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As Target CEO Brian Cornell nears retirement after an almost 11-year tenure, a survey from Mizuho Securities finds medium and large investors overwhelmingly prefer an external candidate as the chain’s next CEO.
“A way to promote wholesale change is to go with an external guy,” David Bellinger, a senior research analyst with Mizuho, told the Wall Street Journal, which reported on the survey.
The findings come as Target’s stock price has retreated close to levels when Cornell, 66, was first appointed CEO in 2014. The retailer has reported 10 straight quarters of flat or declining sales.
Target’s reputation has also taken a hit as the chain has become engulfed by culture war issues surrounding its corporate diversity, equity, and inclusion policies and shifting support for LGBTQ+ communities.
Target's New CEO, Whether an External or Internal Hire, Will Face Morale Challenges
The new CEO will also have to deal with internal morale issues. A Target survey of 260,000 staffers attained by the WSJ found 40% of those who replied said they didn’t have confidence in the company’s future. The scores declined from a year ago, and were lower for those working at Target’s Minneapolis headquarters.
The board has been running a CEO succession process and Michael Fiddelke, the current chief operating officer who has been with the company for more than two decades, is seen as the leading internal candidate. Earlier this year, he was put in charge of a “Enterprise Acceleration Office” that aims to drive speed and agility across operations.
Retail Analysts Weigh In on Target's Future
Scott Benedict of Benedict Enterprises — a retail consultant, former buyer for Walmart and other retailers, and RetailWire BrainTrust panelist — believes Target would benefit from hiring someone who understands Target’s missteps.
He told Modern Retail, “If you can have an effort that’s led by someone who already knows the company, and then they create and round out a leadership team with new ideas and new voices and new perspectives from outside, that’s the perfect combination of things.”
Zhihan Ma, an analyst at Bernstein who recently reiterated his “underperform” rating on Target, believes new management with "an outside perspective could be a positive catalyst," citing the success Best Buy saw after hiring Hubert Joly in 2012.
However, he said Target faces an "existential threat" from Walmart and Amazon, believing further investments in e-commerce supply chain capabilities "may not pay off if TGT doesn’t reach greater scale."
Jerry Storch, vice chairman at Target in the ’90s and 2000s who now leads Storch Advisors, told Twin Cities Business that one of Target’s core problems is its limited-scale grocery sections fail to support a family’s weekly stock-up.
“The value proposition is out of whack,” added Storch. “If [the problem] started in grocery, it spread to everything, in the sense that Walmart is just less expensive, period. And the differentiation that Target applied has been copied by many other retailers, so Target is not as different as it used to be.”
In a LinkedIn column, Brittain Ladd — a supply chain consultant and former Amazon executive — said Fiddelke would be his choice if an internal candidate is chosen. However, Ladd listed Greg Hicks, Canadian Tire’s CEO; Richard Dickson, CEO of Gap Inc.; and Chris Nicholas, president and CEO of Sam's Club, as his top three external candidates.
“A challenge facing Target is that it truly must undergo a transformation,” wrote Ladd. “This means replacing the majority of executives and hiring exceptionally talented executives to take their place. This requires a CEO who is skilled at stepping into a CEO role and making significant changes immediately and generating results.”