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Target Department Stores Biggest Victory in a Decade

facade of target department store

The first quarter of 2018 proved to be a record-breaking triumph for mass merchandiser Target Department Store. In the quarter ending on May 5, it boasted 3.7% store traffic growth, its strongest performance in over ten years. Heavy investments in key areas paid off, contributing to the long-term strategic initiatives of Target and is creating hope for other big box retailers. It earned a 3.5% rise in revenue, growing to $16.6 billion over the year-earlier period, ultimately earning $71.88 billion.

High Return on Revamp for Target Department Store

Retail stores are pursuing many innovations to stay on top of the industry. Retail giant Target owes its success to a handful of initiatives. It successfully completed 56 store remodeling across the US and opened seven new Target department stores. This boosted its image as a store that provides high-quality, on-trend, and affordable products, increasing foot traffic in its brick-and-mortar stores.

Target department store also introduced their own product lines to its stores and online. This included Universal Thread, launched in February. It is an exclusive women’s lifestyle brand that provides clothing and accessories for diverse body types. Also in the same month, Target department store launched Opalhouse, its new home brand with an eclectic aesthetic. Partnerships with different brands also boosted Target’s growth. In February, Target collaborated with Umbro for an exclusive collection of sports apparel, equipment, and footwear for kids.

Later in 2018 Target plans to debut a new exclusive Disney collection for a Mickey Mouse-themed clothing and home line. Target will also be releasing a clothing and accessories line with the New York Museum of Ice Cream this year. Such partnerships enable the company to maintain their customer base and reach new audience.

Target department store also diversified its online services, effectively providing an unmatched convenience for its online users. Target Restock is its next-day delivery service for household essentials, which has become available throughout the US. Target Drive-Up has been rolled out which lets app users shop at Target without stepping foot inside a Target department store. Customers can shop through the app and simply pick up their orders easily without them leaving their cars.

These diverse initiatives cemented Target’s reputation as a fresh and original brand that builds product and services around the needs of its customer base.

Missed Targets for Target Department Stores

Even though Target enjoyed a record high in the past decade, it still missed some expectations, which left investors dissatisfied. While sales were positive, the share price was down by 6%. Investors fear that store and product investments could pull margins down. Weather woes forced a decline on apparel sales—the extended cold weather delayed purchases for spring products like patio furniture, grills, and gardening equipment. The blow was buffered by the continual sales of non-seasonal products like clothes, food and beverages, and other home products.

Executives expect more innovative convenient features like Drive-up and Restock. These would work perfectly with more focused marketing and relevant pricing.

More Store Traffic

The newly renovated Target department stores receive more store visits because they now offer fresh food, produce, and prepared options for customers on a budget and on the go. Executives say store traffic is the true indicator of the health and progress of the business. They are also satisfied with store remodels, new inclusive brands, more convenient fulfillment options, and online offerings.

Strengthening Services

Target fortified its order fulfillment and delivery service by acquiring delivery service Shipt for $550 million.

Acquiring Shipt allowed Target to provide next-day delivery service to more than 700 stores in the first quarter of 2018. Consequently, digital sales went up 28%, compared to the 21% growth Target experienced in the first quarter of 2017.

Target has established itself as an omnichannel marketing behemoth, with a multi-category portfolio. Anything a person may need at any time can be provided by Target department store with just a few taps on a smart phone. Target is expecting its second-quarter sales growth will be in the low and mid-single digit range, with a 15% growth over last year.

“We’re very pleased that our business continued to generate strong traffic and sales growth in the first quarter, as we made significant progress in support of our long-term strategic initiatives.” This according to Brian Cornell, Target’s Chairman and Chief Executive Officer. With Target’s aptitude for diversification and innovation, the retail giant is poised to surpass future expectations. Target will continue to increase its valuation, while still creating products and services that the wider public enjoy and benefit from.

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