Retail giant Target to expand fashion departments, technology in 2017

Over the next three years Target Corp. will spend $7 billion to renovate more than 600 stores, according to WWD.

“[The stores] will look and function differently. They’ll be reconfigured with more space for fashion storytelling and table settings in home. They’ll be digitally connected,” the retail giant’s chairman and chief executive officer Brian Cornell tells WWD.

“Order pickup and bridal registry in 2018 will touch 250 stores — 600 by 2019, and that’s just the beginning.”

Target shoppers on Black Friday, 2016 [source: Target Corporate]

The renovations come on the heels of a “weak quarter,” according to KSTP.

During the past quarter, which includes the holiday season, Target’s profit fell 43 percent “with strong online sales failing to offset weakening business at its stores,” according to KSTP.

“Target’s stock tumbled more than 12 percent and rattled Wall Street, as shares in Walmart, Macy’s and other retailers fell as well.”

Cornell also tells WWD 2016 “was not our best year,” and explains that, not only will the corporation spend $7 billion on a capital investment program to combat fallen profits, it will also “sacrifice $1 billion in annual operating profit this year to grow sales faster and capture market share against better-performing rivals such as Walmart Stores Inc., as well as off-pricers such as TJ Maxx.”

Children wearing Cat & Jack, a successful new brand by Target [source: Target Corporate]

The investments in part will go towards the launch of 12 brands within the next two years, according to WWD, that will represent more than $10 billion of Target’s sales. This is thanks to the success of Cat & Jack, a new children’s brand, that is expected to produce $1 billion in sales in 2017.

“The majority will be in Target’s home and fashion categories, which represent $26 billion in combined sales,” according to WWD.

When deciding which brands to launch, Cornell explains to WWD that the corporation really listened to consumer wants and needs.

“In some cases, it will be a new branch or a relaunch of an existing brand,” Cornell tells WWD.

“The consumer told us that some of our brands have gotten a little tired and a little bit old. We’ll go from a series of labels to a collection of brands. We now have a portfolio with a lot of labels but very few brands.”

On Monday, March 6, Target’s stock closed at $56.11, falling over 16 percent from the week before. Despite this downward trend, Cornell asks shareholders to “make an investment to build a strong company for the future,” according to WWD.

“Our goal today is to demonstrate that the investments we’re making are the right decisions for the long term.”

Inside Target’s small format store at Packard’s Corner near Boston University [source: Arrowstreet]

Though Target’s net earnings for the fourth quarter, which ended January 28, “plummeted 42.7 percent to $817 million from $1.4 billion a year earlier” and “sales for the three months declined 4.3 percent to $20.69 billion,” leaving the company with “an earnings drop of 18.6 percent for the full year, to $2.74 billion, on a sales decline of 5.4 percent, to $20.6 billion,” according to WWD, it found great success in their 32 small format stores.

Cornell tells WWD that “units sales per square foot are higher than average,” and because of this, “Target is ramping up the rollout with 30 new units this year with a goal of 100 set for 2020.”

Outside a small format Target store [source: Arrowstreet]

While all 1,800 of Target’s stores “are within 10 miles of 85 percent of customers,” according to WWD, Cornell insists that the small format stores “expand the corporation’s footprint in in key urban areas and college campuses” in part because they are “customized for each community,” as opposed to the typical, full-line stores.

“In the last six months we’ve opened stores in Manhattan, Queens and Brooklyn. You can expect to see more and more,” Cornell tells WWD.

“It’s time to accelerate this new format.”

When it comes to full-line stores, however, it is quality over quantity. Instead of opening in new locations, the corporation hopes to renovate “old and tired” stores that have not been updated in 10 years, according to WWD.

“Our supply chain has been a major focus,” Cornell tells WWD.

“We’re slow and we have too much inventory. We’re changing how we move product…We’ll operate with less inventory, less working capital and better shelf availability.”

Cathy Smith, Target Corp.’s executive vice president and chief financial officer, tells WWD the corporation “expects a low- to mid-single-digit decline in comparable sales and earnings per share of 80 cents to $1.” Smith also predicts earnings per share (EPS) of $3.80 to $4.20 in 2017.

“We’re positioned to deliver superior Return On Invested Capital over time,” Smith tells WWD. “Let me be clear, this will be a multiyear, multiphase program.”

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