Wall Street cheered the good news, and industry experts say it’s more proof that Target’s long-term transformation strategy is paying off. While Target execs point to gains in many parts of its business, smart moves in new clothing lines have been an essential ingredient in capturing shoppers’ hearts.
“You can’t overestimate the importance of what Target has done in children’s apparel to its foundational appeal,” says Bryan Gildenberg, chief knowledge officer for Kantar Consulting, citing the strong appeal of Cat & Jack for kids and Cloud Island for babies. “The company is bringing a really smart sensibility to clothing and following what moms, kids and teenagers want. And the recent decision to partner with Vineyard Vines is as good an idea as you’re going to have.”
Total revenue came in at $23 billion for the quarter, essentially flat. Net earnings fell to $799 million, a 27% decline from $1.09 billion in the fourth quarter of the prior year. The results were better than analysts had predicted. Target says it expects 2019 sales to climb in the low- to mid-single digits on a comparable store basis.
The company is continuing its aggressive schedule of store remodeling with a new emphasis on grocery products and has made key hires in recent months to strengthen its food and beverage departments. Gildenberg tells Marketing Daily that because Target isn’t a “destination grocery store,” it has a certain amount of freedom that competitors like Walmart don’t.
“Walmart is a grocery store that sells other things, and Target is a nonfood retailer that happens to sell food,” he says. “So Target has an ability to pick and choose where they play in grocery. Going forward, it would surprise me greatly if Target’s evolution in grocery looks anything like Walmart’s.”
Kohl’s also surprised observers with better-than-expected fourth quarter numbers, with same-store sales gaining 1%. Total revenue fell to $6.82 billion from $7.06 billion in the same period a year ago. Net income rose 17% to $366 million, from $312 in the year-ago period. And for this year, it is forecasting a comparable-store sales increase of between 0% and 2%.