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Target (NYSE: TGT) stock opened about 9% lower on Wednesday even though the company released second quarter earnings that topped the Wall Street estimates.

It likely wasn’t its performance or guidance that caused the selloff; rather it was probably due to a big change at the top of the organization.

However, the results in the second quarter weren’t great, even though they beat low expectations from analysts.

Net sales were $25.2 billion, which was down 0.9% from the same quarter a year ago. The Street had estimated $24.5 billion in sales. Comparable store sales dropped 3.2% in the quarter, but the company saw improvement in comparable digital store sales, which rose 4.3%. Overall, combining both, comparable sales were down 1.9% in Q2.

Net earnings fell 21% to $935 million, while earnings dropped 20% to $2.05 per share. But that bested earnings estimates of $2.01 per share. Earnings were buoyed by lower SG&A expenses, which fell 0.1% year over year.

The gross margin fell to 29%, from 30% in Q2 of 2024. This was mainly due to higher markdown rates, purchase order cancellation costs, and pressure from category mix — offset somewhat by lower inventory and growth in advertising and non-merchandise sales.

The decent performance was overshadowed by the news that Target has named a new CEO.

Target hires new CEO

The sinking stock price was mainly in reaction to the news that Target hired a new CEO, Michael Fiddelke. Fiddelke will replace Brian Cornell, who announced earlier this year that he is stepping down, effective February 1, 2026. Cornell will become executive chairman of the board after Fiddelke takes over.

Fiddelke is the current chief operating officer at Target, and he has been with the company for 20 years.

Often, investors like to see a smooth transition and executive hires from within, but not when the company is struggling like Target. Target stock is down 29% YTD and its sales have declined, year-over-year, due to a variety of factors – from tariffs, a slow economy, and brand issues and boycotts related to its changing stance on DEI. The result has been a loss of market share.

Investors were probably hoping to see someone from the outside come in and shake things up and were disappointed with the promotion from within.

But Target’s board is confident that Fiddelke is the right person for the job, touting his strength in delivering efficiencies and technology.

“It is clear that Michael is the right leader to return Target to growth, refocus and accelerate the company’s strategy, and reestablish Target’s position as a leader in the highly dynamic and fast-moving retail environment,” Christine Leahy, lead independent director of Target’s Board of Directors, said. “Michael’s tenure gives him unmatched enterprise insight and a base of strong team trust. But what sets him apart is how he combines those strengths with a ‘fresh eyes’ mindset, challenging the status quo to evolve how the business operates, differentiates and delivers long-term value.”

Fiddelke said he is “eager to refocus our strategy” and build on the assets and capabilities that made the company into an iconic brand.

“And to be clear, we have work to do to reach our full potential,” Fiddelke said. “Now’s the time to take full advantage of our strengths, embrace change with pace and purpose, and regain our momentum.”

Is it time to buy?

Target also reiterated its guidance for the full year, which had been reduced last quarter. It anticipates a low-single digit decline in sales and GAAP earnings of $8.00 to $10.00 per share. Adjusted EPS is expected to be approximately $7.00 to $9.00 per share.

Investors were not pleased with the move nor were most analysts, as Target stock got a few downgrades leading up to earnings. Even after earnings, Roth said Target is “poorly positioned” given the uncertain macro picture, and set a $90 price target, which would be down from the current $96 share price.

The median price target is only slightly better at $100 per share, suggesting 3% growth.

The CEO selloff seems way overblown, as it is more speculative than anything to do with the actual hire. How Fiddelke runs the company remains to be seen. But Target has been a giant for more than 50 years, so hiring someone from within may not be as bad as the kneejerk reaction suggests.

His big challenge will be to revive the brand and to position Target better to compete in a sluggish economy. At this low valuation, especially after this selloff, I don’t think the stock looks too bad, long-term, although the next few quarters could be bumpy.

But what really makes Target attractive is its dividend – one of the best out there. It has a ridiculously high yield of 4.33% and it has raised its dividend for 56 straight years, making it a Dividend King. That should help it navigate the transition.

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