Target sales slip but profits move higher
CEO says company must ‘take advantage of this unique time in retail’
Target’s tweaks to its formula for success as a mass merchandiser, which includes smaller stores and more exclusive brands, didn’t spell sales growth at the start of the year.
But Target was able to boost its profits, earning $681 million for the quarter ended April 29, up 7.7% from $632 million for the same period last year. Still, the retailer did better than Wall Street analysts expected, coming in at $1.22 per share vs. the projected consensus from S&P Global Intelligence of 91 cents a share.
The big issue remains how to grow sales. Target, like other retailers, is struggling to find a way to deal with online behemoth Amazon. It reported Wednesday that sales in stores open at least a year — a key industry measure — slipped 1.3% in the quarter. Target said it was because there were fewer people browsing its stores, while those that did put fewer items in their shopping baskets.
“We’re going to continue to plan our business very prudently,” Brian Cornell, Target’s CEO said in a call with the media Wednesday. “We know we have a lot of work to do. (Foot) traffic continues to be challenging ”
Target’s efforts to boost its digital offerings appear to be paying off as well, with comparable digital channel sales up 22%.
And in a brutal retail environment that may be boiling down to survival of the fittest, Cornell noted that the dozens of stores being closed by competitors such as Macy’s, Sears, The Limited and JCPenney leave plenty of customers ripe for the taking.
“These opportunities are out in front of us,” Cornell said, adding that there may be at least $45 billion to $60 billion of market share that can be absorbed by surviving retailers. “We’ve got to make sure we’ve got the technology, the supply chain ... to take advantage of this unique time in retail where we know there’s going to be billions of dollars of market share up for grabs.’’
To that end, Target is playing up its long-held reputation as a trendy and affordable fashion destination, remodeling existing stores and growing its footprint of small, curated storefronts meant to meet the specific tastes of local shoppers.
In April, it continued its popular tradition of offering limited designer collections with a line created by Victoria Beckham. Additionally, it’s planning to launch a dozen new brands over the next two years to make its stores the only choice for certain items.
Target is remodeling 100 stores this year in a bid to update the look and give shoppers a reason to push away from their laptops. And it’s been banking on the continued rollout of smaller stores in dense, urban areas. The retailer had roughly 30 of these stores at the end of last year, and each tailors its products to the particular demands of local residents.
Target shares closed Wednesday at $55.04, up 0.9%.