March 3, 2015 - NEW YORK, UNITED STATES - Target plans to invest billions of dollars this year streamlining its business, opening new stores that are more personalized to local areas and appealing to customers who are increasingly younger and more diverse.
The retailer will also cut several thousand jobs in the next two years as part of a cost savings plan, the company said Tuesday at a meeting for financial analysts and investors
Target shares are up slightly in after hours trading to $78.09. The announcements come nearly a week after Target said same-store sales for 2014 increased 1.3% and 3.8% in the fourth quarter.
CEO Brian Cornell and other executives outlined the retailer's business priorities, which are focused on making specific product categories more stylish and trendy and encouraging shopping across digital channels and stores.
Target has been working to reposition itself as a shopping destination after several years of missteps that saw the brand lose its edge on fashionable home and apparel. Cornell was brought on last summer after former CEO Gregg Steinhafel left the company in the wake of 2013's holiday-season data breach.
Since then, Cornell has helped Target identify top priorities and drive investment in categories like style, baby and kids, and wellness, which accounted for more than a quarter of the brand's sales last year. Those will continue to be the brand's main merchandising priorities as the retailer invests up to $2.2 billion this year in an effort to grow sales, traffic and brand loyalty.
About $1 billion of that will go toward technology and supply chain management. Last year, Target expanded its buy online, pick up in store program and the number of stores that double as shipping warehouses, cutting down on shipping costs and delivering orders faster. The company also plans to save around $2 billion in the next two years by making its business operations more efficient and reorganizing employees at its headquarters in Minneapolis; that includes eliminating several thousand jobs.
"We've got to make sure we're a simpler organization," Cornell said. "We have to be more agile, more nimble."
One of the company's top strategies is focusing more on its smaller format City Target and Target Express stores, which allow Target to make stores more personalized to specific markets, Cornell said. It's opening eight new express stores this year after piloting a location in Minneapolis last year. Stores will also start experimenting with a new mix of food in the grocery aisles, bringing in more fresh food, local brands and developing a recipe portal to help customers plan healthy meals.
While Cornell emphasized that food will not be a "signature category," it still drives traffic and sales, accounting for more than 20% of business in stores.
"Overall we lack a clear positioning (on food)," said Kathee Tesija, chief merchandising and supply chain officer. She said food isn't why customers come to Target and "that has to change."
Target wants to position its brands to appeal to Millennial families and Hispanics in particular, two groups that are increasingly making up its customer base. That means bolstering its mobile apps and digital experiences in stores. Three quarters of Target customers start shopping on a mobile device, Tesija said, and last year mobile traffic grew 44%. - USA Today.