Target: Amazon
Target is accelerating its program aimed at making it more competitive with Amazon.
NEW YORK — Target is increasing the minimum hourly pay to $12 starting this spring, the second increase in a matter of months, while accelerating its reinvention plan to make the discounter more competitive in the age of Amazon.
The discounter’s moves, announced at its annual investor meeting in Minneapolis, where the company is based, come as its ambitious plan to make itself over is driving more people to its stores and its website. But the cost of such a massive overhaul, along with its pay increases, squeezed its fourth-quarter profits, and it took some shine off overall strong quarterly sales. The company also offered a muted profit outlook.
In fact, shares were trading lower Tuesday on the news of muted profits before the announcement of the pay hike. And investors punished the stock further, sending shares down nearly 5 percent.
Last fall, Target increased its hourly wage to $11 from $10. Brian Cornell, CEO of Target, told analysts Tuesday the company saw a better applicant pool and a 60 percent spike in the number of applicants in the days after the announcement. Cornell reiterated Tuesday its promise to increase the minimum pay to $15 by the end of 2020.
Target also announced other initiatives to help it speed up deliveries and make shopping in its stores easier. The company is rolling out free, two-day shipping for hundreds of thousands of items on Target. com. Except for holders of its branded credit card, shoppers previously needed to spend at least $35 to get free shipping. And its same-day delivery service, which was tested in New York City, is being rolled out to key cities in the U.S. such as Boston and Chicago. Target, which was testing curbside pickup at 50 stores, said it also plans to expand to 1,000 locations nationwide.
“2017 was a year of significant progress,” Cornell said. “2018 is all about acceleration.”
As it races to modernize, Target’s profit margins are under significant pressure. The bottom lines of traditional retailers are getting bruised trying to hold Amazon. com at bay. Late last month, Walmart reported weak fourth-quarter profits as it stumbled with e-commerce sales during the crucial holiday season.