Target will build off its 2020 momentum by investing $4 billion annually in new store openings, remodels for existing stores and supply chain upgrades over the next several years, the retailer announced during an earnings call. The figure represents a substantial increase from the $2.65 billion invested in operations during 2020.
“With all these options to generate profitable growth, we’re in a position to play offense and lean into the opportunity to build on last year’s momentum,” said Michael Fiddelke, EVP and CFO at Target during the call. “As such, we’re planning for annual Capex in the $4 billion range in each of the next few years to support remodels, new stores and supply chain projects that add replenishment capacity and modernize the network, including sortation centers.”
Target is planning to open 30 to 40 new small-format stores each year, with an emphasis on locations near college campuses and in cities such as New York, Los Angeles and Portland. The retailer plans to open on-campus college stores with the University of Georgia and the University of Michigan later in 2021.
“We remain extremely bullish on our college sites,” said John Mulligan, EVP and COO at Target during the call. “Even as the pandemic sent students to online classrooms and sales softened at many of those stores, we see them as a long-term play to serve the college guests, many of whom are on the brink of adulthood and building lifelong shopping habits.”
Additionally, Target will remodel approximately 150 stores by the 2021 holiday season and more than 200 annually in the coming years. This effort will go hand in hand with plans to improve customer service through tech-enabled restocking, including new fulfillment hubs that will sort through packages to free up time for pickers and improve last mile efficiency. The company also will add new distribution centers near the New Jersey-Delaware border and in the Chicago area to speed up store replenishment.
Target’s sales rose 21% in Q4 2020 due to a surge in post-holiday shopping, bringing its full-year comparable sales growth to 19.3%. The retailer declined to offer guidance for 2021 due to the uncertainty created by the ongoing pandemic, but CEO Brian Cornell said he is “seeing a very hopeful consumer who is looking forward to life post-pandemic” in an interview with CNBC.