A person wearing a protective mask walks past a Target Corp. store at the Grossmont Center Mall in La Mesa, California, USA on Thursday, February 11, 2021.
Bing Guan | Bloomberg | Getty Images
Target said Tuesday it hopes to build on its recent growth by investing about $ 4 billion a year in new stores, remodel existing stores, and increase its ability to quickly fulfill online orders over the next several years.
However, investors and analysts had no important information: an outlook for the year. The company declined to advise, saying Covid-19 made it difficult to forecast consumer spending.
Shares fell nearly 5% early Tuesday, despite Target surpassing fourth-quarter earnings expectations.
On a virtual investor day on Tuesday, Target CEO Brian Cornell claimed that the retailer’s recent results are not a pandemic-related blip, but the payoff of its long-term business strategy. He pointed to investments and decisions it has made over the past five years, such as the growing collection of private label brands, partnerships with popular national brands and using the stores as hubs to fulfill online orders.
“This achievement is by no means a fluke, but proof that we have developed a business model that works as intended, one that puts Target in its own category,” said Cornell.
He told investors that ongoing uncertainty won’t distract the company in the coming months.
“I recognize the frustration, not being more precise, especially on the top line when we think about sales, but I can guarantee you our entire leadership team and every part of this organization is focused on keeping and increasing market share, no matter what the variables we have to face it, ”said Cornell.
New shops, distribution centers
Target’s next steps are to open 30 to 40 new stores per year. Some of these stores are located near college campuses and in major cities such as New York, Los Angeles, and Portland.
It will add two distribution centers and try out faster technology-assisted ways to replenish shelves. And it will test new hubs that sort packages, freeing up time for employees to collect and pack orders online and help the company design more cost-effective delivery routes.
With the moves, Chief Financial Officer Michael Fiddelke said the retailer will be “offensive and will take advantage of the opportunity to build on last year’s momentum.”
Target stood out from retail rivals during the pandemic. As shoppers accumulated trips, they spent more money in fewer places where they found a wide variety of items. As shoppers prioritized safety, they were drawn to contactless approaches, such as picking up online purchases from the parking lot. As consumers spent more time at home, they spent more of their dollars on items that helped them work, learn, and relax. These factors have benefited the big box retailer.
The company’s revenue grew by more than $ 15 billion in 2020 – more than its total revenue growth in the past 11 years. It gained approximately $ 9 billion in market share in its categories during the fiscal year.