Target’s CEO to Step Down; Stock Tanks 6% After Q2 Earnings

Target’s second-quarter results came with more than just earnings numbers. Alongside reporting another quarter of margin pressure and weak store traffic, the retailer announced that longtime CEO Brian Cornell will step down in early 2026. The timing of the transition, revealed just after Q2 earnings, left investors uneasy. The board opted to elevate an internal executive, COO Michael Fiddelke, rather than bring in an outside turnaround specialist. The decision, coupled with soft results, pushed Target’s stock down over 6% on August 20th as per Google Finance.

Here’s a closer look at what drove the results, why the stock reacted sharply, and what lies ahead for Target.

Brian Cornell’s Legacy at Target

Brian Cornell took charge in 2014 when Target was still reeling from a damaging data breach and weak performance. As the first outsider CEO, he made bold moves that reshaped the company and reignited growth.

Key achievements under Cornell:

• Exited the unprofitable Canadian operations to refocus on the U.S. market.
• Invested heavily in store remodels, private-label brands, and supply chain upgrades.
• Delivered one of the strongest turnarounds in retail, with sales and profits surging by 2018.
• Guided the stock to a market cap peak of $129.6B in August 2021, up from $37.7B in 2014, a 243% rise in seven years as per CompaniesMarketCap.
• Earned recognition as “CEO of the Year” in 2019.
• Steered the company through the pandemic with record sales in essentials, making Target a key retail winner.

Where Momentum Faded

From 2022 onward, Target’s trajectory began to weaken as financial and reputational headwinds mounted. For investors, the shift reflected both operating pressures and brand challenges.

Key challenges since 2022:

• Margin erosion from excess inventory and higher costs.
• Slowing discretionary demand in categories like apparel and home goods.
• Political controversies over Pride merchandise in 2023 that hurt brand perception.
• Criticism in 2025 after scaling back DEI initiatives, drawing pushback from long-time supporters and even founding family members.
• Market cap declining nearly 60% from its 2021 peak, now at $44.8B as per CompaniesMarketCap, reflecting investor doubts on the company’s future growth path.

Who Is The New Target CEO Michael Fiddelke?

Michael Fiddelke, set to become CEO in February 2026, has been with Target since 2003. Over two decades he worked across finance, merchandising, HR, and operations before becoming CFO in 2019, steering the company through both the pandemic boom and later headwinds.

In 2024 he was promoted to COO, where he oversaw stores, supply chain, and fulfillment, driving over $2 billion in efficiency savings. For investors, that experience offers stability but also raises questions. Fiddelke was closely involved in strategies now being challenged.

Key Numbers From Q2 FY25

Source: Target Q2 Earnings Report, Nasdaq

Target posted net sales of $25.2 billion, down 0.9% YoY, yet that modest dip marked an improvement over Q1 and exceeded Wall Street’s expectations of around $24.93 billion. Adjusted EPS landed at $2.05, well below last year’s $2.57, though just narrowly off the analyst consensus of approximately $2.07-2.09.

Margins were under pressure this quarter, with gross margin slipping to 29.0% from 30.0% last year and operating margin narrowing to 5.2% from 6.4% in Q2 2024. That contraction stood out as a concern for investors.

On the positive side, online sales gave Target some momentum, rising 4.3% on the back of services like Drive Up and the expanding Target Circle 360 program. Revenue from non-merchandise areas such as Roundel advertising, memberships, and marketplace activity jumped 14.2%, providing an offset to weaker merchandise sales.

Why Did Target Stock Slide on CEO Transition, Q2 Earnings?

Despite the modest upside on revenue and digital strength, Target's stock fell sharply, the stock went down and closed over 6% down as per Google Finance, as investors absorbed the broader context of margin erosion, traffic weakness, and a leadership transition that fell short of market expectations.

Investors had hoped for an external leader to reset direction and inject fresh thinking, so the internal appointment drew mixed reactions and did little to lift sentiment after the Q2 earnings miss. While Fiddelke’s execution record is strong, it remains to be seen whether he can inject the new thinking Target may need to reignite growth.

Beyond the headline numbers, sentiment was further hit by uncertainty around how quickly the incoming leadership can restore momentum. Investors worry that ongoing cost pressures and brand challenges could weigh on earnings for several more quarters, leaving the stock vulnerable until a clearer turnaround plan is laid out.

Outlook and Guidance for Target Going Ahead

• FY25 Guidance: Target expects a low single-digit sales decline and EPS in the range of $7 to $9, which is below Wall Street expectations.
• Macroeconomic Pressure: Inflation, softer discretionary spending, and shoppers trading down to lower-priced options are weighing on growth.
• Digital Growth: Online sales rose 4.3% in the latest quarter, helped by same-day services like Drive Up and Order Pickup.
• Loyalty Program: The revamped Target Circle 360 program is boosting customer engagement and spend.
• Ad Revenue: Roundel, Target’s in-house advertising unit, delivered double-digit growth, adding a high-margin revenue stream beyond traditional retail.

The company says it will stay disciplined on costs and inventory while investing in fulfillment capacity. With CFO-turned-COO Michael Fiddelke set to take over as CEO in 2026, the board is signaling stability, but investors remain cautious about whether an insider can deliver the reset needed to reignite long-term growth.

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