NEW YORK (AP) Target is counting on a company veteran to revive its magic as it struggles to compete with rivals like Walmart.

Minneapolis-based retailer Target announced on Wednesday that Michael Fiddelke, who joined the company as an intern 20 years ago, will take over as CEO on February 1.

Fiddelke will replace Brian Cornell, who took on the CEO role in 2014 and revitalized the company, though he faced challenges in boosting sales amid a tougher retail environment post-COVID.

During his tenure, Fiddelke revamped Target’s supply chain, expanded both physical stores and digital services, and reduced costs. In May, he was appointed to head a new division aimed at streamlining decision-making to enhance sales growth.

Fiddelke is taking over at time when Target’s sales are in a funk, its stores are messy and understocked, and it’s losing market share to rivals.

Taking the CEO position, Fiddelke identified three immediate priorities: restoring Target’s dominance in merchandising, ensuring well-stocked shelves and clean stores to improve customer experience, and investing in technology for stores and supply chain efficiency.

“At times when we’ve led with confidence in our merchandising and marketing, setting retail trends, those have been Target’s peak moments in my 20-year tenure,” he commented.

The change in leadership was announced Wednesday at the same time that Target reported another quarter of sluggish results.

The news took some analysts by surprise, as many anticipated that Target would seek external leadership to revamp its strategies. Neil Saunders, managing director at GlobalData Retail, expressed mixed reactions to the decision.

“While we think Fiddelke is talented and has a somewhat different take on things compared to current CEO Brian Cornell, this is an internal appointment that does not necessarily remedy the problems of entrenched groupthink and the inward-looking mindset that have plagued Target for years,” he said.

Target reported a 21% drop in net income in the quarter ended Aug. 2. Sales were down slightly and the company reported a 1.9% dip in comparable sales those from established physical stores and online channels. Target has seen flat or declining comparable sales in eight out of the past 10 quarters including the latest period.

Target, which has about 1,980 U.S. stores, has been the focus of consumer boycotts since late January, when it joined rival Walmart and a number of other prominent American brands in scaling back corporate diversity, equity and inclusion initiatives.

Target’s sales also have languished as customers defect to Walmart and off-price department store chains like TJ Maxx in search of lower prices. But many analysts think Target is stumbling because consumers no longer consider it the place to go for affordable but stylish products, a niche that long ago earned the retailer the jokingly posh nickname “Tarzhay.”

In fact, out of 35 merchandise categories that Target tracks, it gained or maintained market share in only 14 during the first half of the company’s fiscal year, Fiddelke said.

Meanwhile, Walmart gained market share among households with incomes over $100,000 as U.S. inflation caused consumer prices to rise rapidly. Lower-income shoppers have driven customer growth at Target, suggesting it may have lost appeal with wealthier customers, according to market research firm Consumer Edge.

“It’s probably not the best sign, especially because higher-income consumers continue to hold up a little bit better” during times of economic uncertainty, said Consumer Edge Head of Insights Michael Gunther.

In March, members of Target’s executive team told investors they planned to regain the chain’s reputation for selling stylish goods at budget prices by expanding Target’s lineup of store label brands and shortening the time it took to get new items from the idea stage to store shelves. The moves would help the company stay close to trends, executives said.

“In a world where we operate today, our guests are looking for Tarzhay,” Cornell told investors. “Consumers coined that term decades ago to define how we elevate the everything everyday to something special, how we had unexpected fun in the shopping that would be otherwise routine.”

Before joining Target in 2014, Cornell, 66, spent more than 30 years in leadership positions at retail and consumer-product companies, including as chief marketing officer at Safeway Inc. and CEO at Michaels, Walmart’s Sam’s Club and PepsiCo America Foods. In September 2022, the board extended his contract for three more years and eliminated a policy requiring its chief executives to retire at age 65. When Fiddelke takes over, Cornell will transition to be executive chair of the board.

When he got to Target, the company was facing a different set of challenges.

Cornell replaced former CEO Gregg Steinhafel, who stepped down nearly five months after Target disclosed a huge data breach in which hackers stole millions of customers’ credit- and debit-card records. The theft badly damaged the chain’s reputation and profits.

Cornell reenergized sales by having his team rev up Target’s store brands. It now has 40 private label brands in its portfolio. And even before the pandemic, Cornell spearheaded the company’s mission to transform its stores into delivery hubs to cut down on costs and speed up deliveries.

Target’s 2017 acquisition of Shipt helped bolster the discounter’s same-day, store-based fulfillment services. Cornell also focused on making its stores better tailored to the local community

The coronavirus pandemic delivered outsized sales for Target as well as its peers as people stayed home and bought pajamas, furnishings and kitchen items. And it continued to see a surge in sales as shoppers emerged from their homes and went to stores. But the spending sprees eventually subsided.

As inflation started to spike, Target reported a 52% drop in profits during its 2022 first quarter compared with a year earlier. Purchases of big TVs and appliances that Americans loaded up on during the pandemic faded, leaving the retailer with excess inventory that had to be sold off.

In July 2023, as shoppers feeling pinched by inflation curtailed their spending, Target said its comparable sales declined for the first time in six years.

Moreover, Target started losing its edge as an authority on style by focusing too much on home furnishings basics, and not enough trendy items, Fiddelke said.

A customer backlash over the annual line of LGBTQ+ Pride merchandise Target stores carried that year further cut into sales.

Although Walmart retreated from its diversity initiatives first, Target has been the focus of more concerted consumer boycotts. Organizers have said they viewed Target’s action as a greater betrayal because the company previously had held itself out as a champion of inclusion.