Target Corporation has disclosed that it expects an improvement in second quarter results following a brand revitalization campaign which ended up lifting customer traffic and pushing sales higher. In contrast to four consecutive quarters during which sales have declined, the retailer now expects an increase in revenue from its existing stores. Earlier in May Target had indicated that sales would decline in the second quarter by a single digit figure.
Besides an increase in sales Target also expected profits to increase to $1.15 a share after having earlier forecast profits of $0.95 per share. This is an indication that despite stiff competition from Amazon and Walmart, the efforts by Target to improve customer experiences, offer more product choice and lower prices are paying off.
“Our team is energized and focused on enhancing and modernizing the Target shopping experience, and our guests are responding,” Brian Cornell, Target’s chief executive officer, said in a statement.
According to Cornell the unveiling in May of Cloud Island, a brand which provides nursery décor, has proved to be a success. In the coming few months the Minneapolis, Minnesota-based retailer intends to unveil four additional exclusive brands in the home and clothing categories. This will be part of a bigger plan by the retailer to provide an additional 12 exclusive stores brands before the end of next year. Such exclusive brands are likely to lure shoppers since they are not available anywhere else.
As part of its revitalization strategy some brands will also have to be retired. This includes Merona which is brand dedicated to offering women’s and men’s clothing. The men’s business of Mossimo will also be retired but the women’s line will be retained. This will happen in the course of the next couple of months.
After the announcement of the improved outlook some Wall Street analysts remained skeptical. According to Mark Astrachan, an analyst at Stifel Nicalaus & Co, the changing shopping trends where brick and mortar stores continue to suffer in the face of an online onslaught remains a point of concern for the Minneapolis-based retailer.
This is especially so since Target has a higher exposure in channels which have been the hardest hit by online stores such as household essentials, hardlines and apparel. Astrachan also added that it was unlikely for Target to maintain everyday price credibility in the long term especially in the grocery segment given the increasing price competition from the likes of Amazon and Walmart.