Target looks to out-people competition
Target CEO Brian Cornell says it’s the company’s employees that set it apart from its many rivals and he’s committed to continue making investments to attract the best talent even if Wall Street doesn’t approve.
Yesterday, the Target saw its stock price drop 4.45 percent over concerns that the financial investments it is making in its people, stores and digital operations will weigh on profitability. Mr. Cornell, however, has taken the view that its these very investments that will enable Target to win over customers and grow its business now and over the longer haul.
The chain increased the starting wage it pays hourly employees to $11 in October. It has announced it will further increase that to $12 an hour later this spring. Target has set a goal of increasing its minimum wage to $15 an hour by 2020. Higher wages not only help the retailer attract applicants and reduce turnover in a tight labor market, but give the company a competitive advantage, according to Mr. Cornell.
Target saw a 30 percent increase in applicants when it announced its higher hourly minimum before the holiday selling season.
“We had a much stronger pool of talent to hire from,” Mr. Cornell said on the company’s fourth quarter earnings call yesterday (via Seeking Alpha). “But, the benefits of that investment go much further than just the short-term seasonal boost. Our leadership position on wage establishes Target as an employer of choice and we will drive preference for years to come.”
Target reported a same-store sales gain of 3.6 percent during the fourth quarter as the company reported traffic gains in stores and online. The chain’s comparable online sales grew 29 percent during the quarter on top of a 34 percent gain in the same period last year.
- Target Reports Fourth Quarter and Full-Year 2017 Earnings – Target Corporation
- Target’s (TGT) CEO Brian Cornell on Q4 2017 Results (Earnings Call Transcript) – Seeking Alpha
- Target shares swoon on spending plans, more wage hikes this spring – CNBC
- Target CEO: Success built on ‘great physical assets’ and ‘digital interaction’ – RetailWire
DISCUSSION QUESTIONS: Do you think investments made in people typically provide strong returns for retailers? Is Brian Cornell right to stick to Target’s plan despite the negative sentiment from analysts and investors?