Has Target ‘only begun to scratch the surface of what’s possible’ for its business?

Photo: RetailWire
Aug 19, 2021

Target’s second quarter was another one for the record books. The retailer posted an 8.9 percent gain in comparable sales (in-store and online), one year after it saw its revenues jump 24.3 percent. Earnings per share were also up 8.9 percent for the period.

Digital sales rose 10 percent for the chain, one year following a pandemic-driven jump of 195 percent. The company’s stores remain a focal point for this portion of the business with 95 percent of all sales fulfilled by associates in its more than 1,900 locations. Same-day services — in-store, Drive Up and same-day delivery via Shipt — continue to be a star for the chain, up 55 percent on top of last year’s 270 percent gain. Net promoter scores for all three services were up in the most recent quarter.

CEO Brian Cornell said yesterday on a call with analysts that the current success is another sign that the company’s “leadership position is stronger than it’s ever been.” He said that the company had created a “durable model” with its investments in critical areas of the business, a strong team from bottom to top and a corporate culture focused on putting its customers first.

“After years of investment and effort in building this model, it’s clear that we’ve only begun to scratch the surface of what’s possible over time,” he said.

Mr. Cornell said “apparel continues to lead the way” with the chain’s customers responding positively to both Target’s owned brands as well as the national brands it carries, supported by store-within-a-store partnerships with Apple, Disney, Levi’s and Ulta Beauty.

The chain saw moderate growth in hardlines and home. Grocery’s performance was “impressive,” he said. Target’s same-day services have played a critical role in food and beverage sales growth.

Target Circle, the retailer’s loyalty program with more than 100 million members, and store remodels have helped drive increased traffic to the chain’s stores. Mr. Cornell said that more than half of all Targets have been remodeled over the past four years to elevate the shopping experience and optimize the ability of individual locations to meet increasing demands posed by same-day services.

“We’ve reinvented our store operating model, focusing on enhanced service and subject matter expertise in key categories while investing in visual merchandising across our network,” he said.

DISCUSSION QUESTIONS: What areas of strength (merchandising, fulfillment, store ops, technology, etc.) do you see offering the greatest upside for Target going forward? What weaker aspects of its business need shoring up if it is to realize its full sales, market share and earnings potential?

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"Target’s top strength is its focus on caring for consumers and associates rather than obsessing over rivals."

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22 Comments on "Has Target ‘only begun to scratch the surface of what’s possible’ for its business?"

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Mark Ryski

What makes Target so capable is that they are strong in all operational categories – and they seem to be getting better as they go. Among the majors, no one has been as effective at leveraging the strength of their physical stores as effectively as Target has — from investments in technology and new services to employee pay. The challenge for Target in the future will be finding ways to grow at a meaningful pace at their scale. But for now, if it ain’t broke…

Neil Saunders

With a very strong core business and a run of success, the key challenge for Target is to continue generating strong revenue growth. Some of this can come from the selective opening of new stores, and some can come from the refurbishment of existing stores as there are still a handful of older-format locations that need to be remodeled. However the gains here are limited. This is one of the reasons Target has started to do some deeper work into various categories where it believes it can make further gains. One of these is beauty where Target has partnered with Ulta to launch a store-within-a-store concept, the first of which opened this past weekend. There will be a lot more of this more micro-focused improvement work over the next few years.

Ray Riley

Target is Mall 3.0. With the stores-within-a-store from mammoths like Ulta and Apple to emerging growth stories like the ear-piercing hit Rowan (in ~200+ locations). It’s *the place* to acquire curated brand and off-brand across such a swath of categories in a convenient and efficient way. How and where Target integrates these concepts shows a lot of runway for additional revenue opportunities.

Dave Bruno

The entire Target organization has firmly established its prowess in (non-grocery) merchandising, operations, and store fulfillment, and those three areas have formed the pillars for much of their growth. If they can continue to refine their assortments, potentially including grocery, stay laser-focused on inventory and replenishment and clean up some of their online fulfillment processes to minimize the number of boxes shipped per order, I think they have a clear path to keep earning even more share and increasing basket size and customer LTV. It’s been a very impressive run for this impressive company.

Jeff Sward

I come down on the side of product (vs. process) as the primary strength for Target’s success. And it’s more at the macro level than micro. I may find the men’s Goodfellow assortment lackluster, but when looking through a wider lens that encompasses all of their proprietary brands along with their growing roster of key national brands, Target simply has the best overall portfolio in retail. And then they go and out-execute everybody on process. It’s a one/two punch that makes them the reigning champ. I’m trying to think of a retailer that has enjoyed a stronger bond with the customer over such a broad range of product over the last 20-30 years and I’m drawing a blank.

