Target to Buy Delivery Service Shipt
- By Sydnee Gatewood
In an attempt to win over customers who prefer shopping online, big-box retailer Target Corp. (TGT) announced Wednesday morning it is acquiring Shipt Inc., a same-day delivery service, for $550 million in cash.
The deal, which is one of Target"s biggest to date, is an aggressive step in the retailer"s journey to catch up to Walmart (WMT) and Amazon (AMZN). Through Shipt, Target will begin to offer same-day delivery of groceries, furniture, electronics and other home goods at about half its stores starting in early 2018.
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Target Executive Vice President and Chief Operating Officer John Mulligan said the deal is part of the retailer"s "ambitious strategic agenda" that was laid out in early 2107 to focus on giving customers more convenient shopping options.
"With Shipt"s network of local shoppers and their current market penetration, we will move from days to hours, dramatically accelerating our ability to bring affordable same-day delivery to guests across the country," he said.
He went on to say the service will be offered in every major market across the country by the 2018 holiday season. By the end of 2019, its services will include all major categories.
The deal is expected to close before the end of 2017. While it will be immaterial to Target"s near-term results, the company said the acquisition should boost its digital and overall sales growth over time.
Alabama-based Shipt will operate as a wholly-owned subsidiary of Target, but will run its business independently under the leadership of founder and CEO Bill Smith. All Shipt employees will remain at its operations in Birmingham and San Francisco. Smith will report to Mulligan.
Smith expressed his excitement for the deal in a prepared statement.
"Partnering with Target and the national scale they provide allows Shipt to further accelerate our growth, bringing our service to more people, in more markets across the country," he said."We"ll continue growing our marketplace and membership base, working with a variety of retailers to drive scale and efficiencies."
Target shares rose more than 1.4% Wednesday morning to trade around $61.85. According to GuruFocus, the stock has lost 16% year to date.
Disclosure: I do not own any stocks mentioned.
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 2 Warning Signs with TGT. Click here to check it out.
The intrinsic value of TGT
