Target to invest $ 4 billion to accelerate new stores, expand supply chain

A person wearing a protective mask walks past a Target Corp. store at the Grossmont Center mall in La Mesa, California, U.S., on Thursday, Feb. 11, 2021.

Bing Guan | Bloomberg | fake images

Target said Tuesday it hopes to build on its recent growth by investing about $ 4 billion annually over the next several years to accelerate new store construction, remodel existing ones and increase its ability to quickly fill online orders.

However, investors and analysts were left without a key piece of information: an outlook for the year. The company declined to provide guidance, saying Covid-19 made it difficult to predict consumer spending.

The stock fell nearly 5% early Tuesday, despite Target beat expectations for fourth-quarter earnings.

On a virtual investor day on Tuesday, Target CEO Brian Cornell argued that the retailer’s recent results are not a sudden pandemic-related issue, but rather the payoff of its long-term business strategy. He pointed to the investments and decisions it has made over the past five years, such as its growing collection of private labels, its partnerships with popular national brands, and using its stores as hubs to fulfill online orders.

“Far from being a fluke, this performance is further proof that we built a business model that works as intended, one that puts Target in a category of its own,” Cornell said.

He told investors that continued uncertainty will not distract the company in the coming months.

“I recognize the frustration, not being more precise, particularly on the top line when we think about sales, but I can assure you that our entire leadership team and every part of this organization is focused on retaining and increasing market share, no matter what. variables that we have to deal with, “Cornell said.

New stores, distribution centers

Target’s next steps will include opening 30 to 40 new stores each year. Some of these stores will be close to college campuses and in major cities like New York, Los Angeles, and Portland.

You will add two distribution centers and test faster and more technological ways to restock the shelves. And it will test new centers that sort packages, freeing up time for employees to collect and pack orders online and help the company design more profitable delivery routes.

With the measures, CFO Michael Fiddelke said the retailer “will play offense and build on the opportunity to build on last year’s momentum.”

Target has stood out from its retail rivals during the pandemic. As shoppers consolidated their trips, they spent more money in fewer places where they found a wide variety of items. As shoppers prioritized safety, they were turning to contactless approaches, such as picking up online purchases from the parking lot. As consumers spent more time at home, they spent more money on items that helped them work, learn and relax. Those factors have benefited the large retailer.

The company’s sales in 2020 grew by more than $ 15 billion, more than its total sales growth over the previous 11 years. It has earned about $ 9 billion in market share in all of its categories during the fiscal year.


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