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Target Keeps Tab of Changes in Retail Landscape to Stay Afloat

Zacks Equity Research

Retail is no more restricted to brick-&-mortar and the scenario has changed drastically with the advancement of technology and digital transformation, which have altered consumer shopping patterns. Consumers now seek more convenience, personalization and speed, and retailers are coming up with ground-breaking ideas to build a loyal customer base. In fact, Target Corporation TGT has taken steps that have improved prospects in a big way.

The company’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments, and emphasis on flexible format stores to generate higher sales productivity bode well.

The company has rolled out Target Restock program that enable customers to restock their shipping box with essential items online and get them delivered at their doorstep by the next business day for a nominal charge. Drive Up, an app-based service, is another initiative to expedite the shopping process. The service enables customers to place orders using the Target app and have them delivered to their cars. The company offers the service across more than 1,250 stores.

Further, in order to improve supply chain and expand delivery capabilities, the company acquired Grand Junction. Earlier, Target had teamed up with popular online grocery delivery service, Instacart, to capture the booming online grocery delivery market. The company made significant headway in the same-day delivery race by acquiring Internet-based grocery delivery service, Shipt, to provide same-day delivery of groceries, essentials, home, electronics, toys and other products.

Shipt operates in more than 1,500 outlets in more than 200 markets. Per media reports, online shoppers can now get items delivered on the same day by paying a fee of $9.99 per order.

Further, Target continues to lay emphasis on developing smaller format stores to tap densely populated urban regions and space-crunched cities. With the changing business scenario and rising competition, Target felt the need to have stores of various sizes and formats in order to better serve its target areas. This approach helps the company to augment sales without substantial capital investment. These types of stores generally have higher sales productivity. The company opened seven small format stores during the first quarter of fiscal 2019.

Wrapping Up

Target is deploying resources to enhance omni-channel capabilities, coming up with new brands, remodeling or refurbishing stores, and expanding same-day delivery options to take on Amazon AMZN, Walmart WMT and Kroger KR. Moreover, like Amazon’s Prime Day, the company has launched two-day sale called “Target Deal Days.”

Such efforts help result in robust traffic, favorable store comps and surge in comparable digital sales. We note that comparable sales rose 4.8% in the first quarter of fiscal 2019. Comparable digital channel sales surged 42% and added 2.1 percentage points to comparable sales. We note that shares of this Zacks Rank #2 (Buy) company have advanced 25.1% in the past six months compared with the industry’s growth of 23.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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