Target’s ‘Commitment To Newness’ Has The Look And Feel Of Growth

Target’sTGT
fourth quarter was not as strong as Brian Cornell and company would have liked, but the retailer did post its twenty-third straight quarterly same-store sales gains.

The retailer needed discounts to achieve its 0.7 comp gain even as traffic grew 2.1 percent. That experience, paired with the concern that inflation and other economic variables will continue to focus consumers’ attention on purchases of lower-price necessities, led Target to temper its expectations for 2023.

Mr. Cornell, speaking in late February on a call with analysts, touted Target’s flexibility and core business strengths as reasons to believe that the retailer would continue to outpace the competition.

He pointed to Target’s continuing investments in private brands, store-within-a-store partnerships and customer loyalty as differentiating factors for the chain.

“We believe our commitment to newness is a key reason why we continue to generate traffic growth and why we drove broad unit share gains last year,” said Christina Hennington, Target executive vice president, chief growth officer.

“Our owned brands have long been a source of pride and differentiation for Target, offering great style and quality, all at incredible value. So, it’s no surprise that our owned brands have continued to outpace total enterprise growth and why we have plans to launch new or extend assortments in more than ten owned brands this year,” she said.

In an online discussion last week on RetailWire, many members of the RetailWire BrainTrust were on board with Target’s strategy and expected good things in the near future.

“Target has a long, successful history of aspirational collaborations and innovative brands, so it’s smart to continue to lean into that,” wrote Melissa Minkow, director of retail strategy at CI&T. “There’s a widespread brand affection for Target that is pretty much unmatched and the private labels plus the collaborations are a key aspect of that.”

“Yes!” wrote Nicole Kinsella, SVP of global marketing at Fluent Commerce. “Absolutely! [Newness is] one of their best differentiators from WalmartWMT
and a must to attract young shoppers used to an ever changing digital world. Target has done a great job of forging strong partnerships to provide new product and brand experiences, particularly in key consumable areas such as personal care and beauty. I look forward to seeing more growth in this space.”

“Commitment to newness, being trend-right in its segment of the retail business — these have always been central to the Target brand,” wrote Dick Seesel, president at Retailing in Focus. “I wouldn’t expect every new initiative to succeed, especially in a challenging economic environment, but I would expect Target to stick to its cultural roots.”

Target’s partnerships with AppleAAPL
, Disney, StarbucksSBUX
and Ulta Beauty have succeeded, and the chain continues to expand the store-within-a-store concepts.

“Last year’s sales from Ulta Beauty at Target were more than four times higher than in 2021, and this growth was almost entirely incremental,” said Ms. Hennington.

The retailer believes it is only scratching the surface of the potential of its Target Circle loyalty program. Circle members spent three times more than non-members during the holiday season.

“Whether searching for an item or browsing for inspiration, we continue to elevate their (Circle members) experience, providing personalized and relevant content using our incredible data and guest insights. This will include more customized home pages, improved search functionality, and even more personalized offers,” said Ms. Hennington.

“I would expect Target to build its app up even more given how crucial its loyalty program is to retention and growth,” wrote Ms. Minkow. “The app is one of the few that shoppers really understand the value in, so why not elevate its capabilities even further?”

Not everyone on the BrainTrust, however, saw Target’s announcement as emblematic of an unqualified success.

“In some categories there is too much newness like in women’s apparel,” wrote Liza Amlani, principal at Retail Strategy Group. “Women’s athletic has a clear POV but fashion has always been a “let’s be everything to everyone” strategy. Menswear is light in SKUs and needs some excitement. It would be ideal to see more consistency in the merchandising strategy from a seasonality perspective. Seasonless core products that customers can count on trickled with newness that delights the shopper. Learning why the guest shops Target apparel and what they want to buy from the brand is critical. This guest-centric merchandising strategy seems clearer across food and home.”

“Let’s be realistic about Q3,” wrote professor Gene Detroyer. “A dollar gain of 0.7 percent in same-store sales in a quarter of 7.7 percent inflation is no gain at all. Can we start being realistic about performance?”