Target Shares Plunge as CEO Transition Overshadows Earnings Beat
Stock drops over 8% as investors signal disapproval of internal CEO pick, despite Q2 results topping analyst forecasts.
Target Corporation (TGT) shares tumbled more than 8% on Wednesday, as investors brushed aside second-quarter earnings that surpassed expectations, focusing instead on the impending departure of CEO Brian Cornell. The negative market reaction was fueled by the announcement that Chief Operating Officer Michael Fiddelke, a company veteran, will take the helm, a move seen by many as a continuation of the current strategy rather than the significant overhaul some investors had sought.
The Minneapolis-based retailer reported adjusted earnings of $2.05 per share on sales of $25.2 billion for the quarter ending August 3. While these figures topped Wall Street estimates, the news was completely overshadowed by the leadership transition. Cornell, who has led Target for 11 years, will step down on February 1, 2026, with Fiddelke, a 20-year insider, set to succeed him.
The market's reaction suggests a deep-seated desire for a fresh perspective. Analysts noted that an internal promotion lacked the 'pop' an external hire might have provided. D.A. Davidson analyst Michael Baker commented that the negative stock reaction reflected a hope that 'an external CEO hire would be a catalyst for significant change.' This sentiment was echoed in a recent Mizuho Securities survey where 96% of investors expressed a preference for an outside candidate to 'shake up the company's culture.'
Despite the C-suite shuffle, Target's underlying performance showed some signs of improvement. Comparable sales fell by 1.9%, a smaller decline than the 2.9% drop analysts had anticipated. The company also maintained its full-year guidance, expecting a low-single-digit sales decline and adjusted earnings per share between $7.00 and $9.00.
Incoming CEO Michael Fiddelke acknowledged the company's challenges, stating, 'we're far from satisfied with our current performance.' He outlined priorities focused on recapturing Target's 'merchandising authority and signature style,' improving the customer experience, and leveraging technology to accelerate growth. However, the promotion of an architect of the current strategy has left investors skeptical about the prospect of a meaningful pivot for the retailer, which has faced sluggish sales and increasing competition.