target is in the midst of spending
billions of dollars to win customers
back and roughly one year ago that
costly gamble began to look like it was
paying off as target sales started to
rebound thanks to investments online and
in stores
the company is earning back its target
nickname something that it arguably lost
in the wake of the great recession
[Music]
born in 1962 out of the department store
chain dayton's target was a discount
retailer but also was known to be a
destination for trendy items through the
70s and 80s it aggressively added more
stores across the u.s to compete with
grocers and big box chains like walmart
kmart and kroger getting target to the
roughly 1800 locations that it has today
by the early 90s and into the 2000s
shoppers were opting to go to target for
its low-priced fashion ford merchandise
the company was partnering with
designers like todd oldham and massimo
gianouli offering exclusive lines for
home goods and clothing that customers
wouldn't be able to find elsewhere it
was all about cheap chic which prompted
shoppers to jokingly pronounce the
store's name as if it were a french
boutique
when the great recession rocked the
retail industry in the early 2000s
target like many companies at the time
pulled back on its design efforts and
became more conservative in its approach
to merchandising
it moved away from fashion and focused
more on essentials at the time consumers
were only looking for the best bargains
and not many were in the position to buy
much more than what they needed
but as the economy improved and shoppers
began spending more target wasn't seeing
many gains after 13 consecutive quarters
of same-store sales growth targets comps
turn negative in the first quarter of
2013. its profits declined by more than
a third for all of 2013. the year ended
on a final sour note with a credit card
breach that impacted millions of
customers and cost target millions of
dollars target's problem now was it
needed to win back shoppers trust in
order to get people back into stores
there were other cracks too in a hunt
for growth outside the u.s target
expanded to canada beginning in 2013.
within two years it opened more than 100
stores there but the pace was too quick
there were a slew of supply chain issues
with customers complaining about prices
being too high and items being out of
stock when brian cornell stepped in as
ceo of target in the fall of 2014 having
served executive roles at other
retailers including sam's club and
pepsico one of his early steps was to
get out of canada and close all of those
shops cornell took a hard look at other
parts of the business where he recalled
shopping himself as a child he felt the
retailer had lost its target mystique
and he vowed to get it back in february
of 2017 cornell mapped out a strategy to
spend roughly seven billion dollars to
make changes to target's age fleet of
stores while opening new and smaller
shops primarily in college towns
launching new store-owned brands adding
more delivery options for shoppers and
growing the retailer's website under the
plan 2017 and 2018 were investment years
and 2019 would mark a return to stable
growth investors initially punished the
company over these plans by selling off
shares the stock saw its biggest one-day
drop in roughly nine years on february
28th of 2017. wall street wasn't pleased
with a plan that would weigh on target's
bottom line investors also were
skeptical the strategy wouldn't pay off
but as traffic to target stores is back
on the rise digital sales are gaining
momentum and shoppers seem to think of
the retailer as a destination for cheap
chic again target's stock price has
since rebounded through late september
of 2018 the stock is up roughly 40
percent
key to target's latest successes are two
things it's newer in-house brands and
impressive store remodels
well when we think about brands it's not
an either or it's an end so we want to
make sure we've got this amazing
combination of our own brands
and
great curated national brands that
complement our offering
across the entire store so just
yesterday i had two of our major
national brand ceos here in minneapolis
talking about the fourth quarter talking
about 2019 so those partnerships are
really important because they're
important to our guests
the company has rolled out 17 of its own
brands since early 2017. target has its
own kitchen and accessories line called
made by design opel house is its
whimsical home decor line and good
fellow and co is its new men's clothing
line target is on track to add eight
more brands by the end of 2019. it's
trendy line for kids clothing called cat
and jack arguably one of the retailers
most well-known brands today reached 2
billion dollars in sales just one year
after its launch in 2016.
target is also back to partnering with
well-known designers most recently
hunter for rain gear and hgtv stars chip
and joanna gaines for a home decor line
it's also started to bring online brands
like harry's and casper into its stores
aside from the new brands target stores
are also starting to look a lot
different whether you're walking around
the beauty department
or through the toy aisles the company
has said it will remodel about 300
locations out of its fleet of 1800 this
year and is on track to complete 1100
remodels by the end of 2020.
it said it typically sees a sales lift
of between two and four percent at
remodeled stores
if we go back
five or six years
you know our target stores really served
one role it was a place you can shop
today they're at the very center of our
strategy both from a physical and a
digital standpoint we want to make sure
when you're in our store it is a great
in-store experience and we're investing
in
ours and our team
labor and wages to make sure we provide
a great experience but our stores are at
the center of our digital growth they're
fulfilling the majority of our orders
whether it's order pick up or drive up
it's where we fulfill most of those
orders in local neighborhoods so the
stores are centered to everything we're
doing at target but the company may be
in a more challenging position now as it
tries to maintain growth after plowing
billions into the business
the retail industry continues to evolve
across the u.s
amazon is pressuring businesses to speed
deliveries target has opted to focus on
its stores which also serve as many
distribution hubs helping fulfill online
orders and the company continues to bulk
up its supply chain most recently
acquiring same-day delivery platform
shipped
earlier this year on amazon's prime day
in july target said it had its highest
single day of traffic and sales on its
website so far in 2018.
the company said it fulfilled 90 of
those online orders from within its
stores
cornell tells cnbc there is a lot more
to come for target in the future