As the retail world found itself in crisis last year, Target Corp. started to pick up its pace.
After spending more than a year testing new layouts and fixtures, Target geared up on remodeling hundreds of stores over the next few years. After finding success with a couple new in-house brands, notably the $2 billion Cat & Jack kids clothing line, it launched 10 more last year including a popular men’s clothing label. And after years of piloting small-format urban stores, it stepped on the gas with plans to open 30 to 40 a year over the next few years.
Since CEO Brian Cornell arrived at the Minneapolis-based retailer nearly four years ago, he has talked a lot about the need for the company to move faster. Now it seems to be happening.
“We put a premium on speed and agility, but we also want to make sure we’re making the right choices,” Cornell said during an interview at Target’s bustling Nicollet Mall store, which has a sleeker look following a $10 million makeover. “We now have more of the proof points in place and we can accelerate.”
This coming year will be another year of speeding things up, he said. Not only will Target be tripling the number of store remodels this year to more than 300 and rolling out same-day delivery to most of the United States through recently acquired firm Shipt, it will also be swiftly expanding the Drive Up curbside pickup service it began last year in the Twin Cities.
Cornell and other top Target executives will reveal more of their strategic road map at an investors meeting in Minneapolis on Tuesday.
“I think there’s been a great sense of urgency for four years now,” he said. “The difference is we’ve been very disciplined. I use the term ‘surgical’ in testing and validating before we roll things out.”
Target’s sales, which had been in a slump, are beginning to see a lift.
“They have an ambitious agenda,” said Mark Miller of BlueView Investment, who has been following Target for two decades. “They’re starting to see payback from some of their initiatives. The challenges haven’t gone away, but they’re now able to speak more to” how they’re addressing them.
But so, too, are many other companies. The rapid shift to online, as well as other changes to shopping habits, has been a reckoning for many retailers, punctuated by a huge number of store closings and bankruptcies last year.
Walmart responded by acquiring Jet.com and a number of other online retailers as it doubles down on its digital business. Kohl’s has been experimenting with an Amazon partnership and last week announced another with Aldi.
“The elephant in the room is Amazon,” said Miller, noting that Target is especially vulnerable since there’s such a big overlap between its shoppers and members of the growing Amazon Prime program.
In addition to setting the bar for fast delivery, Amazon has been keeping everyone on its toes with its purchase last year of Whole Foods. Still, Cornell saw that deal as a vindication of his conviction that the future of retail will continue to include stores as well as digital.
“If you go back a year ago, there was such a negative tone to retail overall — and almost a belief that brick-and-mortar retail was never going to recover,” he said.
But that narrative has begun to change, he said, especially in recent weeks as more retailers’ holiday numbers have been coming in, boosted by the booming economy. Best Buy had its best quarter in more than a decade. Kohl’s had a 6 percent jump in comparable sales.
And Target, which is trying to claw back to growth, saw sales rise 3.4 percent in November and December. It will release its full fourth-quarter results this week.
While the retail outlook is looking much brighter this year, Cornell said it will still be difficult for retailers who aren’t investing in their stores, employees and online infrastructure to make it.
“There’s really no place for poorly run and highly leveraged retailers in this environment,” he said. “I think we’ll continue to see some of those retailers unfortunately close stores and potentially move to bankruptcy and liquidation. But for well-run retailers, I think there are significant opportunities in front of us.”
In a research report last week, Seth Sigman, an analyst with Credit Suisse, said Target’s “aggressive” strategic moves position it to be a “survivor” in the new retail landscape and to be poised for more near-term growth.
As other retailers falter, Target is hoping it can pick some of their business in areas such as apparel and toys.
“The fact that Toys ‘R’ Us is semi-imploding, Target was there over the holidays to pick up a lot of the spillover,” said Craig Johnson, president of Customer Growth Partners, adding that Target will likely rake in even more in toy sales this year as Toys ‘R’ Us, which filed bankruptcy last year, closes hundreds of stores.
He’s also heartened to see that Target is drawing more traffic back to its stores. “Things are getting back on track,” he said.
Michelle Grant, head of retailing for Euromonitor, said Target is also just getting the basics of retailing right with its in-store displays and presentations.
“They are making sure their products aren’t just piled up high in endless aisles,” she said. “There’s a lot to gain by responding to how people want to shop in stores and making sure it’s a pleasant experience.”
And, she said, the company has rediscovered its “mojo” with its new brands such as Cat & Jack and its multiyear tie-up with HGTV stars Chip and Joanna Gaines on a country-chic home decor brand. And last week, Target unveiled its next design partnership with Hunter, the popular British maker of rain boots.
“They’ve really returned to their Tar-zhay roots,” said Grant. “In the short-term, they’re doing what they can to remain competitive.”
At the same time, Amazon has been making its own push into apparel. A recent survey by Coresight Research found it’s been drawing the most customers away from Target. Then last week, Walmart, which hasn’t traditionally played much with fashion, unveiled four new in-house apparel brands.
Cornell said he isn’t losing too much sleep over the developments.
“I have a big secret for you — retail is always going to be competitive,” he said playfully as he walked around the store. “It’s a world of fast followers. But not everyone has the ability and the credibility to do the things we do.”
It’s not just the quality and value of Target’s new brands that has made a difference, he said. It’s about how the company has found more attractive ways to display them in stores and online and has trained employees to provide more boutique-like help in not only clothing departments but also the beauty aisles and home areas.
“All of those elements that have to come together,” he said, “it’s the sum of the parts.”
As for its grocery department, which has been one of Target’s Achilles’ heels in recent years, Cornell said the company has been working to improve it. He brought in a new grocery chief last year and hired some other new executives in this area.
But Cornell said not to expect a big unveiling of a completely new grocery department.
“It will be subtle changes,” he said. “It may not be something we shout about, but we know the changes we’re making in assortment and presentation and service. … They don’t jump out at you, but we know what we’ve done and the guest responds well to it.”