“Following a thorough strategic review of our business, coupled with a careful evaluation of the changing retail landscape, we have identified the key initiatives that will put Target on a clear path to growth,” said chairman and chief executive officer Brian Cornell. “We’re focused on our future and building the capabilities that will take us further, faster. Redefining Target will require a renewed emphasis on prioritization and innovation.”
The key points of the plan call for new approaches to merchandising strategy, format development, technology and cost cutting.
Store development will be focused on deploying its newest formats, CityTarget (the performance of which Cornell described as “phenomenal”) and Target Express, to capitalize on the potential of fast-growing, densely populated urban areas. Immediate plans call for opening eight more Target Express locations across the country.
In addition, Target will test new layouts in its full-size general merchandise stores. That decision may be directly related to a merchandising shift that will place top priority on four product categories that Cornell singled out as “signature categories”: style, baby, kids and wellness.
“Signature categories account for $20 billion in sales, representing more than a quarter of our total sales in the U.S.,” Cornell said. “These are the categories that Target has historically been known for, and they play a very key role in differentiating Target from everyone else in the marketplace.”
After converting most of its traditional discount stores to the PFresh format — which incorporates a significant, though limited, grocery offering — the company will reposition grocery which, although not a signature category, nonetheless generates more than 20% of sales and is tied closely to wellness. “Our guests have told us they expect to have food in our stores, but they’d like us to offer more choices that support their wellness goals: more natural products, more organic, more gluten-free,” Cornell elaborated.
To drive its business, Target is placing a much greater emphasis on online and mobile, and will invest about $1 billion in needed technology and supply chain capabilities. Cornell pointed out that customers who shop both Target’s stores and online produce three times the sales as store-only shoppers.
To finance a capital investment budget of $2 billion to $2.2 billion, the retailer will also undertake a massive restructuring that will slash thousands of jobs from its headquarters. The corporate downsizing is also intended to produce a leaner, more agile and efficient management organized into centralized teams focused on specialized expertise.