Target CEO: 'Strategy Is Working' -- WSJ
07 March 2018 - 7:02PM
Dow Jones News
Retailer points to the sharp improvement in holiday business
after dismal 2016 results
By Khadeeja Safdar
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 7, 2018).
MINNEAPOLIS -- Strong consumer spending during the holiday
season boosted Target Corp.'s quarterly sales, and the retailer
signaled it would continue to invest this year to remodel stores
and expand its delivery services.
The company said fourth-quarter same-store sales rose by 3.6%,
its third consecutive quarter of growth. After a dismal holiday
performance in 2016, the Minneapolis-based company embarked on a
multibillion-dollar spending plan to improve its stores and digital
capabilities.
"What a difference a year makes," CEO Brian Cornell said on
Tuesday at an investor presentation. "You don't have to get too far
into the numbers to see our strategy is working."
Still, Target's spending plan has taken a toll on profits, which
compressed more than Wall Street was expecting, sending shares of
the retailer down 4% in midday trading. The stock has gained about
27% in a year.
"Despite the good numbers, the sustainability of performance is
open to question," Neil Saunders, managing director of GlobalData
Retail, wrote in a research note. "After all, Target's results were
delivered over a period of robust trading for the retail
sector."
Target is one of several brick-and-mortar chains that benefited
from rising wages and strong consumer confidence over the holiday
period. Best Buy Co., Macy's Inc. and Kohl's Corp. posted sales
gains as well, though Walmart Inc. stumbled after misjudging its
online inventory for the season.
Like other big box chains, Target has been struggling to compete
with Amazon.com Inc., which is benefiting from the movement of
consumer shopping online. Mr. Cornell has been investing in the
company's supply chain, lower prices, exclusive brands, store
renovations and new stores in urban areas. Target recently agreed
to acquire grocery-delivery startup Shipt Inc., moving to match
services that have been rolled out by rivals Amazon and
Walmart.
At the investor meeting on Tuesday, the company played a video,
showing negative news clips following its 2016 holiday season, side
by side with the changes the company has implemented in the past
year. "Coming out of soft holiday sales, the headlines were all
about store closures, a catastrophic border tax and a looming
retail apocalypse," he said.
Target plans to remodel 325 more stores in 2018 and add more
locations in urban areas. The company said it also would launch new
brands, expand its ship-from-store capabilities and offer more
delivery and pickup options, including same-day delivery and
curbside pickup. The goal is to make Target "America's easiest
place to shop," said Mr. Cornell.
Target, which raised its minimum wage to $11 an hour last fall,
said workers will receive $12 an hour this year. The company also
said it is training store employees to make them more versed in
specific merchandising categories and arming them with mobile
devices to check out products and place online orders from the
sales floor.
Mr. Cornell said Target has reduced its spending on technology
and moved more of the work in-house. The company's engineers have
been working on projects, such as applications to help store
employees choose the smallest box size for online orders and
automatically identify out-of-stock items on the sales floor. "Our
teams are exploring retail applications for just about every
buzzword you can imagine," said Mr. Cornell.
For the current year and its first quarter, Target said it
expects comparable sales to rise in the low single digits. For the
quarter, the company is expecting adjusted earnings to be between
$1.25 and $1.45 a share. Analysts are expecting adjusted earnings
of $1.40 a share.
Target reported a profit of $1.1 billion, or $2.02 a share, up
35% from $817 million, or $1.45 a share in the same period a year
ago. Adjusted earnings from continuing operations were $1.37 a
share, down from $1.45 a year ago. Analysts polled by Thomson
Reuters were expecting adjusted earnings of $1.38 a share.
--Allison Prang contributed to this article.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
March 07, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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