retail news in context, analysis with attitude

Coming off a fourth quarter in which its profits were down to $817 million from $1.43 billion a year earlier, sales were down 4.3 percent and same-store sales were down 1.5 percent, Target CEO Brian Cornell "vowed to invest billions of dollars to lower prices and remodel hundreds of stores, an admission that the retailer’s focus on trendy merchandise wasn’t enough to attract shoppers," according to a story in the Wall Street Journal.

Cornell called 2017 “a year of investment,” and said that "Target would spend $7 billion over the next three years to improve its stores, launch exclusive brands and develop its supply- chain and digital capabilities. The company also said it was prepared to sacrifice about $1 billion worth of potential profit, by cutting prices and driving lower-margin digital sales."

The Journal writes that "Cornell said he expects Target to return to earnings growth in 2019." He said that "Target plans to revamp as many as 600 locations over the next three years and open 100 smaller locations in college towns and urban areas," and that there are no plans for mass closings.

According to the story, "The changes come more than a year after rival Wal-Mart began pouring money into revamping its stores, lowering prices and expanding its e-commerce operations—changes that reversed a sales slump. Target also has been squeezed by the expansion of Amazon.com Inc., which shares many customers and products with Target.

"For decades, Target’s formula of offering stylish but affordable merchandise helped set the retailer apart from competitors. Under Mr. Cornell, Target has centered much of its growth strategy on its roughly 1,800 stores and regaining its cachet for selling fashionable products. He pushed the addition of specialty foods and trendy labels developed in-house, such as children’s apparel brand Cat & Jack.

"Although Mr. Cornell said Target would continue to push style and new brands, on Tuesday he took a page out of Wal-Mart’s script by saying Target needed to return to 'everyday low pricing'."

In addition, Target said that it needs to get faster and more nimble in the e-commerce side of the business; Q4 comp e-commerce sales were up 34 percent, "but still make up only a fraction of overall revenue."
KC's View:
Maybe it is just perception, but it seems to me that Target execs have been spending a lot of time lately recalculating the company's marketing and merchandising approaches. They try new things, they make statements of strategy and tactics, but then they have to tack this way or that way because things don't turn out the way they expected.

I have no idea how to fix Target. But I'm beginning to wonder if there is some sort of foundational problem that needs to be addressed before price cuts and remodels can have any sort of impact.