Commentary

Target Hits Its Numbers - And More - In Turnaround Under Cornell

Same-store sales for Target rose 2.3% for the first quarter, the Minneapolis-based retailer announced yesterday, and e-commerce zoomed 38%, suggesting that the shake-up led by Brian Cornell since he took over as CEO in August is taking root even as the category itself is resistant to growth. The bottom line showed 52% improves, with a $635 million profit.

“The momentum we’ve seen so far makes us more confident than ever that we’re moving in the right direction and encourages us to move even faster,” Cornell told analysts and shareholders in a conference call. A transcript of the call is available on Seeking Alpha.

It is focusing on its “signature categories” such as baby, wellness, apparel, where growth was double the company average for the quarter, “while experimenting with groceries,” according to CFO John Mulligan, CNBC’s Nana Sidibe reports.

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“We're going to invest in presentation, marketing and bringing the newness to our guests and we saw our guests responding to the offering this quarter,” Mulligan said in an interview.

“Those are the categories where they can, in our opinion, differentiate themselves from their competitors,” says Edward Jones analyst Brian Yarbrough, Rachel Abrams reports in the New York Times. “What they needed to do was get back to offering exciting, fashionable merchandise.”

“Little steps are paying off,” writes Kavita Kumar for the Minneapolis Star Tribune. “Remember those mannequins Target has been rolling out? They are now in 1,000 stores and are helping to clinch sales, executives said. Its new plus-size line, Ava & Viv, resonated with customers.… And even one of its longtime private-label fashion brands, Merona, had a good showing.”

Cornell “has sought to shake up Target’s bureaucratic culture to make it quicker to adapt to change and add more stylishness to its apparel,” Phil Wahba writes for Fortune. He “has also pushed Target, a long-time laggard in e-commerce, to pick up its digital game.” 

Although Target’s online sales jump of 38% was more than double the 17% rise at Walmart, Wahba points out that “it’s easier to grow quickly from a smaller starting base.” 

“In the years before Mr. Cornell’s appointment, Target suffered a series of stumbles including unimaginative merchandise, a bungled expansion into Canada and a data breach that ultimately forced change at the top,” Paul Ziobro reports for the Wall Street Journal

“Target now is benefiting from focusing all of its resources on the U.S. and trying to bring back a sense of uniqueness to its stores. The biggest refresh is due in grocery …. Target wants to play up healthier fare and up-and-coming smaller brands at the expense of large packaged-food companies.”

USA Today’s Matt Krantz takes a look at why Target is, as a whole, “reviving faster than Walmart,” expanding upon three bullet points:

  • Target is driving the top line again.
  • Target is extracting better profitability. 
  • Target is addressing product mix. 

But don’t count your chickens — organic as they may be — before they are fully hatched. “It’s important to note that the revival of these rivals is still a work in progress. Analysts remain guarded on both,” Krantz concludes.

In other news, Target “took to Twitter this morning to announce it is partnering with jewelry designer Eddie Borgo for a limited-edition collection of customizable jewelry, accessories and wall art,” writes Michelle Persad for Huffington Post.

“Although Borgo may not yet be a household name like other designers and brands who've partnered with the store (including Lilly Pulitzer, Missoni and Proenza Schouler), he's garnered a lot of attention over the years for his jewelry line that features conical studs and geometric shapes.”

The recent Lilly Pulitzer fiasco on both its websites and in stores left executives “disappointed in ourselves,” Mulligan told CNBC. “Our expectation is that we provide a great guest experience regardless of where the guest interacts with us.”

Cornell emphasized the positive in his earning call. “Things like the Lilly event create the frosting on everything we do,” he said, the NYT’s Abrams reports

It may have been a half-baked execution, but it would appear that Target is working to get the ingredients just right for all of its offerings. 

“The goal is to use its unique lineup to get back Target’s former cachet, from the time when it was called ‘Tar-zhay’ with a mock French accent,” says analyst Yarbrough, Bloomberg’s Renee Dudley writes.

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