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Target Will Invest $1 Billion in Supply Chain, but also Cut Jobs

March 4, 2015
The company will invest between $2 and $2.2 billion in capital expenditures this year. That figure includes a $1 billion investment in technology and supply chain.

In an effort to transform its business, Target CEO Brian Cornell presented a plan this week to the investor community which includes investing between $2 and $2.2 billion in capital expenditures this year. That figure includes a $1 billion investment in technology and supply chain.

This money will come from cost savings of $2 billion over the next two years  which will be realized through operations, technology and process improvements; supply chain and sourcing efficiencies; and corporate restructuring.

Part of the savings will be through eliminating “several thousand positions over the next two years.”

The company is focusing on four specific areas:

Digital Sales: The company will take a channel-agnostic approach to growing its business, driving a total Target experience across stores, online and mobile. Guests who shop Target in stores and online generate three times the sales compared to guests who shop in stores only. Continued enhancements in technology, supply chain and inventory management will create a shopping experience that is rooted in ease and inspiration. This will help spur Target’s continued annual growth in digital channel sales of 40%, as well as contribute to a total projected sales growth of 2% to 3% and comparable sales growth of 1.5% to 2.5% in 2015.

Pump up Profitable Segments : Style, Baby, Kids and Wellness are being prioritized . The company will invest in these areas with a focus on newness and differentiation. In 2014, these four categories accounted for more than a quarter of Target’s sales. Other categories, including Grocery, are being repositioned to deliver a more compelling and appealing shopping experience.

Grow Guest-Centric Experience: Target will create a more guest-centric experience by tailoring its assortment and offering more locally relevant products, with demographics, climate, location and other guest-led factors driving merchandising decisions. Additionally, Target will strengthen its data and analytics and technology capabilities to deliver more personalized digital experiences, loyalty programs and promotional offers.  

Open Stores in Dense Urban Areas: Target’s store opening plans will increasingly focus on new, more flexible formats like TargetExpress and CityTarget, which cater to guests in rapidly-growing, dense urban areas. Throughout 2015, the retailer will open eight TargetExpress locations across the country. In addition, the company will continue to open the right stores to fit each community and test new layouts in its general merchandise stores.

"While we’re in the early days and there’s no doubt that transformation can be challenging, we’re taking the steps necessary to unleash the potential of this incredible brand,” said Cornell. “I’m encouraged by our early momentum, and am confident that by implementing our strategy, simplifying how we work, and practicing financial discipline, we will ignite Target’s innovative spirit and deliver sustained growth.”