Target Looks to Add $50 Billion in Sales Over the Next Decade
Updated 4:47 p.m. ET March 5
Target Corp. might be working through something of a rough patch in revenues — fourth-quarter comparable sales fell 4.4 percent — but the discounter is looking to make up for that with profits and long-term vision.
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Shares of Target shot up 12 percent to $168.58 on Tuesday after the company posted a 57.8 percent gain in earnings and chief executive officer and chairman Brian Cornell laid out his vision for the next 10 years at an investor meeting in Manhattan.
Target is looking to grow in both old ways (adding 300 mostly large format stores) and in new ways (through a revamped Target Circle loyalty program that offers three tiers of engagement and an option for same-day shipping).
“Over the next decade, we expect our total revenue will grow by an average rate of roughly 4 percent per year,” Cornell said. “If we attain that goal, our business will add more than $50 billion of revenue on top of the $107 billion we delivered in 2023. That growth will enable our business to further benefit from scale efficiencies as we continue to extend our reach in the U.S. market.”
In short, Target is aiming to add the equivalent of two Macy’s Inc.’s to its top line — having already added $35 billion in sales in the past decade.
Still, that doesn’t take all of the pain out of the fourth quarter.
“Having tackled both industry and in-house challenges the last couple of years, I can tell you I’m not satisfied and our team is not satisfied with our recent top-line results,” Cornell said. “We wanted to be even further along than we are today, but we’re confident in our path forward and we’re eager to share what’s next. Target is not just a bigger company than it was 10 years ago. It’s stronger, healthier and more resilient. A company that’s flipping a switch from ‘go time’ to ‘grow time.’”
That’s the longer-term vision. In the meantime, the company is still winding its way back to normal after a prolonged post-pandemic period of disruption.
Revenues for the three months ended Feb. 3 inched up just 1.7 percent to $31.9 billion from $31.4 billion, even with the most-recent quarter including an extra week compared with a year earlier. The comparable sales decline included a 5.4 percent drop at stores and a 0.7 percent decrease in digital sales.
Traffic was down 1.7 percent year-over-year in the fourth quarter, a much better showing than the 4.1 percent decline in the third quarter.
But the company was able to overcome the top-line weakness by managing costs on inventory, freight and supply chain and turn in a much better bottom line.
Net profits for the fourth quarter increased to $1.4 billion from $876 million a year earlier. That put earnings per share at $2.98 — 56 cents better than the $2.42 analysts projected, according to FactSet.
To help build momentum, Target plans to reintroduce its loyalty membership program next month with a three-tiered offering that includes:
The free to join Target Circle with personalized deal and savings.
The Target Circle Card level, which gives shoppers an extra 5 percent off for using the credit card.
And Target Circle 360, which will cost $49 at first and includes same-day delivery.
As Target chases growth, it’s basically doubling down on what’s working best, planting more of its biggest stores into new markets, building on its quick-turn, same-day delivery momentum and continuing to push on its $30 billion private brand business.
“Target pioneered cheap chic,” Jill Sando, chief merchandising officer overseeing apparel, accessories, home and hardlines told analysts.
“What we’re doing is so hard to replicate because we didn’t decide to make a play in owned brands five or even 10 years ago,” Sando said. “We’ve been doing this for decades. We’ve had an in-house sourcing capability for 25 years now.
“Because we own our end to end sourcing business, we control our own destiny,” she said. “When you think about issues like country production and raw material, we’re more cost effective with far fewer intermediaries in our network, which allows us to grow our bottom line even as we pass savings on to our guest….We’ve been evolving our capabilities and are now operating more like a CPG company. The research, the market analysis, looking hard at the white space that’s shaped our decision making around existing brands, like prioritizing Threshold as our flagship home brand.”
This month, the company added to its private brand mix with Dealworthy, which targets nearly 400 everyday basics, including apparel and beauty goods, with most items priced below $10.
And Target is also looking to keep things new in fashion. This month the store unveiled a limited-time collection with Diane von Furstenberg featuring more than 200 items across women’s, girls, baby, beauty and home decor.
Tarjay is sticking to its knitting as it grows.
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