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MINNEAPOLIS — Target Corp. will spend up to $5 billion this year to secure its long-term growth potential.
The investment will focus on helping the retailer deliver “affordable joy” to customers and renewing its focus on deal-conscious shoppers, the company said last month during its annual get-together with the financial community in New York.
“Investments in our shopping experience and frontline team have deepened our guests’ engagement with Target during the last few years, which is reflected in our continued traffic and sales growth,” said Michael Fiddelke, Target’s chief financial officer. “This year, we’ll continue investing in our long-term strategic initiatives that propel our market share and profit growth over time. Coupled with our teams’ ongoing efforts to scale our business with greater simplicity, we are confident in our ongoing ability to meet the evolving needs of our guests and deliver value for our shareholders.”
In allocating between $4 billion and $5 billion this year, Target intends to expand its capabilities in guest-centric services, digital experiences, and its network of stores and supply chain facilities. The spending will also help the company advance its enterprise efficiency after years of rapid growth.
Target this year plans to introduce or expand at least 10 owned brands, bringing thousands of new, differentiated products to shoppers. The company also aims to deepen its appeal to value-conscious shoppers, with more items starting at $3, $5, $10 and $15. In addition, Target will focus on offering clear, compelling promotions; introduce enhancements to its Target Circle loyalty program; and debut a new advertising campaign that celebrates how Target delivers what it calls affordable joy.
Target plans to open about 20 new stores, many of which will include new design elements that reflect the local communities; experiences that highlight new brands, assortment and services; and sustainable features. Target is also making investments in about 175 of its existing stores, ranging from full remodels to the addition of Ulta Beauty at Target or Apple at Target shop-in-shop experiences, or expanded capacity for same-day fulfillment services.
On tap is the expansion of Drive Up Returns, which allows customers to return most new, unopened items within 90 days of purchase from the comfort of their car.
Funds are also being allocated for expansion of the retailer’s network of sortation centers, from nine locations to 15 or more by 2026, making next-day delivery an option for more shoppers. These specialized supply chain facilities allow Target to deliver digital orders faster, more efficiently and at a lower cost, with up to 40% of orders delivered by its last-mile delivery capability arriving next day. Additionally, these facilities remove pressure from Target’s stores, giving team members more time to serve guests, the company said.
Target’s meeting with the financial community occurred as the company was releasing fourth quarter sales and earnings growth that topped Wall Street’s expectations, the first time it has done so in a year. But the retailer was also cautious about the coming year, with a same-store sales growth forecast ranging from a slight decline to a small increase.
Fourth quarter revenue increased 1.3% to $31.4 billion, on comparable-store sales growth of 1.9%. Digital comps declined 3.6% in the quarter.
“This performance highlights the benefit of our multi-category merchandise assortment, which drives relevance with our guests in any environment, and is a key reason we grew traffic every quarter last year,” said Brian Cornell, Target’s chairman and chief executive officer.
