Less than a week after unveiling its innovative curbside returns and Starbucks partnership, Target has given investors another dose of news that is sending the stock higher.
Read more: Target to Test Combining Curbside Returns, Starbucks Orders
Not only did the Minnesota-based owner of 1,900 retail locations cap off a “year of record growth” on the back of a pandemic and stimulus-check-aided prior period, but it did so in a manner that is distinctly different than anything the big box chain has done in the past 100 years.
“We have a multi-category portfolio and a differentiated approach to curating owned and national brands,” Target Chairman and CEO Brian Cornell told analysts and investors Tuesday (March 1) on the company’s fourth-quarter earnings webcast, which was being hosted in-person in New York City for the first time since 2019. “We have scale and same-day services and a pathway for more digital growth thanks to the synchronized operation of stores, fulfillment centers, flow centers, sortation centers and Shipt.”
Target not only fulfills 96% of its sales through its stores, with 19% of revenue originating from its digital platform, but it is proving to be a profit driver as well, as Cornell noted the company had delivered 19 consecutive quarters of comparable store sales growth, eight of which have come during the pandemic.
“The way we run our stores is the secret to growing digital sales,” Cornell added. “We allow our guests to consolidate trips, get more done in one store and experience a little bit of affordable luxury for their families, especially in this inflationary economy.”
Partners and Team Members
Target has also embarked on a period of pairing with big brands to grow its portfolio of store-in-store offerings, including deals with Apple, Disney, Starbucks and Ulta Beauty.
According to Chief Growth Officer Christina Hennington, those collaborations are working, driving ancillary purchases from customers who come in to shop, and they will be expanded.
“We remain committed to operating at least 800 Ulta Beauty at Target locations over time, with plans to add more than 250 new locations in 2022,” Hennington said.
At the same time, the retailer said it plans to invest $5 Billi0n in physical stores, digital experiences, fulfillment capabilities and supply chain capacity to fuel its growth. Target will also add 30 new small- to medium-sized format locations this year, while remodeling 200 existing stores. The moves will add more groceries and specialized curbside pickup locations and see roughly half its store count undergoing top-to-bottom renovations since 2017.
In addition to its investment in physical and digital properties, Target is also embarking on a major expansion of its investment in people, or team members, including a $300 million investment announced Monday (Feb. 28) that will lift its base starting wage from $15 to $24 per hour in select markets with tight labor conditions.
See more: Retail Wage War Escalates as Target Offers $24/Hour in Competitive Markets
“Our team is at the heart of our strategy and success, and their energy and resilience keep us at the forefront of meeting the changing needs of our guests year after year,” Target Chief Human Resource Officer Melissa Kremer said in the company’s press release.
Optimism Versus Ongoing Challenges
In his opening remarks, Cornell made a point of acknowledging the “continued uncertainty that’s around our world” that has only been magnified by the growing conflict between Russia and the Ukraine.
“It serves as another reminder of our continued need to support our teams, our guests, our communities, as we all navigate these very challenging times,” Cornell said, while pursuing a strategy he described as continued differentiation through affordability, assortment, ease and convenience.
Even so, Target is projecting low- to mid-single-digit revenue growth this year, and high-single digit earnings growth, guidance that was ahead of Wall Street expectations and an outlook that pushed the stock up as much as 10% in early trading Tuesday.
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