A person wearing a protective mask walks through a Target Corp store. at the Grossmont Center Mall in La Mesa, California, USA, on Thursday, February 11, 2021.
Bing Guan | Bloomberg | Getty Images
Target said on Tuesday that it expects to capitalize on its recent growth by investing around $ 4 billion a year for the next few years to accelerate new stores, renovate existing ones and increase its ability to fulfill orders online quickly.
Investors and analysts were left without important information, however: the outlook for the year. The company declined to provide guidance, saying Covid-19 made it difficult to forecast consumer spending.
The shares fell nearly 5% on Tuesday, despite Target exceeding fourth-quarter profit expectations.
On a virtual investor day on Tuesday, Target CEO Brian Cornell argued that the retailer’s recent results are not a speck related to the pandemic, but the reward for its long-term business strategy. He highlighted the investments and decisions he made in the last five years, such as his growing collection of private labels, his partnerships with national popular brands and the use of his stores as centers to fulfill online orders.
“Far from being a fluke, this performance is further proof that we have built a business model that is working as expected, which puts Target in its own category,” said Cornell.
He told investors that continued uncertainty will not distract the company in the coming months.
“I recognize the frustration, not being more accurate, especially in the top line when we think about sales, but I can assure you of our entire leadership team and each part of this organization is focused on retaining and increasing market share, no matter what. variables that we have to face, “said Cornell.
New stores, distribution centers
Target’s next steps will include opening 30 to 40 new stores each year. Some of these stores will be located near university campuses and in major cities such as New York, Los Angeles and Portland.
He will add two distribution centers and experiment with faster and more technological ways to replenish the shelves. And it will test new centers that separate packages, freeing up time for employees to select and package orders online and help the company design more economical delivery routes.
With the changes, CFO Michael Fiddelke said the retailer would “play offense and seize the opportunity to take advantage of last year’s momentum.”
Target stood out from retail rivals during the pandemic. As buyers consolidated their travels, they spent more money in fewer places where they found a wide variety of items. As shoppers prioritized security, they turned to non-contact approaches, such as taking online shopping from the parking lot. As consumers spent more time at home, they directed their dollars more towards items that helped them work, learn and relax. These factors benefited the large retailer.
The company’s sales in 2020 grew by more than $ 15 billion – greater than the total sales growth in the previous 11 years. It gained about $ 9 billion in market share in its categories during the fiscal year.