The biggest news from retailer Target's (TGT 2.25%) second-quarter earnings report, which arrived on Wednesday, wasn't the 21% plunge in profits (although that was bad). It's what the company is doing about it: hiring a new CEO.
Target's board unanimously appointed Michael Fiddelke to replace current CEO Brian Cornell, who has led the company since 2014. Cornell will officially step down in February.
Here's what this is likely to mean for Target and its stock.
Image source: Getty Images.
Not a surprise departure
Analysts had been expecting Cornell to step down soon. On top of the company's recent poor performance and PR missteps, his current three-year contract was set to expire in September.
Cornell isn't fully leaving, but transitioning into the role of executive chair of the board of directors, indicating he's not departing on bad terms.
The big surprise wasn't Cornell's departure, it was the identity of his successor.
A company insider
Some analysts were hoping that Target would bring in an outsider who would "shake things up" at Target, much as Cornell himself did in 2014.
Cornell came to Target from PepsiCo's global foods business. He made big investments in Target's online fulfillment, same-day delivery, and curbside pickup capabilities, which paid off during the pandemic lockdowns, sending revenue and share prices soaring.
Fiddelke, on the other hand, is perhaps the ultimate company insider: He's Target's current chief operating officer, its former CFO, and a 20-year company veteran. Target credits him with scaling up the company's supply chain and digital capabilities and spearheading the current push to find efficiencies in the business.
What it means for investors
The choice of Fiddelke to succeed Cornell is seen by some as a decision to "stay the course." That is, focus on existing initiatives to boost same-store traffic and identify cost savings, rather than make big changes.
Shares tumbled by about 10% in the wake of the announcement:
That's an indication that Wall Street isn't convinced staying the course is the right move for the struggling retailer. Investors who agree may want to hold off on buying shares.
