Michael Fiddelke played the long game.
Currently chief operating officer at Target, Fiddelke will soon lead the company he’s worked at for over 20 years.
He joined the retailer as an intern in 2003 and worked his way up to leadership roles, even serving as Target’s chief financial officer for several years.
This tenure is what makes him the perfect fit to take on the CEO position from Brian Cornell in February, according to Target’s board. But industry analysts seem more cautious about the decision to promote internally instead of looking outward for Cornell’s successor.
The CEO transition announced on Wednesday was not a surprise, but still a letdown for some who believe Target’s current performance issues (which were further demonstrated by its latest earnings results) can only be fixed by an external candidate who hasn’t played a role in the retailer’s strategic choices these past few years.
“We are not surprised by the news, given Mr. Fiddelke had been groomed to become CEO, evidenced by his multiple leadership roles, including COO and CFO,” Telsey Advisory Group analysts led by Joe Feldman said in a note shared with Retail Dive Wednesday. “We expect a smooth leadership transition, although we are unsure of how Mr. Fiddelke will change the strategy he helped create.”
Cornell even praised Fiddelke for advising him during the 11 years he’s served as CEO.
“Since I arrived at Target, I have consistently relied on Michael's strategic insights and sound judgment when making decisions,” Cornell told analysts on an earnings call Wednesday. “And he has played a critical role in advancing the key initiatives that have grown and sustained our business.”
However, Lead Independent Director of Target’s board of directors Christine Leahy emphasized in a statement that Fiddelke still brings a fresh mindset to the table.
The COO has been leading Target’s new Enterprise Acceleration Office since May, which was developed to “drive even greater speed and agility” in the retailer’s turnaround efforts.
Analysts got a taste of Fiddelke's priorities Wednesday when he outlined three key initiatives in returning Target to its former glory.
“First, we must reestablish our merchandising authority in a way that is distinctly Target,” Fiddelke said. “Second, we're a retailer that believes that an elevated experience is every bit as important as product. We want guests to find a sense of joy from every trip to Target and we must do that more consistently and frequently. And third, we must more fully use technology to improve our speed, guest experience and efficiency throughout the business.”
A return to growth is a core focus for the company going forward, Roth analysts led by Bill Kirk said in a note.
“To do so, we believe Target has to dramatically increase spending, an earnings dilutive step they have, so far, been unwilling to take,” Roth analysts added.
Former CEOs stay aboard
Can Fiddelke achieve his goals with his former boss serving as executive chair?
“We are also surprised that Brian Cornell will move into the role of Executive Chairman,” GlobalData Managing Director Neil Saunders said in emailed comments. “To us, this seems like a reward for failure. It also runs the risk of having the person who has not guided Target well having some influence over future policy.”
“In our view, the boardroom needed a clear out but, instead, has received a light dusting which has failed to address the debris that litters the floor,” he said.
This approach to succession isn’t exactly new for Target.
The mass retailer’s longtime CEO Bob Ulrich stepped down in 2008 and remained executive chair of the board through the end of the 2008 fiscal year.
“It's really important to kind of understand what kind of responsibility are they going to have as executive chairman, because that has a meaningful influence about how to assess this CEO change,” Georgetown Associate Professor at the McDonough School of Business Jason Schloetzer told Retail Dive.
A Target spokesperson told Retail Dive that the executive chair role does not and has never had a term limit. They did not expand upon the specific responsibilities that Cornell will have in this position.
“You have to ask, well, what is he going to be able to decide with the executive chair in the room where you don't want to step on toes, the person who got you this job is sitting across the table from you, and you might want to reverse some of the decisions that he made,” Schloetzer added. “It gets a little complicated there.”
Cornell’s appointment as Target’s CEO 11 years ago marked the first time the company tapped an external executive for the position. With its decision Wednesday, the retailer has put its confidence in internal expertise to take it forward after executing a “deliberate and thoughtful CEO succession process” over the last few years, which included an external search, per Leahy.
“[Target] has stumbled recently with customer mis-steps, merchandising issues, poor employee morale, execution, and competitive pressures,” Wells Fargo analysts led by Edward Kelly said in a note. “The time seemed right for a new set of eyes and ideas; either the company disagreed or could not find a high profile executive to take on the challenge.”
When asked by UBS Analyst Michael Lasser how this succession plan brings about change during Wednesday’s call, Fiddelke assured that he was the right man for the job
“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,” the executive responded. “And so you can expect me to operate with candor, urgency and pace and making the changes that we need to get the growth we expect.”
