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Target (TGT -9%) is sharply lower after reporting Q2 (Jul) results. But we think the bigger news is that Target has named its new CEO. Michael Fiddelke, who currently serves as COO will replace Brian Cornell, effective February 1. Cornell will become executive chair of the Board. We think investors are disappointed that Target chose a long time insider (20+ years at Target), when maybe an outsider to shake things up might have been a wiser choice.

• Let's start with the earnings. The retail giant bounced back from a miss in Q1 to report a modest EPS and revenue beat in Q2. Revenue fell 0.9% yr/yr to $25.21 bln, which was a bit better than expected. Also, after a big FY26 EPS guidance cut last quarter, it was good to see Target reaffirm FY26 adjusted EPS and revenue guidance at $7.00-9.00 and a low-single digit decline, respectively.
• Same store comps for Q2 came in at -1.9% (in-store -3.2%; digital +4.3%), which was a bit better than street ests. It was also notably better than Q1's -3.8% (in-store -5.7%; digital +4.7%) and sales were notably stronger in June and July than May. Traffic and comp trends improved meaningfully from Q1, particularly in its stores. In addition, TGT saw improvements in quality measures related to store experience, including on-shelf availability and newness/innovation.
• A notable area of strength was in trading cards, where Target has been beefing up its offering, given the wide appeal to young fans and adult collector. Trading card sales are up nearly 70% YTD, driving hundreds of millions of dollars of incremental sales. Target also saw an incredible response to the launch of Nintendo Switch 2 and it's excited about 2H. Food and beverage categories grew slightly driven by newness and floral offerings, however, beauty sales were down slightly.
• In terms of Q3, Target is already well into back-to-school, which is Target's second largest seasonal moment of the year. Both back-to-school and back to college are off to encouraging starts. Guests are responding to value offerings, including essential school supplies, from $5 backpacks to $0.50 boxes of Crayola Crayons. TGT is also excited about its plans for Halloween and the Q4 holiday with lots of on-trend newness and value.

As we said in our preview, Briefing.com was cautious heading into this report. In terms of operations, we would characterize its Q2 report as better-than-feared. Target saw a notable sequential improvement in Q2 relative to Q1 in terms of comps and traffic. We also liked that June/July was stronger than May, which bodes well for Q3 and the important back-to-school season. We were also pleased to see Target reaffirm FY26 guidance, we were afraid another cut was possible.

We think the main reason for today's weakness is the decision to go with a long time insider as its new CEO. Target has been underperforming for years, with lackluster merchandise and out-of-stocks. Perhaps an outsider might have shaken things up more. On a final note, it was disappointing that TGT did not repurchase any shares in Q2. However, it mentioned on the call that it will support its dividend. With today's share price drop, the yield has climbed to 4.7%, which is pretty lofty. We think a cut there would not be the worst idea in the world and maybe spend more on share buybacks given the pullback in price.