Target Corp.’s new chief executive officer is setting big expectations for Wall Street and pledging a return to growth powered by trendy new food products, in-store beauty services and other changes.
The big-box retailer struck an upbeat tone on Tuesday during CEO Michael Fiddelke’s presentation to analysts, with executives saying the company expects net sales to grow this year. The shares rose as much as 8.2 percent, the most in almost a year, extending their gain during the event.
The optimistic tone, along with better-than-expected guidance earlier Tuesday, show that Target is making progress toward reversing a three-year sales slump. Executives said the company is seeing early signs of improvement from changes and investments, touting upcoming upgrades ranging from beauty studios to the decorative-accessories department.
Now, investors’ focus will turn to how effectively and quickly the company can translate its strategy to consistent growth and regain market share it has lost to competitors in a volatile macroeconomic environment.
“Our path to growth and share gains is unique to Target and is fully within our power to drive,” Fiddelke said Tuesday during his first investor day as CEO in Minneapolis. “You’ll see us make the changes in investments in the areas that matter most to guests and ultimately win trips, build baskets and drive growth.”
Minneapolis-based Target, whose efforts to popularise “cheap chic” gave it the moniker Tarzhay, has struggled coming out of the pandemic. Its assortment and stores have lost their allure, hurting sales as Walmart Inc., Costco Wholesale Corp. and other competitors got larger. Political controversies, including changes to diversity policies, have also weighed on its performance.
Fiddelke, who took over in February, vowed to recapture Target’s swagger. Executives said they’re focused on expanding categories that Target had distinctive advantages in, echoing former CEO Brian Cornell’s first investor day more than a decade ago. Then, Cornell said he would prioritise style, baby, kids and wellness areas.
Fiddelke pledged “purposeful change in the categories and experiences where we have a real right to win.” During the company’s presentation, executives focused on beauty, baby and groceries. The company is also dedicating space to “celebrate big cultural moments, from seasonal fandom to viral trends,” according to Chief Merchandising Officer Cara Sylvester.
The company plans to double the number of unique items in its grocery section over the next three years. While it’s not looking to become a traditional supermarket, it will sharpen its focus on new trends and offer more food samples.
Elsewhere, Target will add “shop-in-shop” destinations while expanding its prestige cosmetics assortment and introducing beauty studios in 600 stores. The beauty move follows a partnership with Ulta Beauty Inc. that is being discontinued. The baby department will also undergo a revamp that includes a pilot baby concierge service.
Executives said Target’s online deliveries are getting faster, with same-day services contributing to two-thirds of its digital sales. Its paid membership doubled last year, and the retailer plans to offer more deal days and introduce new benefits.
On the labor side, Target is investing in additional hours for employees and training. It’s also opening new stores, with 30 planned this year.
Nonetheless, the company faces some skepticism, with UBS analyst Michael Lasser pointing out that “a lot of the elements of the plan are not that dissimilar from what we saw at Target around 10 years ago.”
In response, Fiddelke said he’s seen high and low moments at the company. “The ingredients that have always fueled us at our best are when we’re design-led, when we’re winning with differentiation, and when our experience is top-notch,” he said.
By Jaewon Kang
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