Good morning. Target still hasn’t identified its next CFO. But both the CEO and current finance chief are looking forward to getting a person in that seat.
Michael Fiddelke, who has served as CFO at Target since Nov. 1, 2019, was named chief operating officer, effective Feb. 4. Until his replacement is named, Fiddelke is continuing to serve as CFO. During Target’s Q2 earnings call on Wednesday, CEO Brian Cornell noted that the company announced in January that Fiddelke would move into the “pivotal” role of COO.
“Michael took on the CFO role just before the pandemic, and he's done an outstanding job leading the company through a period of unprecedented growth and volatility,” he said. The search for Fiddelke’s replacement as CFO is ongoing, Cornell said. “I share Michael's excitement for the time when he is able to fully focus on his new role leading all of our operational functions.”
Fiddelke acknowledged on the call that he’s “temporarily wearing two hats.”
He added, “While I'm looking forward to the day when I'm only wearing the COO hat, I'm privileged to be surrounded by exceptionally talented leaders and teams that are operating with a guest-first long-term focus that's fueling our results.”
Second quarter comparable sales, from stores and digital channels, grew 2% year over year. This increase was at the high end of Target’s expectations. That’s also an improvement from Q1 when sales declined 3.7%. Total net earnings for the quarter were $1.1 billion, up from $835 million the same time last year. And total revenues increased 3% year over year to $25.45 billion from $24.77 billion. Second-quarter growth was driven entirely by traffic in stores and digital channels, with double-digit growth in same-day delivery services, according to Cornell.
For the full year, the company has now raised its guidance range for EPS to $9 to $9.70 from $8.60 to $9.60. Its stock price soared on Wednesday, and was up about 11% at market close.
'A deep understanding of the industry's challenges'
The new CFO will play a major role in keeping up this momentum. Target is “highly regarded” and should not have any issues attracting top talent, Shawn Cole, president and founding partner of Cowen Partners, a C-suite-focused executive search firm, told me. The average CFO search lasts approximately six to nine months, Cole said. But he doesn’t think it will take Target nine months to secure a new finance chief.
The company’s ideal CFO would bring extensive experience in retail finance, with a deep understanding of the industry's challenges, such as low margins, high inventory turnover, and supply chain complexities, Cole said. A candidate with experience in senior financial roles at large, omni-channel retailers with e-commerce exposure, would also be desirable to the board, as well as possessing a proven track record in optimizing costs, improving supply chain efficiency, and managing substantial budgets, he said.
“Experience in leading financial strategy through transformation, including digital innovation and market expansion, is essential,” Cole said. And the ability to align financial strategy with operational goals is key as well, he said.
In May, Target announced it would lower prices on 5,000 frequently purchased items. Target “routinely adjusts its prices to ensure it is competitive within the markets it does business,” the company stated in May. In an interview with CNBC on Wednesday, Cornell was asked if Target or its competitors benefit from price gouging in reference to Vice President and Democratic nominee for President Kamala Harris’ proposed first-ever federal ban on “corporate price-gouging in the food and grocery industries.” “We’re in a penny business,” Cornell told CNBC, indicating the small profit margins in the retail industry, compared with other industries like tech.
Fiddelke has been with Target for 20 years, first starting as an intern, and he's held roles spanning across the business. As the COO, he said on the earnings call that the operations team is focused on reinforcing retail fundamentals “following an extended period of unprecedented volatility that began more than four years ago.”
Sheryl Estrada
sheryl.estrada@fortune.com
The following sections of CFO Daily were curated by Greg McKenna.
