Target Earnings: Fiddelke to Take the Helm as Competitive and Macro Angst Persist

Key Morningstar Metrics for Target

• Fair Value Estimate: $123.00
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Medium

What We Thought of Target’s Earnings

Alongside second-quarter results (a 1.9% drop in comparable sales and a 100-basis-point erosion in gross margin to 29%), Target TGT announced that COO Michael Fiddelke (a 20-year veteran of the company) will take the reins from CEO Brian Cornell in February 2026. Cornell will stay on as executive chair.

Why it matters: Competitive pressures and waning consumer confidence endure, but we see green shoots from Target’s strategic initiatives. Management cited sequential improvement in several discretionary aisles, including apparel, beauty, hardlines, and home furnishings.

• Despite a 1.3% decline in traffic and a 0.6% drop in average ticket year over year, these marks were more modest relative to the 2.4% and 1.4% respective falls recorded in the first quarter.
• Given the competitive onslaught, we think Target will need to reinvest in its supply chain (capital expenditures of 3.5% of sales) to drive efficiencies in procurement and multichannel order fulfillment to deliver competitive prices and fuel enhancements to its assortment and stores.

The bottom line: We maintain our $123 fair value estimate for no-moat Target after incorporating recent results. Shares contracted by a high-single-digit percentage after earnings, leaving them undervalued.

• While we expect challenges to remain (we forecast a nearly 3% decline in sales this year), we believe Target boasts an iconic brand and continued investments should facilitate low-single-digit sales growth against mid-single-digit operating margins over the longer term.

Coming up: We suspect the unfavorable stock market reaction is a byproduct of the executive leadership appointment and questions around whether Fiddelke, a long-tenured employee, will be able to drive the necessary change to reignite top-line performance.

• On the contrary, our initial read suggests Fiddelke is operating with urgency to return Target to a positive sales trajectory by making investments, particularly as related to products and the store experience.