3 Factors Why Target Can Counter Competitive Retail Scenario

Retail is no more restricted to brick-&-mortar presence. The scenario has drastically changed with the advancement of technology and digital transformation that are playing key roles in changing consumer shopping pattern. Nevertheless, this transition has persuaded retailers to come up with innovative ways to market products, and Target Corp. (NYSE:TGT) is no exception to the trend.

Consumers now prefer to shop online from the comfort of their homes rather than hopping from one store to another. Retail bellwethers such as Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) are aggressively making headway by tapping customers’ evolving shopping patterns. No wonder Target is trying all means to rapidly adapt to the changes in the retail ecosystem.

Target Sharpening the Edge

Focus on Private-Label Brands

Target has undertaken several strategic initiatives to boost performance. The company intends to deploy resources to significantly develop its online platform as well as store facilities to make shopping more convenient for customers. The company plans to expand merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories that are performing well.

Management is focusing on key departments, such as Apparel, Beauty, Electronics and Food and Beverage. In the recent past, the company has unveiled some private label brands such as Cloud Island, Cat & Jack, A New Day, Goodfellow & Co., Project 62, JoyLab and others. Target had earlier informed that it plans to infuse $7 billion of capital over a period of three years to merge digital and physical shopping, open small format stores and fulfillment centers, revamp stores and bring in new merchandise.

Restock Program & Other Customer Friendly Endeavors

This general merchandise retailer rolled out Target Restock program that allows customers to restock their shipping box with essential items online and get them delivered at door steps by the next business day for a nominal charge. The company also launched curbside pickup program at 50 Twin Cities stores. This program gives customers an option to get ordered items without leaving the comfort of their cars.

Further, in order to improve supply chain and expand delivery capabilities, the company had acquired Grand Junction. To capitalize on digital sales this holiday season, Target strengthened relationship with Google (NASDAQ:GOOGL) by allowing customers nationwide to shop through Google Express, including voice-activated shopping. Wal-Mart and Home Depot (NYSE:HD) are also using Google's voice-activated shopping platform. Target has also made a concerted effort on the front of same-day delivery services by acquiring internet-based grocery delivery service Shipt for $550 million.

Flexible Format Stores

Target continues to lay emphasis on developing flexible format stores to penetrate deep into urban areas. This type of stores generally has higher sales productivity. Management had earlier informed that Target is opening 32 small format stores in fiscal 2017 with plans to open 35 new outlets in fiscal 2018. The company plans to operate over 130 small-format outlets nationwide by the end of fiscal 2019. It remodeled 110 stores in fiscal 2017, including 37 in the third quarter. The company plans to remodel 325 in fiscal 2018, 350 in fiscal 2019 and 325 in fiscal 2020.

Wrapping Up

A reflection of the company’s endeavors was quite visible in the strong holiday season sales. Comparable sales rose 3.4% in the combined November/December period buoyed by healthy store comps, robust traffic and sturdy digital sales. The solid holiday numbers allowed management to lift the view.

This Minneapolis, MN-based company now projects fourth-quarter fiscal 2017 adjusted earnings in the band of $1.30-$1.40 compared with the prior range of $1.05-$1.25. For the fiscal year, management now forecasts adjusted earnings between $4.64 and $4.74 per share, up from the previous guidance of $4.40-$4.60.

Further, Target now envisions comparable sales to increase approximately 3.4% during the fourth quarter with full year expected to be just over 1%. Taking into account the 53rd week, Target anticipates total sales to increase more than 9% in the final quarter.

Certainly, Target is leaving no stone unturned to attract consumers and attain incremental revenues. We believe that these strategies are likely to bolster the company’s performance and help overcome impediments, thus positioning it well for 2018.

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