Target hopes value-hungry shoppers will come to the rescue this holiday season

The goal is to emphasize value this holiday season, when consumers are feeling the pinch with inflation. At her New Jersey store, labels advertising low-priced items stand out more than they have in previous years.

Melissa Rybko | CNBC

Fairfield, NJ – Inside this suburban superstore, targeting Tries to create holiday magic for shoppers.

Christmas tunes are played over the loudspeaker. Adult and junior models show matching family pajamas. Red and green pillows decorate the shelves.

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The large retailer is also looking for its own magic. The holiday shopping period has turned out to be precarious for Target, after it posted disappointing earnings results for three quarters and cut its forecast for the current period. Excess inventory hurt the company’s profits, as sales slowed.

The goal is to compete in an environment where retailers must work harder to get inflation-weary consumers to spend. Its huge Covid-related gains are at risk as middle- and upper-income shoppers spend their money on other expenses, like commuting, vacations, and sending kids to piano lessons and soccer camp. Many have already revamped their wardrobes and branched out for pricey items like flat screen televisions, leaving fewer items on the wish list. And even the wealthiest families turn to discounts like Walmart , Which is famous for cheap groceries.

Other retailers are also under pressure. kohlAnd the under shield And the difference They all navigate the season while looking for new CEOs. bed bath behind She is trying to revive her business, as she has shrunk her store size and workforce. Nearly every retailer is trying to get inventory in a cleaner position, while juggling both junk merchandise and more price-sensitive shoppers.

But Target is by far the largest of these companies, with a market capitalization of about $66 billion, and it has a lot more at stake. Shares of Target are down more than 37% so far this year. The decline in shares came after Target in May missed its fiscal first-quarter earnings and in June warned it would take a hit to earnings because it cut merchandise.

Target has more than 1,700 exclusive toys for its stores and website this holiday season. They also have a deal selling game items from the FAO Schwartz brand.

Melissa Rybko | CNBC

Bigger price tags, fresher goods

On a recent tour of the Fairfield store, Chief Merchandising Officer Jill Sandow pointed out a large sign promoting Target’s Holiday Price Match Guarantee, offering them bigger price tags and lower-priced gifts scattered all over the sales floor, from $5 to $20 necklace-and-ring sets.

“We want to celebrate the value,” Sandhu said. “When we talk about affordable joy, you see the pride in the work. You see the pride in the product. We don’t whisper it. We shout it.”

Target is also trying to ride out the holiday promotional hype. Known for cheap chic, Big-Box has struck exclusive deals with brands and made its own fresh goods.

One of those deals is with the famous toy brand FAO Schwarz. Another is with Marks & Spencer, a British retailer, who has created a range of specialty food items such as shortbread cookies in a tin shaped like a London bus and teabags in a collectible lantern.

As shoppers navigate holiday parties and hit stores again, Target wants shoppers’ visits to be comfortable and enjoyable, said Kara Sylvester, chief guest experience officer.

Store associates will rotate displays and the ends of aisles to feature unique items, including gingerbread houseware kits and beauty gift sets. She said the aim is for it to be a “happy vacation spot” where shoppers want to stay awhile and fill up their carts.

In the parking lot, Target has been added recently Starbucks Orders to curbside pickup option, Drive Up. Besides making online purchases, shoppers can also get coffee without leaving the car. It began rolling out the option to 240 stores just before the holiday — with plans to add it to more stores soon.

For customers with a full calendar of holiday outings and events, it has even more mini events Ulta Beauty Shops within its stores, with special holiday gift sets, fragrances, beauty items and some giftable items for $5 or $10. There are 350 stores — up from about 100 a year ago.

A problem that is difficult to get rid of

But Target doesn’t have the same advantage it did during the pandemic’s early years — while remaining open as a primary retailer, becoming a mall alternative and tapping into customers who were pouring in stimulus money.

Target’s weekly store traffic is down when compared year-over-year and when compared to store traffic before the pandemic in 2019, according to data from Placer.ai, which tracks retail foot traffic. It was down 6.1% year-over-year and down 4.7% compared to 2019 for the week of December 5th, the latest data available.

It snapped that downward trend across other retailers, including Walmart, Messi And the best buy. It doesn’t say whether shoppers are spending more or less than in previous years.

Michael Baker, retail analyst at DA Davidson, said the goal is still haunted by a strategic mistake — placing a large bet on discretionary commodities at the wrong time.

Only about 20% of Target’s annual sales come from groceries, according to company filings. Most of the sales come from apparel, home goods, and other discretionary goods—the same items that don’t sell as often as they once did.

Target ended up with a lot of that merchandise, as supply chain clogs eased and inflation picked up. And announced a bold plan to get rid of the glut. However, in its third-quarter earnings announcement in November, it shared a new challenge: a sharp slowdown in sales in late October and early November.

Baker said investors hope to see signs of a rebound in Target’s sales as the holiday rush gathers steam.

“If things go wrong from there, it raises the question of what’s going on with Target,” he said.

With so much uncertainty, between inflation and the possibility of a recession, Target’s Sylvester said she didn’t expect the broader economy to be “rosy” next year. So, she said, Target will continue to confirm.

During a visit to the Fairfield store, Sylvester said Target can win with its wide merchandise mix. Shoppers can come to buy groceries. They can buy inexpensive Target-branded exercise equipment, All in Motion, as they make their New Year’s resolutions. And they can choose from more products in a historically recession-proof category—beauty—as Ulta stores open in more stores, she said.

“How do we double down and bring the kind of Target cheer and magic to our guests who are going to need it most?” She said. “Affordable joy doesn’t have to be just a holiday. It’s all year round.”

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