Target's incoming CEO Michael Fiddelke is betting that AI, technology and process optimization will return the company to growth while navigating economic uncertainty.
Fiddelke's earnings call debut coincided with a disappointing second quarter. Fiddelke is currently chief operating officer and has been in various roles at Target for 20 years. Wall Street wasn't pleased an insider got the job and current CEO Brian Cornell will stay through the end of the year. Fiddelke takes over at the start of Target's fiscal 2026 in January.
To be sure, Target faces more than a few challenges. Target reported second quarter earnings of $2.05 a share on revenue of $25.2 billion, down 0.9% from a year ago, but slightly ahead of Wall Street estimates. Same store sales in the second quarter were down 1.9%, but digital comparable sales were up 4.3% due to same-day delivery via Target Circle 360.
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As for the fiscal 2025 outlook, Target said it expects a low-single digit decline in sales and earnings of $8 a share to $10 a share. Adjusted earnings will be $7 a share to $9 a share due to litigation settlements.
Target plans to spend about $4 billion in capital expenditures to open new stories, remodel existing ones and invest in supply chain and technology.
Fiddelke, who has led Target's Enterprise Acceleration Office, said he's stepping in as CEO with "a clear and urgent commitment to build new momentum in the business and get back to profitable growth."
The topline plan for Target includes the following:
- Reestablish merchandising authority to improve product selection.
- Create an "elevated experience" to give guests "a sense of joy from every trip to Target."
- Use technology to improve speed, guest experience and efficiency.
Technology, with a heavy dose of AI, will span everything from sourcing to supply chain and customer experience. "While technology is at the core of all our operations today, it will need to play an even stronger role going forward," said Fiddelke. "As we continue investing in our future growth, we'll be making key technology investments throughout our stores, supply chain, headquarters and digital operations to power our team and our business."
Details were sparse, but the big picture is that Fiddelke wants to move faster, reevaluate strategies continuously and be nimble enough to react to the tariff and consumer landscape. Target's enterprise acceleration office is designed to scale best practices and technologies.
"We've identified the biggest challenges that slow us down, legacy technology that doesn't meet today's needs, manual work that can be automated, unclear accountabilities, slow decision-making, siloed goals and a lack of access to quality data. For example, it's clear that at our headquarters, team structures and processes have significant opportunities to improve," said Fiddelke. "We started redesigning large cross-functional processes like how our teams build our merchandising and inventory plans to clarify roles and access the right data to make more effective decisions."
Fiddelke said Target is doing the following:
- Embedding more technology and data to evaluate initiatives with the highest returns.
- Leverage AI and other tools for better forecasting.
- The company has deployed more than 10,000 new AI licenses across its employee base.
"Solving these challenges will require changes, both big and small, across technology and data, process and structures and organizational behaviors," said Fiddelke.
Fiddelke moved to address the perception that he isn't an agent of change. He said, "there's real power in drawing on 20 years of knowing what makes Target, Target."
"Having seen us at our very best in different chapters gives me a clear focus on who we are in retail and what our unique path is that's going to lead to growth. And it centers on style and design," said Fiddelke.
Now all Fiddelke has to do is leverage technology to revamp Target's store fulfillment "in a capital light way" and offset tariffs by becoming more efficient.
