Brian Cornell effectively signed off to Wall Street on Wednesday.
It felt something like a bittersweet goodbye for Cornell, who after 11 years as Target Corp.’s chief executive officer will pass the torch to Michael Fiddelke in February.
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That’s because even though third-quarter results came in about as expected, they were still disappointing for a retailer that not long ago was the cheap-chic leader.
Net earnings in the three-month period fell 19.3 percent to $689 million, which included $120 million in after-tax costs as the company cut 1,800 corporate jobs last month, trying to remove complexity and enable quicker decision-making.
Sales slipped 1.5 percent to $25.3 billion, with a 1.9 percent decline in merchandise sales. Comparable sales in the apparel department were down 5 percent.
But Cornell — who’s staying on as executive chair, to the chagrin of at least some shareholders — had some definite wins to point to as he recapped his time in the corner office, describing it as the “highlight of my career.”
“This year’s top line is expected to be well over $30 billion higher than the year I arrived,” Cornell said on a conference call with analysts, which he said would be his last.
Earnings are expected to nearly double the roughly $4 a share Target logged in 2014, when Cornell took the reins.
During that time, the company also partnered with CVS to run its pharmacy business, invested in product design, launched several billion-dollar brands and “pioneered the stores as hubs model for digital fulfillment.”
With that brief look back, Cornell pointed to the future and stepped aside.
“I am singularly focused on supporting Michael and the entire leadership team as they make changes to the way we work,” he said.
Target has indeed grown from big to bigger under Cornell’s watch, but larger competitors have gained even more and have continued to press ahead as the bullseye retailer stalled.
Doug McMillon, whose term as Walmart Inc.’s CEO also started in 2011, saw his empire add more than $216 billion in revenues over the same timeframe. And Amazon has only become more and more important to the country’s daily shopping life.
Now Fiddelke, a 20-year veteran of the company, is stepping into the top job, when some analysts and investors were hoping for a fresher set of eyes on the business.
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While not even in the job yet, Fiddelke seemed to have his hands on the reins during the call with analysts. And he took the opportunity to start laying out his vision for the retailer, which once drove much of the fashion conversation with its many high-profile collaborations, but is now searching for a way out of the retail wilderness.
“We have high but achievable aspirations for Target’s future, and we’re acting with urgency to make the changes in investments to position Target for sustainable and profitable growth over time,” Fiddelke told analysts. “While our third-quarter performance came in as expected, we’re far from satisfied with our current results, and we won’t be satisfied until we’re operating at our full potential.”
Target plans to increase its capital expenditures by 25 percent to $5 billion next year with an eye toward accelerating merchandising and store experience updates.
Investors remained cautious and traded shares of the company down 2.8 percent to $86.08, leaving the retailer to close the day with a market capitalization of $39.1 billion.
The incoming CEO is focusing on three priorities as he seeks to realize that potential.
Leading with design and expanding the company’s merchandising authority.
Elevating the shopping experience in stores and online.
Accelerating the use of technology to rev up speed, guest experience and efficiency throughout the business.
The plan promises to make adjustments consumers will see as they shop.
“In stores, we’re making changes to give our team members more time to focus on what matters most, spending time helping our guests,” Fiddelke said. “Through enhanced digital tools, we’re reducing time devoted to backroom tasks through more efficient truck unloading and stocking.
“Every hour we save is being reinvested to allow more guest interaction with a focus on friendliness and service that makes Target Target,” he said.
A Target store from the parking lot.
Although Cornell pioneered the store as e-commerce fulfillment hub, Fiddelke is tweaking the approach.
“For those stores with high foot traffic volume, we’re reducing their mix of brown-box fulfillment, allowing those teams to spend more time interacting with in-store guests,” he said. “For lower-volume stores in the same market with big back rooms that are perfectly suited to ship product, we’re pushing more digital fulfillment volume their way and of course, more labor hours to support this work, creating economies of scale and a more optimized workload for each node within a market.”
Already Target can reach about 80 percent of the U.S. population with same-day delivery.
Fiddelke did not directly address the apparel business, but Rick Gomez, executive vice president and chief commercial officer, said that although fashion comped down last quarter, denim and sleepwear showed “meaningful growth” that was “driven by style-forward newness.”
“This tells us that, while there is still plenty of work to do, where we have made our biggest bets in terms of on-trend design-led newness, consumers are reacting positively, giving us confidence in our approach and the path ahead,” Gomez said.
“We’re also accelerating newness in women’s apparel, leaning into luxe fabrics and trending athleisure at affordable prices,” he said. “Inspired by our sourcing trip to the Swiss Alps, our latest cashmere-like sweaters start at just $30.”
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