MINNEAPOLIS (AP) — Target is investing another $2 billion in its business this year to expand its in-store experience, remodel stores and invest in its employees as it tries to turn around persistent sales woes and regain its grip on style.
The investment, announced Tuesday at its annual investor meeting at its headquarters in Minneapolis, comes as the discounter reported another quarter of declining sales and profits as it struggles to regain footing with customers who go elsewhere for fashion, home and other needs.
Tuesday’s report offered some hope for businesses. The company posted a strong annual profit outlook that was better than Wall Street was suggesting. It also said it believes net sales will grow in every quarter this year.
Target said comparable store sales rose to start the current quarter.
“This is a new season, and it’s all about growth,” said CEO Michael Fedlak, a 20-year veteran of the company who succeeded longtime CEO Brian Cornell last month. “We’re going to make it our own game and make big changes to please our guests.”
Target already announced in November that it plans to invest $1 billion in capital expenditures for $5 billion this year. But on Tuesday, he offered more details about his capital plans. This includes plans to open 30 new stores and remodel 130 of its existing stores. Many of the stores being refreshed haven’t been explored in a decade, Target executives said.
But Target said Tuesday it will also spend another billion dollars in additional operating costs, including hundreds of millions of dollars in additional store workers and training support, as well as investments in artificial intelligence.
Target said it is launching a new beauty area in 600 stores this fall called Target Beauty Studio, which will feature high-end beauty products and product expertise by employees. The new area will partially replace its stores with Ulta, which ended its partnership with the retailer in August, the company said.
Fedlak is serving on the front lines of President Donald Trump’s campaign to curb illegal immigration, with Minneapolis the target city. Some of the company’s stores have become flashpoints in the push against U.S. Immigration and Customs Enforcement. The company is under pressure to take a public stance on the immigration crisis.
Even before the immigration clashes, Target faced protests and boycotts over the company’s decision to roll back its diversity, equity and inclusion initiatives. Critics believe it is a betrayal of the cause’s philanthropic commitment to combating racial disparities and promoting progressive values in liberal Minneapolis and beyond.
This is out of a volatile economic and political environment that has been accelerated by Trump’s aggressive trade campaign. The White House is now calling for a 15% global tariff, after the US Supreme Court struck down many of the far-reaching tariffs on imports it imposed last year.
While the pace of inflation has cooled, consumer prices have risen about 25% over the past five years. U.S. companies face a grim prospect of harming American families, and the Trump administration is trying to work around a Supreme Court decision to keep its jobs in place.
And targeted shoppers are fed up with what they see as disorganized and cluttered stores with poor quality merchandise.
As the company’s nearly 2,000 store locations become shipping hubs for online operations, customers say the in-store shopping experience has shifted with employees fulfilling digital orders rather than stocking aisles.
Target also faces stiff competition from Walmart, which has focused on fashion and other goods.
Fedlock has already reshuffled the leadership team at Target, increased in-store staffing costs and cut back on distribution facilities and regional offices, according to a memo sent to employees in February.
Target said Tuesday it is pushing new styles in business categories to set itself apart from its competitors. For example, in the home area, 75% of the company’s decorative layout will be new.
The company is also reworking its own store label brands such as a home goods brand called Threshold, among other store brands. Target also uses artificial intelligence tools to pick trends. That will help reduce the time frame from design concept to stocking shelves in a matter of weeks to a year in some cases, according to Cara Sylvester, Target’s chief merchandising officer.
And in food, the company hopes to drive more customer journeys by expanding its fresh produce while offering innovative products from specialty brands like Fishwife, which sells canned fish. This year, it plans to increase new classifications by nearly 50%, Target executives said.
The company earned $2.30 per share, or $1.05 billion, for the three-month period ended Jan. 31. That compares to $2.41 per share, or $1.10 billion, in the year-ago period. Adjusted earnings per share for the most recent quarter were $2.44.
Sales fell 1.5% to $30.45 billion in the latest period. For the full year, sales fell nearly 2% to $104.78 billion.
Analysts had expected $2.16 per share on sales of $30.46 billion, according to a survey by FactSet.
Comparable sales – sales in established stores and online channels – fell 2.5%, following a 2.7% decline in the fiscal third quarter. The latest figures mark 11 of the past 13 quarters in which the target has either declined or grown flat for that measure.
Target said sales and customer traffic accelerated in the final two months of the quarter. And it saw sales growth in food and beverages, beauty and toys for the most recent quarter.
Target said it expects net sales to increase 2% for the year, meaning it expects sales to reach $106.88 billion. That’s slightly above analysts’ expectations of $106.7 billion. Target also estimates that earnings per share will be in the range of $7.50 to $8.50. Analysts expect earnings of $7.30 per share for the year, according to analysts polled by FactSet.
Shares of Target rose 6.8% in afternoon trade while the broader market declined.