Richard Hernandez
Richard Hernandez
Director of Commerce
1 year 1 month ago

I agree with Jeff – Target has made great strides in re-defining their private label brands as well as increasing the presence of grocery (not completely a grocery destination, but getting there). My only beef is also with the Goodfellow assortment. I like it a lot, but stores have it — then they don’t or they change it. They haven’t figured that one out yet.

Liza Amlani

Target is a leader in retailing with an authentic and deep understanding of their customers while continuing to delight them through their shopping journey.

From product mix to visual merchandising to partnering with brands that represent their customer, Target is truly customer-centric.

From a merchant perspective, the challenge for Target is that they are just too big. There are too many vendors, too many SKUs, and we just don’t know enough about their suppliers. Supply chain transparency/visibility is a challenge for such a huge retailer and it comes down to sourcing working more closely with merchandising to truly understand who is making their products, if their vendors are using ethical practices, and if sustainability is top of mind.

Ricardo Belmar
Target is America’s modern department store. In many ways, they are the biggest winner out of the pandemic. They have hit a perfect storm with customers in terms of product selection and fulfillment capabilities. While there are still some stores in need of a remodel, and incremental improvements to be made in their already successful customer services, including delivery and pickup, the greatest opportunities for Target will come from categories such as beauty with their Ulta Beauty partnership and in departments that still need more attention. Electronics, outside of Apple, could still use a boost in terms of selection, merchandising, and marketing. Grocery, while showing strong signs of success, is still a growth area for Target where they can acquire share from other competitors by continuing to add impressive private labels and better showcase national brands they curate. Adding more items to the drive-up list from grocery will fuel growth in this category. In terms of operations, Target is leading the way in showcasing its store footprint as its primary superpower. Even Walmart doesn’t seem… Read more »
Melissa Minkow

Target is firing on almost all cylinders, which is far more than most retailers can say. The retailer put effort and resources behind every initiative that mattered over the last five years, and it proved powerful during the pandemic especially. The synergies between logistics/distribution, loyalty, omnichannel strategy, and brick-and-mortar improvements have worked together in a harmony no other retailer has been able to fully achieve. The only weak spot we continue to observe is its grocery business. I wonder if the brand will eventually work that into the rest of this synchronous ecosystem.

Lisa Goller

Target’s top strength is its focus on caring for consumers and associates rather than obsessing over rivals. Prioritizing these key stakeholders boosts Target’s loyalty and retention for long-term gains.

Additional strengths include:

  • Supply chain: Strategic partnerships (Apple, Levi’s), private label innovation and same-day service options.
  • Store operations: Omnichannel differentiators like Drive Up add value to shoppers. Happy employees also distinguish Target’s customer experience. Offering debt-free college degrees helps Target invest in its people and its future.
  • Technology capabilities: Robust e-commerce functionality and robotic fulfillment support digital sales.

To realize its full potential Target needs to continue to manage the high costs of reinvention, including its last-mile efficiency and store remodels, especially with inflation on the rise.

Cathy Hotka

Target excels in every area, but I’ll give merchandising the edge. Think of the possibilities — expanded furniture lines, additional apparel options, a fully fleshed-out home line. How will Target prioritize?

Carol Spieckerman

I don’t think it’s hyperbole to say that Target has executed one of the most impressive turnarounds in retail. Even so, following Amazon and Walmart’s examples by building out additional solutions and services (financial services, healthcare, etc.) presents tremendous upside. Target has made major strides in its grocery business, especially considering its traditional strength in softlines. Getting serious about grocery click-and-collect and exploring delivery are logical next steps. Target began making major strides when it departed from its insular past and embraced partnerships that extended beyond designer collaborations. Focusing on operational excellence and acknowledging that not everything can be home-grown have really paid off.

Ian Percy

When Brian Cornell says: “…it’s clear that we’ve only begun to scratch the surface of what’s possible over time,” he’s speaking about all of us regardless of our circumstances. This note is more about possibilities than about Target. “What is possible?” is the one qiuestion all leaders need to ask constantly throughout their day. We’ve been taught and conditoned to look back and down for answers to what are considered “problems” instead of forward and up where possibilities live.

We don’t create possiblities, ALL possibilities already exist and always have. The trick that Target seems to be onto is how to see and recognize them. That is a rare ability. Once we do see a possibility our job is to create an opportunity. As renowned physicist Michio Kaku says, “What we usually consider as impossible are simply engineering problems…there’s no law of physics preventing them.” In retail, like in every other endeavor, those who learn to see possibilities and create opportunities to make them real, win.

