Why Walmart’s Incoming CEO Has a Head Start on Target’s New Leader

John Furner will take over as Walmart CEO next year. (Paul Morigi/Getty Images for Semafor)

With Walmart CEO Doug McMillon set to retire next year, two of America’s largest big-box retailers now find themselves in key leadership transitions. Earlier this year, Target said its CEO, Brian Cornell, would be retiring.

The executive shuffle comes at a critical juncture for the industry—rife with uncertainty over consumer demand and questions over how artificial intelligence will change shopping behavior. And when it comes down it, one executive will have an easier time navigating the company through these challenges than the other, analysts say.

John Furner, who currently helms Walmart’s U.S. business, is slated to succeed McMillon. Michael Fiddelke, Target’s chief operating officer, will replace Cornell. The two appointments are effective Feb. 1.

On the surface, there are a couple of similarities between the appointments other than the executives’ starting date. Both Furner and Fiddelke are longtime veterans of their respective companies—Furner has been at Walmart for three decades; Fiddelke has been at Target for two. Both have held multiple leadership positions over the course of their tenure, and have been instrumental at charting the current path their respective companies are on.

That is where the similarities end. In terms of both their stock and financial performance, the two companies have diverged sharply: Walmart has been trekking consistently upward, while Target is coming off a multiyear losing streak. This sets Furner up to start from a position of strength and Fiddelke from a significantly weaker one, said Michael Baker, an analyst at D.A. Davidson.

Over the past five years, Walmart has emerged as the de facto leader of the retail industry. Its investments in technology, supply chain efficiencies, value proposition, and alternative profit streams have driven consistent market-share gains and growth on both the top and bottom lines, giving Furner a strong foundation to build from.

Meanwhile, Target is coming off years of declining sales and foot traffic, shrinking profits, and a steady deterioration in the store experience.

“All John [Furner] is having to do—I say all, but it’s a big ask—all he’s having to do is, number one, keep things going as they’re going, and add icing onto the cake,” said Neil Saunders, managing director and retail analyst at GlobalData Retail. “Target is back to baking the cake. It’s putting the ingredients in the mixing bowl still and deciding how they come together.”

To be sure, inheriting a legacy as storied as McMillon’s brings its own challenges, analysts say. Wall Street has come to expect much from Walmart, and Furner is going to have to work hard to live up to those goals, Baker said.

But analysts are confident he’ll deliver on investors’ ambitions. As head of Walmart’s largest division, Furner has proven himself a skilled operator, able to balance continuity and innovation. Plus, recent investments in artificial intelligence, including a deal with OpenAI’s ChatGPT, suggest the company is already laying the groundwork for the next stage of growth.

“We believe that Mr. Furner’s experience in growing omnichannel capabilities within Walmart U.S. will be critical as he leads Walmart in an increasingly digital and AI-driven environment,” wrote Zhihan Ma, an analyst at Bernstein, in a research note Friday.

Fiddelke’s starting point is more precarious. Target is a jumbled “knot of problems” that need to be sorted out, Saunders said. That is a daunting task for any leader, but it’s especially difficult for one who has been part of the decisions that landed the company in trouble in the first place, he added. Many investors were hoping that Target would bring in an external hire to replace Cornell.

Although he won’t officially be CEO until next year, Fiddelke is already trying to convince Wall Street that he can bring fresh perspectives to the retailer. Target laid off nearly 2,000 corporate employees in late October in a bid to make the company more efficient, and earlier this week it unveiled a new AI-powered gift finder to help customers with holiday shopping. But there’s still more work to be done.

“Both situations have their challenges for the new CEO, but it does feel like turning around Target right now is a little bit more of a heavier lift,” Baker said.

Walmart and Target are scheduled to report quarterly earnings next week. Investors will on the lookout for any commentary from Furner and Fiddelke that could give them more clues on their visions for the two retailers.

Write to Sabrina Escobar at sabrina.escobar@barrons.com