first quarter performance, we can’t reliably estimate the impact of each one separately,” he added.
Target has faced backlash, particularly from activists and customers, due to its decision to roll back some of its DEI practices amid the Trump administration’s anti-DEI push, and a number of boycotts have roiled in-store foot traffic.
Target continues to “grapple with a competitive retail environment and deteriorating consumer confidence,” Rohr wrote in a note on Wednesday. “We plan to lower our $135 fair value estimate on no-moat Target by a high-single-digit percentage as the firm’s financial marks and guidance proved underwhelming.” But he noted that investors’ sentiment seems “overly pessimistic, and we view shares as undervalued.”
I’m sure investors will be watching to see if Fiddelke can spur positive momentum with the newly created acceleration office and how the company will work to restore customer trust.
Sheryl Estrada
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This story was originally featured on Fortune.com
