Target to invest up to $5 billion to fuel more growth

Mar 1, 2022, 4:33 AM | Updated: 10:07 pm

NEW YORK (AP) — Target will invest up to $5 billion this year in physical stores, remodels, new brands and expanding its online fulfilment as the discounter continues to drive sales growth and differentiate itself from rivals.

The plans, announced Tuesday at its annual investor meeting held in New York, include opening 30 new stores, from midsize locations in dense suburban areas to small stores in cities like Charleston, South Carolina. It also plans to remodel 200 of its existing stores, reaching more than half of its 1,900 stores this year. The Minneapolis retailer also aims to roll out brand partnerships including opening 250 more Ulta Beauty shops in its stores, with plans to eventually operate 800 shops.

The moves come as Target pushed through headwinds — from congested ports to inflation that’s been the highest in 40 years — to deliver solid results for the three-month period that included the crucial holiday shopping season.

“We continue to see a resilient consumer,” Target CEO Brian Cornell told analysts at the meeting.

Fourth-quarter profit rose nearly 12%, while sales increased 9.4%, and the Minneapolis retailer released an upbeat revenue outlook for 2022.

Target was one of a handful of retailers that prospered during the depths of the COVID-19 outbreak. As physical stores selling non-essential goods closed temporarily or permanently during the depths of the pandemic, homebound people turned to Target’s online services for everything from groceries to cleaning supplies.

But in recent months, as overall demand has surged, retailers are facing rising costs for everything from labor to shipping as supply chain backups hit companies worldwide. Target, because of its size, was able to charter vessels and fill its shelves ahead of the holiday shipping crunch. But many other big retailers have defied these challenges as well.

Target’s earnings report followed strong fourth-quarter results from Walmart as well as major home improvement chains Home Depot and Lowe’s in the past two weeks. Both Kohl’s and Nordstrom also reported solid results on Tuesday. Kohl’s announced fiscal fourth-quarter profits that beat analysts’ expectations but revenue fell short of estimates, according to analysts polled by FactSet. But Kohl’s delivered an annual profit outlook that was above analysts’ estimates. Nordstrom reported both profits and sales that were above Wall Street expectations and also offered an upbeat annual profit outlook.

Target was not unscathed and cost pressures from 2021 are carrying over into this year.

Gross margins fell from 26.8% during the fourth quarter of 2020 to 25.7% in the most recent quarter. And Target said Tuesday that margins in the first quarter will be lower than last year.

That did not faze investors who drove Target’s shares up nearly 10%, or $19.66, to close Tuesday at $219.43.

Target’s advantage competing against massive rivals can be found in its stores, which have become become the equivalent to Amazon’s “fulfilment centers.” Aisles have been filling with shoppers again as the pandemic wanes and behind the scenes, online orders are taken, goods are packed and shipped or prepared for curbside pickup at Target stores that are critical to satisfying digital sales, which rose 9.2% in the quarter.

Digital sales growth reached nearly $13 billion in 2021, and more than 95% of Target’s fourth-quarter sales were fulfilled at its stores.

The company is also adding “sortation” centers beyond Minneapolis, with five more facilities operating across Dallas, Houston, and Austin, Texas as well as Atlanta and Philadelphia by spring. Another is planned to open later this year. Sortation centers organize online orders packed by local stores for fast neighborhood deliveries.

“We’re getting more efficient, more productive — and that’s flowing through to the bottom line,” Cornell said on CNBC.

Net income for the quarter that ended Jan. 29 reached $1.54 billion, or $3.21 per share. Adjusted earnings per share for the latest quarter was $3.19, easily topping the $2.85 that industry analysts were looking for, according to FactSet. It also topped last year’s fourth-quarter profit of $1.38 billion, or $2.73 per share.

Revenue was $31 billion compared with Wall Street projections of $31.32 billion.

The company registered an 8.9% increase in sales at stores opened at least a year.

Target expects low- to mid-single digit revenue growth for the current fiscal year.

