Target’s $7 billion investment initiative into its stores is in full swing, with the retailer revealing it has remodeled 500 of the 1,000 stores it committed to updating by the end of 2020. In total, Target expects to remodel 300 stores in 2019. The company also has opened 100 small-format stores since the investment plan was established in February 2017.
The small-format shops average 40,000 square feet in size, or one third of a full-size store, with smaller locations having only 15,000 square feet of space. Target reaffirmed that it is still on pace to open 30 small-format stores across the U.S. each year, particularly in urban areas and college campuses, with the intent of localizing the merchandise the stores will offer.
Like top mass merchandise competitor Walmart, Target had a great showing in Q2, seeing comparable sales increase 3.4% (ahead of 2.9% growth estimates by Refinitiv)and online sales climbing by 34%. In total, Target Q2 sales rose 3.6% year-over-year to $18.2 billion, while net earnings increased 17.4% to $938 million.
Same-day fulfillment continues to be a growth driver for the retailer, further justifying Target’s massive brick-and-mortar and supply chain investments. Revenue from Target’s curbside pickup, in-store pickup and Shipt delivery services has doubled from a year ago, accounting for nearly 1.5 percentage points of Target’s overall comparable sales growth during the quarter. In Q2, these services represented one third of digital sales for the retailer, according to John Mulligan, EVP and COO of Target in an earnings call.
“Q2 could not have gone better for Target,” said Charlie O’Shea, VP and Lead Retail Analyst at Moody’s in commentary provided to Retail TouchPoints. “Every measurable metric demonstrates continued acceleration and validates the company’s strategic shift articulated in February 2017, proving that short-term pain can generate long term gains if the strategy is well executed.”
Target also has beefed up its grocery business with the introduction of its private label grocery brand Good & Gather. Good & Gather products are scheduled to hit Target store shelves Sept. 15, and by 2020 the brand will offer 2,000 products. Grocery sales represent approximately one quarter of total revenue for Target.
In the earnings call, CFO Cathy Smith said Target projects $3.5 billion in capital expenditures for the full fiscal year, driven mainly by the remodel program but also including investments in new stores, supply chain and technology.