Target holiday profits fall, plans drive-up return service
NEW YORK — Target plans to invest as much as $5 billion this year expanding services for customers, including a drive-up service for returns, renovations at 175 stores and improvements in online shopping.
The Minneapolis retailer announced the investments Tuesday during its annual investor meeting as it reported a 43% tumble in profits for the holiday quarter, reflecting the ongoing challenges of balancing more cautious consumer spending and rising costs.
Target issued a cautious outlook for the year as inflation squeezes household budgets, but it topped Wall Street expectations for the fourth quarter and shares rose nearly 3% in mid-day trading, reversing an earlier sell-off.
“We recognize that the landscape is unpredictable, and there are plenty of challenges in the near-term horizon,” Target’s CEO Brian Cornell told analysts at the meeting on Tuesday.
For the full year, Target expects comparable sales — those from stores open at least a year and online channels — will range from a low single-digit decline to a low single-digit increase.
“We’re planning our business cautiously in the near term to ensure we remain agile and responsive to the current operating environment,” Cornell said in a statement.
Target is pushing ahead to accelerate its e-commerce strategy. It announced last week that it will spend $100 million to develop a larger network of package sorting centers that cut the cost of delivering online orders while increasing the speed of delivery.
Target said that its drive up service for returns will be rolled out to all stores by the end of this summer. Customers will be able to return most new, unopened items within 90 days of purchases without leaving their car.
Target also plans to open about 20 new stores in addition to renovating 175 of them. One of the big attractions has been its partnership with Ulta Beauty to have shops at the store.
Last year, its sales from Ulta Beauty at Target were more than four times higher than in 2021, the company said.