Lee Peterson

Two really smart pre-emptive moves on Target’s part: 1.) private label; middle men have disappeared or been wiped out by Amazon or Walmart across the board, so creating your own brands not available from either of those two was a necessary move (but even more importantly, they executed well and continue to do so) and, 2.) neighborhood stores; who knew the work from home necessity would strike? No one, but stores in my ‘hood looks like Target had a crystal ball.

Regarding the downside, they have thousands of huge box stores that are going to have to become part fulfillment centers. They’ve already started and are ahead of the game, but that’s a big one in terms of expense and a potential (key term) drag on profits.

But all in all this is very impressive and, more importantly, very differentiated.

Jeff Weidauer

Brian Cornell and team have done a great job of putting Target back into the spotlight – and on top of the consideration list for shoppers. It’s accomplished this by pushing into new areas and trying uncomfortable things. The greatest challenge the company faces is to keep the momentum and not get comfortable.

Rich Kizer

Target is amazing. They are the envy of inventory with a GMROI which any other retailer wishes they could attain. And that is the big key to their success.

Dick Seesel

There is plenty to like about Target’s merchandising, its focus on omnichannel, its development of new formats, and so forth. But the underlying key is a cultural attribute: The company’s refusal to rest on its laurels. At the same time, Target’s opportunism is focused on areas that are true to the brand rather than distractions.

As long as “no complacency” is in Target’s DNA, it will continue to grow.

George Anderson
There’s a lot to like about Target and, speaking personally, I’ve shopped in the chain’s stores for decades. I like it so much, I want it to do better. I can speak to several pain points as a customer that Target could address and, in turn, generate even higher net promoter scores, sales and profits for the chain. The first is grocery inventory and space management. The chain has made improvements, but I know from personal experience as well as numerous reports from others that in-stock positions are typically well below what you would find in other stores with similar traffic. Even before recent remodels, for example, it was common to go into local stores here in New Jersey and see whole frozen doors with no more than two or three boxes or bags on the shelves. Other obviously quick selling products in the refrigerated case are given one facing and inspire a happy dance when one or two of the item can be found. That’s sad. The second challenge is related to its pickup… Read more »
Shep Hyken

I’m impressed with Target. In our workshops and presentations, we’ll ask the audience, “Who is your favorite company to do business with?” In the past, Amazon has been the clear winner. Lately (past six months), the brand that is starting to give Amazon a run for its money is Target. A big reason has to do with the overall customer experience and their wide range of merchandise, from apparel to to food — and more. To continue this growth, they must continuously innovate behalf of the customers’ needs and expectations.

Brandon Rael

Target gets it and has shifted its entire operating model around driving an outstanding customer experience. Their foundations are built around a digital-first strategy that extends across the entire retail value chain, including merchandising, store operations, digital, supply chain, and the necessary technology investments in support of a very evolving operating model that is agile, scalable, and growth oriented.

Target has been one of the retail industry’s success stories and a digital-first powerhouse that has proven extremely resilient during the pandemic digital great acceleration. Their brand equity, value proposition, private-label merchandising, and customer-first strategies have positioned Target for significant growth over the next 5-10 years.

They are literally just scratching the surface and will remain a retail powerhouse for years to come.

Carlos Arambula

Target has done a wonderful job in curating its brand and delivering across all brand promises and attributes. I’m certain — as with all retailers, there are areas that could be improved. However, when customers talk about Target they are very forgiving of any shortfalls the retailer might have and willing to try new offerings or formats they offer.


Also of importance is the composition of the comp. In-store comp sales gained +8.7% and transactions were up +12.7%. (Placer’s data also shows traffic up +12.7%, with July being the strongest month.) The average transaction amount was down -3.4%. That decline is a function of the normalization from last year’s trip consolidation and pantry load trips. This suggests that while the consumer is no longer consolidating trips, they are also not “un-consolidating” them at last year’s COVID winners Walmart, Target, Albertsons, and Costco. This has negative ramifications for the smaller grocers like Whole Foods, etc. Target’s grocery business grew ~ +13% on top of a +21% increase in ‘20; these compounded are a 38% increase, or +$5B on an annualized basis.

Similar to Walmart’s e-commerce slowdown, Target’s e-commerce sales (including curbside, in-store pick up, Shipt, and home delivery) rose only +10% YoY, or by $317M (2X’s Walmart’s) with the curbside, pick up, and Shipt portion up +55% and the home delivery piece down -21%. Yes, Target is winning increased market share by leveraging its stores.

"Target’s top strength is its focus on caring for consumers and associates rather than obsessing over rivals."

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