Target sees sales recover and takes aim at rivals with new paid membership program
07 Mar 2024 --- Target beats analysts expectations with its fourth quarter earnings report as the discount retailer takes aim at rivals such as Walmart and Amazon with its new Target Circle paid membership program.
Target’s adjusted earnings of US$2.98 per share were higher than the same period last year when the company struggled with lower sales and lost market share to key competitors.
While comparable sales declined 4.4% in the fourth quarter (a key metric followed by the market), it was better than analysts feared, helping to send the stock higher on the New York Stock Exchange.
Target strikes back with loyalty schemes and deals
Brian Cornell, chairman and CEO of Target Corporation, says profitability was “well ahead of expectations.”
“Throughout the season, guests responded to newness, value and the inspiration and ease of our in-store and digital shopping experience,” he comments. “Looking ahead, we'll continue to invest in the strengths and differentiators that have delivered strong financial performance over time.”
“We’ll also roll out fresh innovations, including our new Target Circle membership program, as part of our roadmap for growth aimed at meeting consumers where they are, reigniting sales, traffic and market share gains, and positioning Target for profitable growth in 2024 and beyond.”
Target Circle offers shoppers unlimited same-day delivery worth US$49. The home deliveries are covered by Shipt, which Target acquired in 2017 for US$550 million.
Alongside this loyalty program, Target recently introduced Dealworthy. The new line of 400 products ranges from beauty to apparel and electronics at prices below US$1.
Historically, memberships have been a rewarding play for big retailers including Amazon, with its Prime program that saw subscribers grow to 200 million members globally in early 2021. Target is also rivaled by Walmart’s Walmart+, which offers perks like free shipping and grocery deliveries for minimum orders of US$35.
Target sees 2024 sales rebound
For the first quarter 2024, Target anticipates a comparable sales decline of 3–5% and for the full year, a modest increase from flat to 2%.
This forecast follows the sales declines of the last year, which were met with loss of market share to competitor Walmart as well as to dollar stores.
Target has a ten-year plan built predominantly upon brick-and mortar. Chairman and CEO Brain Cornell remarked that two-thirds to three-quarters of commerce is still taking place in physical stores, speaking at the retailer’s 2024 Financial Community Meeting last Tuesday.
"If you think store shopping will wind down any time in the decade, we’ll politely disagree — again,” he commented.
Target communicates its ambitions to build more than 300 new stores equipped with same-day services. It will also be investing in “enhancing the vast majority” of its nearly 2,000 stores, with projects ranging from full remodels to adding Ulta Beauty locations, upgrading fixtures and supporting same-day services.
Cornell anticipates Target’s total revenue during the next decade will grow by an average rate of roughly 4% per year.
“If we attain that goal, our business will add more than US$50 billion of revenue on top of the US$107 billion we delivered in 2023,” he said.
In the beauty category, Target recently began selling products by Australian brand Naked Sundays, which formulates a blend of skin care and sun care products. This month, the retailer was also a distribution partner to Nails.Inc’s collaboration with McDonald’s to create fast food inspired nail polish and nail sticker sets.
By Benjamin Ferrer
To contact our editorial team please email us at editorial@cnsmedia.com
Subscribe now to receive the latest news directly into your inbox.