That comes as the retailer Target aims to recruit and hold on its workers with higher pay. The company said Monday that it will offer minimum wages that range from $15 to $24 an hour, with the highest pay going to hires in the most competitive markets. It currently pays a universal starting wage of $15 an hour.

The company has done well with its partnerships with such brands as Levi’s and Disney. Last year, it began rolling out Ulta Beauty shops in its stores as part of a deal with the beauty retailer. Target executives said the Ulta shops have twice the productivity compared with the rest of the store.

_______

Follow Anne D’Innocenzio: http://twitter.com/ADInnocenzio

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - President Joe Biden speaks during the Major Economies Forum on Energy and Climate in the Sou...
Associated Press

Most say nation on wrong track, including Dems: AP-NORC poll

WASHINGTON (AP) — An overwhelming and growing majority of Americans say the U.S. is heading in the wrong direction, including nearly 8 in 10 Democrats, according to a new poll that finds deep pessimism about the economy plaguing President Joe Biden. Eighty-five percent of U.S. adults say the country is on the wrong track, and […]
12 hours ago
Lev Parnas, a former associate of Rudy Giuliani, arrives at the federal courthouse with his wife Sv...
Associated Press

Giuliani’s former Ukraine fixer gets 20 months in prison

NEW YORK (AP) — Lev Parnas, an associate of Rudy Giuliani who was a figure in President Donald Trump’s first impeachment investigation, was sentenced Wednesday to a year and eight months in prison for fraud and campaign finance crimes. Parnas, 50, had sought leniency on the grounds that he’d cooperated with the Congressional probe of […]
12 hours ago
This Feb. 26, 2021, file photo shows an oil well east of Casper, Wyo. The Biden administration is r...
Associated Press

Biden administration holding its first onshore oil sales

BILLINGS, Mont. (AP) — The U.S. government this week is holding its first onshore oil and gas drilling lease auctions since President Joe Biden took office after a federal court blocked the administration’s attempt to suspend such sales because of climate change worries. The online auctions start Wednesday and conclude Thursday. About 200 square miles […]
12 hours ago
Quincey Johnson, left, outreach director Upper Missouri Waterkeeper in Bozeman, Mont., and Martin L...
Associated Press

Enviros train drone pilots to find and pursue pollution

POOLESVILLE, Md. (AP) — When environmentalist Brent Walls saw a milky-white substance in a stream flowing through a rural stretch of central Pennsylvania, he suspected the nearby rock mine was violating the law. Recent rains had filled the ponds at the mine that allow sediment to settle out of the water, but Walls couldn’t easily […]
12 hours ago
FLE - A line of Spirit Airlines jets sit on the tarmac at the Orlando International Airport on May ...
Associated Press

Merger vote at Spirit could reshape discount airline market

DALLAS (AP) — The prospect of a takeover of Spirit Airlines threatens to upend the cheap-fare end of the industry much like a series of mergers among big airlines reduced choices for travelers. Spirit is the largest budget airline in the United States, but its days as a stand-alone company appear numbered. The big question […]
12 hours ago
Follow @ktar923...
Sponsored Content by Arizona Department of Health Services

Great news: Children under 5 can now get COVID-19 vaccine

After more than two years of battle with an invisible killer, we can now vaccinate the youngest among us against COVID-19. This is great news.

Sponsored Articles

...
Dr. Richard Carmona

Great news: Children under 5 can now get COVID-19 vaccine

After more than two years of battle with an invisible killer, we can now vaccinate the youngest among us against COVID-19. This is great news.
(Courtesy Condor)...
Condor Airlines

Condor Airlines shows passion for destinations from Sky Harbor with new-look aircraft

Condor Airlines brings passion to each flight and connects people to their dream destinations throughout the world.
...
CANVAS ANNUITY

Best retirement savings rates hit 4.30%

Maximize your retirement savings with guaranteed fixed rates up to 4.30%. Did you know there is a financial product that can give you great interest rates as you build your retirement savings and provide you with a paycheck for life once you retire? It might sound too good to be true but it is not; this product is called an annuity.
Target to invest up to $5 billion to fuel more growth