By Siddharth Cavale and Juveria Tabassum
(Reuters) -Target named insider Michael Fiddelke on Wednesday as its new CEO to succeed long-time top boss Brian Cornell, and beat quarterly estimates, helped by a recovery in traffic at its stores and average receipts.
However, the company's shares fell 10% in premarket trading after it held on to its annual forecasts after lowering them in May when it blamed weak demand for the largely discretionary merchandise it sells like apparel and electronics items.
Fiddelke, a 20-year company veteran most recently serving as chief operating officer, will take the helm on February 1, 2026 with Cornell transitioning to the role of executive chairman, the company said in a statement.
"My number one goal is to get us back to growth," Fiddelke said during a media call on Target's second-quarter earnings report, which showed a 1.9% decline in comparable store sales, smaller than analysts' expectations of a 3% drop.
Fiddelke, 49, said his three priorities are to improve the quality of merchandise, value and style that Target offers, ensure a more consistent shopper experience and to embed more technology in all parts of its business.
"We need to move faster, much faster," he said.
Over the past few years, Target has grappled with a series of challenges including merchandise missteps, retail crime, and inventory management issues.
In the past year especially, it has struggled to maintain consistent sales growth, faced boycotts and lawsuits related to its diversity, equity, and inclusion (DEI) practices and remained reliant on sourcing from countries affected by broad-based tariffs imposed by U.S. President Donald Trump.
These pressures have weighed heavily on its stock, which has declined 27% over the past year to Tuesday's close, when many of its peers have seen gains.
DEEPER DISCOUNTS
The retailer has taken steps to turn itself around, including intensifying efforts to entice customers worried about the economy. These have included offering 10,000 new items starting at $1, with most priced under $20, and launching several affordable private label lines.
Still, consumers remain selective and are motivated by promotions as inflation continues to strain household budgets, Target executives noted on the call.
Target said deeper discounts helped bring more shoppers into stores and boosted how much they spent. Store traffic improved from a 2.4% drop in the first quarter to a smaller 1.3% decline in the second. The average amount spent per visit also improved, falling just 0.6% compared to a 1.4% drop in the previous quarter.
Sales improved across all six main product categories: apparel, beauty, food, home furnishings, hardlines, and household essentials. The hardlines category, which includes gaming devices such as the Nintendo Switch and other electronics, performed best, growing 5% and posting its strongest results since 2021.
On tariffs and pricing, the company reiterated its stance from May, stating that price increases would be considered only as a last resort. Cornell, who has led Target for 11 years, noted progress in diversifying the company's sourcing strategy. This includes reducing reliance on store-brand products from China and leveraging Target's scale to navigate the tariff landscape more effectively.
Target reported second-quarter net sales of $25.21 billion, beating estimates of $24.93 billion, according to data compiled by LSEG. Excluding items, the company reported earnings per share of $2.05, which topped Wall Street estimates by 2 cents.
Like Target, home improvement company Home Depot also retained annual targets but warned of some price increases due to tariffs.
Retail bellwether Walmart reports quarterly results on Thursday.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Muralikumar Anantharaman)
