Target Pledges to Keep Lowering Prices

Target stunned investors this week when by revealing plans to move prices further down-market after reporting a 1.5% decline in same-store sales.Reeling from changing consumer behavior that is shifting more buying online, Target hopes price cuts in key departments such as grocery will drive more shoppers to stores. The mass merchant intends to absorb lower profit margins to better position itself to compete with rivals including key competitor Walmart, which is doubling down its own price investments."Our fourth-quarter results reflect the impact of rapidly changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores," Target chief executive officer Brian Cornell said in a statement.During the fourth quarter of fiscal 2016 (ended Jan. 28), sales decreased 4.3% to $20.7 billion. Target's ongoing efforts to boost traffic nudged it 0.2% in the right direction. The retailer first turned to periodic price discounts and promotions (see Related Updates below) after a drop in comp sales in the second quarter of 2016, but now will shift to more of an everyday low price approach. Some analysts worry the cuts will erode the retailer's "cheap chic" vibe and upscale shopping experience; historically a clean-aisle retailer, Target already has loosened restrictions on the merchandisers it allows into stores.During a call with investors, Cornell further said the retailer will accelerate "investments in a smart network of physical and digital assets as well as our exclusive and differentiated assortment, including the launch of more than 12 new brands, representing more than $10 billion of our sales, over the next two years." Following recent successful launches such as Cat & Jack and Pillowfort, Target will concentrate the new lines in the apparel and home categories.Additionally, the retailer plans to open 30 small-format stores in 2017 and some 100 small-format stores over the next three years. During the same time frame, it will overhaul another 600 locations. Changes will include new grocery displays and layouts.Cornell said the retailer feels a renewed urgency to quicken the pace of the changes, laying out $2 billion this year and $7 billion total over the next three years for the investments. Other changes the retailer is planning include:Merging Cartwheel with the flagship Target mobile application later this year.Transforming store backrooms into hyper-local distribution centers supporting ship-from-store.Arming employees with new technology that lets them search inventory, take payments and arrange delivery from the sales floor.

P2PI MEMBERS

JOIN P2PI

You May Also Like

Target Outlines Next Era of Growth

Aldi to Add 800 U.S. Stores by 2028