A person wearing a protective mask passes last Thursday, February 11, 2021 in front of a Target Corp. store. at the Grossmont Center Mall in La Mesa, California, USA.
Bing Guan | Bloomberg | Getty Images
Target said Tuesday that it expects to leverage its recent growth by investing nearly $ 4 billion annually over the next few years to accelerate new stores, remodel existing ones and increase its ability to quickly fulfill online orders.
However, investors and analysts were left without key information: a prospect for the year. The company declined to provide guidance, saying Covid-19 made it difficult to predict consumer spending.
Shares fell nearly 5% early Tuesday, although Target exceeded fourth-quarter earnings expectations.
On Tuesday, at a virtual investment day, Target CEO Brian Cornell said the retailer’s recent results are not a pandemic-related mistake, but the benefit of its long-term business strategy. He noted the investments and decisions he has made over the past five years, such as his growing collection of private label brands, his partnerships with popular national brands, and the use of his stores as centers to meet online orders.
“Far from being a fortune, this performance is further proof that we have built a business model that works as intended, which 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 as I’m not more accurate, especially on the front line, as we think about sales, but I can guarantee you our entire leadership team and all parts of this organization are focused on maintaining and growing market share, regardless of what variables we face, ”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 major cities such as New York, Los Angeles and Portland.
It will add two distribution centers and test faster, technology-compatible ways to replace shelves. And it will test new centers that classify packages, freeing up time for employees to choose and package orders online and helping the company design more cost-effective delivery routes.
With the moves, chief financial officer Michael Fiddelke said the retailer “will play offensively and lean on the opportunity to build on last year’s momentum.”
Target has stood out from retail rivals during the pandemic. As shoppers consolidated trips, they spent more money on fewer places where they found a wide range of items. As shoppers prioritized security, they gravitated toward contactless approaches, such as picking up online purchases in the parking lot. As consumers spent more time at home, they directed more of their dollars toward items that helped them work, learn, and relax. These factors have benefited large retailers.
The company’s sales for 2020 grew by more than $ 15 billion, higher than the total sales growth of the previous 11 years. During the fiscal year, it has earned about $ 9 billion in market share in all its categories.