Target outlines focus going forward as it ends 'year of transition'

MINNEAPOLIS — Target closed out a “year of transition” and is now looking to the future as it sharpens its focus on key priorities, including digital, smaller formats and wellness.



“It’s clear that 2014 was a year of transition in which we began to lay the foundation for the transformation we will accomplish in the next few years,” Brian Cornell, chairman and CEO of Target, told analysts during Wednesday’s fourth quarter conference call. “A year ago we were in the recovery mode working to repair guest relationships following the data breach, while we undertook an assessment of long-term prospects for our Canadian business.”



Fast-forward to today, Target has moved beyond the data breach, recording a 4.1% lift in fourth-quarter sales, and discontinued its Canadian operations, which resulted in a pre-tax loss of $5.1 billion for the fourth quarter. With these weights lifted, Target executives are now rising up to sharpen their focus on five priorities.



As outlined by Cornell, these priorities include —



• To become a leading omnichannel retailer. “Our digital growth led the industry in 2014 and we’re working to build on that success in 2015 and beyond,” Cornell told analysts.



• To clearly define roles for each of its merchandised categories and build out appropriate plans. “While we’re in the early stages of this journey, I’m pleased with our efforts to invest in the growth of our signature categories like style, baby, kids and wellness. These are the categories we are most famous for and our guests have asked us to lead with them in the years ahead,” Cornell said.



• To become increasingly localized in its assortment and in-store experience, and more personalized in its digital interaction with guests. “We are in the very early stages of these efforts and we see huge opportunity ahead of us,” Cornell said.



• To further develop its smaller formats. Cornell said the company is seeing “strong” financial results from its eight CityTarget stores and “strong” initial performance in the test of its first Target Express location in Twin Cities. In 2015, the company is slated to open eight additional TargetExpress locations and one CityTarget.



• Reduce complexity and control costs to fuel its investments and priorities.



Driving Digital



Like many retailers, Target has set its sights on digital and is aggressively working to become a leading omnichannel player. While there remains much work to be done, its efforts appear to be gaining traction.



In its digital channels during the fourth quarter, Target experienced a high single-digit increase in visits driven entirely by growth in mobile. According to the company, orders were up well over 50%, driven by strong conversion increases on both the conventional web site and mobile. Furthermore, mobile accounted for more than 40% of its digital orders during the fourth quarter.



Target executives also said they are pleased with the results of its store pickup program and its ship-from-store capabilities. The fourth quarter marked the second holiday season in which it offered store pickup and this year Target had more than 400,000 store pickup orders on the Black Friday week, alone. And they accounted for half of digital traffic in the last four days leading up to Christmas.



This holiday season marked the first season for Target’s ship-from-store capabilities, which rolled out to 139 stores at the end of third quarter. This enables Target to ship more than 60,000 items directly from stores to its guests.



Target gets “well”



According to Target executives, wellness is a category of tremendous opportunity, especially when it comes to natural and organic products.



While overall sales in the natural and organic space are rapidly growing, Target executives said that sales of such products in its stores are growing even faster — outpacing the industry by 50% in 2014.



Executives noted that its “Made to Matter – Handpicked by Target” collection of natural, organic and sustainable brands remains one of the greatest examples of Target’s focus on wellness. In 2014, sales of the brands within the Made to Matter collection grew twice as fast at Target compared with elsewhere in the market, according to executives.



Looking to 2015, Target will unveil a refreshed “Made to Matter – Handpicked by Target” collection, which will double in size compared with last year to offer more than 200 new and exclusive products from 31 brands.