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March 2, 2022

Target Corp pumps US$5bn into growth drive with supply chain core focus

US department store retailer Target Corporation is to invest up to US$5bn to continue scaling its operations in 2022, with supply chain among its areas of focus.

By Beth Wright

“Years of investment in our team and business have driven our sales beyond $100bn and positioned Target to meet the needs of our guests no matter how they choose to shop,” says Michael Fiddelke, chief financial officer, Target. “We see substantial opportunities to build on our core capabilities to drive deeper guest engagement and long-term growth.”

Since 2019, Target’s same-day fulfillment services have grown nearly 400%, accounting for more than half of the company’s $13bn digital growth.

To add speed, efficiency and capacity to its fulfillment operation, Target continues to invest in sortation centres, which organise digital orders packed by local stores for fast neighbourhood deliveries. The company is expanding this model beyond Minneapolis, with five more facilities operating across Dallas, Houston, Austin, Atlanta, and Philadelphia by spring and another five planned to open later this year. Sortation centres enable a next-day shipping capability in dense markets and allow the company to further scale its stores-as-hubs strategy.

Target also opened two new distribution facilities in 2021 to support the increased inventory flow to its stores. The company has another four facilities currently in development to expand supply chain capacity, with plans for several more in the next few years.

In 2022, Target also plans to open about 30 stores, with the new locations ranging in footprint, from mid-size locations in dense suburban areas to small-format stores in city centres like Charleston, SC, and New York’s Times Square. This flexibility enables Target to open stores of any size to meet community needs, the company says.

In addition to new stores, Target will build on the company’s remodel programme with 200 top-to-bottom renovations of its existing fleet, reaching more than half the chain since beginning this effort in 2017.

On top of the full-store remodels, Target will complete hundreds of smaller projects across the chain to support the growth of its fulfillment services and expanding in-store brand partnerships.

Meanwhile, Target’s ongoing technology investments fuel growing digital capabilities like Roundel, which optimises advertising placements on Target.com to deliver a more relevant, personalised guest experience and create value for partners. Roundel drove more than $1bn in value in 2021, and the company expects that to grow to over $2bn in the next few years.

The news comes as Target CEO Brian Cornell hailed a strong fourth-quarter performance that capped off a year of record growth in 2021.

The company’s total comparable sales grew 8.9% in the fourth quarter, reflecting comparable stores sales growth of 8.9% and digital sales growth of 9.2%. Total revenue of US$31bn grew 9.4% compared with last year, driven by sales growth of 9.4% and an 11.1% increase in other revenue. Net earnings, meanwhile, amounted to $1.54bn, up from $1.38bn in the prior-year quarter.

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