From The Wall Street Journal:
Target Corp.’s chief vowed to invest billions to lower prices and remodel hundreds of stores, an admission that the retailer’s focus on trendy merchandise wasn’t enough to attract shoppers.
Chief Executive Brian Cornell defended his brick-and-mortar-centric strategy Tuesday after Target reported sales and profit declines for the holiday quarter, and gave an even gloomier outlook. The company said its 2017 profits would fall as much as 25% below what Wall Street had forecast.
The warning sent Target shares skidding 12% to $58.87 in Tuesday afternoon trading. The shares have now erased nearly all the gains since Mr. Cornell took the reins in August 2014 in the wake of a massive customer-data breach.
. . . .
The changes come more than a year after rival Wal-Mart Stores Inc. began pouring money into revamping its stores, lowering prices and expanding its e-commerce operations—changes that reversed a sales slump. Target has also been squeezed by the expansion of Amazon.com Inc., which shares many customers and products with Target.
. . . .
Analysts at Credit Suisse said the retailer essentially admitted it has pursued a flawed strategy to avoid competing on price. “The announcement represents confirmation of the company’s difficult position and it’s unclear if there is a winning strategy at this point given how far behind it is from competitors like [Amazon] and even [Wal-Mart] now.”
. . . .
Analysts predict that Target will continue to lose market share to Amazon and other online sellers if it doesn’t do more to adapt to the digital age. In a recent study, Goldman Sachs found that Target customers are more likely to have an Amazon Prime membership than those of Wal-Mart and other discount retailers.
Link to the rest at The Wall Street Journal (Link may expire)
The local Target put up signs to the effect that I’m not welcome in their store.
It’s the only department store I’ve encountered that feels that way. Fortunately, Wal-Mart and K-Mart respect my civil rights.
I’m in Australia and our Target stores are different animals, TRX, so I’m not sure what’s the deal with the unwelcoming signs and not respecting civil rights?
No guns allowed.
A few weeks ago, some Floridian lunatic was arrested for planning to bomb Target stores on the east coast. He wanted Target stocks to plunge so that he could buy them up, which is silly because they’re plunging all on their own.
This reminds me of Sony’s ereader problems, ca 2011-12.
Their readers were fine products in a vacuum but they were out of phase with the needs of the market; at a time when ebook adoption was exploding into the mainstream and the biggest selling point for ereaders was the ability to easily tap ebookstores, Sony tried to market premium readers with touchscreens, lighting, durable metal cases, but no wireless.
The market wanted entry-level standalone readers and Sony sold premium PC accessories.
And then, once the market matured, they pivoted to focus on the entry-level just as demand for Premium readers balloned.
Target did well against Wal-Mart by going upmarket and going after value shoppers rather than price shoppers. Worked great during the booming 90’s and the stable aughts. But this decade is a decade of uncertainty and retrenching. Arguing value vs price isn’t quite as effective: “pay more to get more” invites the question of whether you really *need* more.
Whether it be bookstores, fancy malls, department stores, or premium gadgets, consumers are getting a lot more price and needs conscious across the board. Japan has had 20 years of this with no end in sight and no clear path to older shopping patterns. It might be a permanent sea change that sticks even after the economy “improves”.
Once Target stops selling women’s shirts made of Kleenex, I will go back. Until then, not so much. I can get shirts of decent fabric at Meijer’s. The only stuff we buy at Target are my daughters’ “layering” pieces; the shirts are so flimsy the girls have to wear two at a time. Not “hip” in my book.
Haha, yeah, a lot of stores do that, actually. The only time I buy those shirts are when I want something to sleep in, and even then only when I’m absolutely sure no one else will see me in it. It really is astonishing how thin some of the shirts they try to sell women these days are. I’m not sure some of them even qualify as shirts.
Ummm, I suspect a measurable part of the drop is because they stepped into the bathroom arena.
That faux-pas was more of a symptom than a cause. Target was thinking it could sell to the Social Justice market segment.
That, unfortunately, is a segment that buys just as cheap as they possibly can. Unless it is a product that signals their virtue – which products are pretty much found only in small, niche boutiques, which actually can do quite well.
Nothing at Target signals their virtue – so they will shop at evil Walmart, evil Amazon, evil whatever.
“Target customers are more likely to have an Amazon Prime membership than those of Wal-Mart and other discount retailers”.
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We are good examples.
But do still shop there twice/month.