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Target makes $1B bet on digital

March 4, 2015Written by George Anderson

On last week's earnings call with analysts, Target CEO Brian Cornell said the company's first priority was "to drive industry leading digital sales growth" and "become a leading omnichannel retailer." Yesterday, Mr. Cornell and his team began to provide analysts with some answers on how they intend to achieve those goals.

For one, Target announced it would allocate roughly half of the company's $2.1 billion capital expenditures budget for technology, supply chain and inventory management upgrades to help connect more effectively and efficiently with digital consumers.

According to an announcement released yesterday, the company is looking to drive the total experience across stores, online and mobile. Target's research has found that shoppers who make purchases from its stores and website spend three times as much as those who shop in its stores alone.

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Target.com had a really good fourth quarter, with sales growing 36 percent. The company expects to improve on that pace with 40 percent growth in digital revenues this year. Sales at physical stores are expected to grow between two and three percent in 2015.

Target's investments in technology and e-commerce is a clear departure from the company's past practices in which the majority of capex dollars went to opening new stores and remodeling existing locations. The retailer plans to continue expanding on its store base, but shifting its focus to "more flexible formats like TargetExpress and CityTarget, which cater to guests in rapidly-growing, dense urban areas."

Target is also looking to cut roughly $2 billion in costs through a restructuring plan that will mean the elimination of several thousand jobs at the company's headquarters in Minneapolis as well as its tech hub in Bangalore, India.

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