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NEW YORK, United States — Target Corp said on Wednesday it will invest $2-$2.5 billion annually starting 2017, mainly to upgrade its supply chain and technology infrastructure, as it races to reduce stock shortages and pushes for online growth.
In 2016, Target will invest $1.8 billion primarily towards similar improvements, after investing about $1 billion in upgrading its supply network and technology in 2015.
Ramping up online sales growth and fixing a supply chain network blamed for stock shortages and disappointing sales growth are priorities in the revival plan outlined by Chief Executive Officer Brian Cornell.
"We laid out a bold multi-year transformation agenda last March..and we'll be laser focused on those initiatives in 2016," Chief Executive Brian Cornell told a meeting of analysts in New York.
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Since taking over in July 2014, Cornell has narrowed the retailer's focus to a handful of product categories where Target believed it has an edge on quality and price. He has pushed to revamp the retailer's grocery business with newer offerings, driven online growth and overhauled Target's archaic and complicated supply chain.
He has also outlined cost savings plans, cut thousands of jobs and pulled out of Canada.
This year, Target will focus on improving sales online and on mobile, localize assortment in stores and open more smaller-format stores in urban markets, Cornell said.
Target will also drive grocery sales this year by focusing more on in-house products and will add more organic products and improve the freshness of its grocery products, he said.
The retailer also plans to grow its comparable sales by 3 percent or more annually starting next year and expects a majority of that growth to come from its existing stores and -online operations. It expects smaller format stores to contribute to the additional sales.
For the current fiscal year ending January 2017, Target said it expected adjusted profit per share of between $5.20 to $5.40, compared with the market consensus for $5.16, according to Thomson Reuters I/B/E/S.
Total 2016 sales are expected to be 3-4 percent lower due to the divestment of Target's pharmacy business but comparable sales during the year will grow 1.5-2.5 percent.
By Nandita Bose; editor: Andrew Hay.
