In Minnesota, the Star Tribune quotes Target CEO Brian Cornell as saying that “every element of our strategy is working and working together” - a comment that seems justified since the retailer just reported Q1 results that include same-store sales that were up three percent.
In fact, the story says, “A strong economy, remodeled stores, new clothing and furnishing brands — plus the launch of free two-day shipping — helped drive more shoppers to Target this spring.” In fact, Target said that things would’ve been even better except for “the cold and wet weather in April, which delayed the sales of higher-margin warm-weather items such as outdoor furniture and apparel and contributed to depressed margins.”
The story notes that “growth came at a cost as the investments needed to improve sales weighed down profits … Target has spent on everything from costly remodels to higher employee wages. Even a 28 percent growth in online sales pinched the bottom line because of the higher costs to fulfilling digital orders.”
(Target’s Q1 revenue was up 3.4 percent to $16.8 billion, while net profit was up 5.9 percent to $718 million.)
The story also notes that “Target’s same-day delivery service through subsidiary Shipt has rolled out to more than 75 more markets and Target looks to have it up and running from most stores by the end of the year … In total, more than two-thirds of Target’s digital orders in the first quarter were fulfilled from stores, compared with half in the same period a year ago, he said. That helps keep Target’s fulfillment costs down since the stores are closer to customers.”
In fact, the story says, “A strong economy, remodeled stores, new clothing and furnishing brands — plus the launch of free two-day shipping — helped drive more shoppers to Target this spring.” In fact, Target said that things would’ve been even better except for “the cold and wet weather in April, which delayed the sales of higher-margin warm-weather items such as outdoor furniture and apparel and contributed to depressed margins.”
The story notes that “growth came at a cost as the investments needed to improve sales weighed down profits … Target has spent on everything from costly remodels to higher employee wages. Even a 28 percent growth in online sales pinched the bottom line because of the higher costs to fulfilling digital orders.”
(Target’s Q1 revenue was up 3.4 percent to $16.8 billion, while net profit was up 5.9 percent to $718 million.)
The story also notes that “Target’s same-day delivery service through subsidiary Shipt has rolled out to more than 75 more markets and Target looks to have it up and running from most stores by the end of the year … In total, more than two-thirds of Target’s digital orders in the first quarter were fulfilled from stores, compared with half in the same period a year ago, he said. That helps keep Target’s fulfillment costs down since the stores are closer to customers.”
- KC's View:
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Target is looking better right now than it has in some time, which means that if it is going to make a deal for some sort of merger or acquisition, it should do so right now while it is in a position of strength.
I continue to believe that at the very least, Target needs to negotiate a deal with Kroger that puts the grocer in charge of its grocery departments, which never have lived up to expectations; it would be the grocery equivalent of the arrangement that put CVS in charge of its HBC/Rx departments.
But that’s at the very least. It seems to me that there really ought to be a Kroger-Target merger, which would give the combined company a bigger base from which to operate and grow. And I think it needs to happen soon, while Albertsons is preoccupied dealing with its Rite Aid acquisition. (An Albertsons-Target deal would be more problematic because of the Target-CVS connection, I suspect, but that doesn’t mean something couldn’t be worked out.)
By the way, for the record, I’m just spitballing here. I have no inside information, nor do I own stock in any of these companies. This all just seems to make sense to me.
