Optimist Or Pessimist: Don’t Miss Your Target In 2018

Brick and mortar retailers have been hit hard by the Amazon (AMZN – Free Report) effect and many stores have, as a result, bitten the dust. Target (TGT – Free Report) may have shut a few itself, but that isn’t a good enough reason to think that the retailer has bowed out. The following analysis shows that not only will the company continue fighting, but like Walmart (WMT – Free Report) , it will also become a force to reckon with in the increasingly omnichannel retail market.

The Turnaround Plan

Weak sales, weak gross margins (an indication that the company is heavily discounting goods to move stock, or high procurement cost related to new brands, or both) and relatively steady EPS despite a steadily declining share count aren’t things that inspire confidence. But CEO Brian Cornell has outlined a turnaround plan, and execution appears to be on track.

“We’re investing in our business with a long-term view of years and decades, not months and quarters,” Cornell said in a nutshell. “We’re putting digital first and evolving our stores, digital channels and supply chain to work together as a smart network that delivers on everything guests love about Target, including more than a dozen new brands we’ll introduce over the next two years.”

For the purpose, he’s earmarked $7 billion for capital expenses over the next three years and a billion more in operating profits, beginning in 2017. So let’s see how he’s doing-

Putting Digital First

There are two aspects to this, the first being increased digitization of the stores to improve the in-store shopping experience and the second being the building of the online shopping channel to improve that shopping experience. Target has been working on both.

On the store front, it has added RFID (radio frequency identification) tags to apparel to quickly locate in-store inventory and beacons through which location-based information can be transmitted to shoppers while in the store. Now, it’s doing more to remodel the stores so they are to support delivery of orders taken online (more on that later).

This year, it’s rolling out new technology in stores that will allow store employees to check inventory, take orders, process payments through a mobile point-of-sale system and arrange delivery. The capability will be expanded to all stores by year-end.

On the online shopping front, it has invested in its digital infrastructure to increase its speed, stability, performance and capacity. So today it has a much more functional website and app. This year, it is also integrating its savings app Cartwheel with the main Target shopping app to streamline the shopping experience. It also has a deal with Pinterest that could attract more users.