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Target's Q2 Earnings Call: Six Interesting Facts

8/16/2017

Target's remodeling efforts, new smaller store format, same-day delivery pilot and private-label brands were among the topics discussed by company executives during the chain's quarterly earnings call on Wednesday with investors and analysts. Here are six interesting points from the call worth noting:



1. Target's ambitious remodeling effort, which calls for the transformation of the look and feel of more than 600 stores over a three-year period, is paying off. While the retailer said it sees a range of outcomes on an individual store level, average sales lifts are in line with its plan to deliver a 2% to 4% sales lift in remodeled stores.



2. The pace of store remodels will pick up in 2018. The company is on track to complete more than 100 remodels this year, with 63 completed to date.



3. Target will open nearly 30 small-format stores this year, with a total of more than 100 planned over the next three years. In July, it opened nine new small stores on top of four in the first quarter. The July openers have been particularly strong out of the gate, company executives said.



Sales productivity in the seven small format Target stores that have been open for more than a year is more than double the company average, and the stores have been delivering high single-digit comp increases so far in 2017.



4. The company is experiencing rapid growth in its capability to ship digital orders from stores directly to customers' homes. In the fall, it plans to roll out the program to another 350 stores in advance of the holiday season, bringing the total number of ship from store locations to more than 1,400 stores.



5. Target's efforts to differentiate its assortment with exclusive brands are resonating with customers. Its Cat & Jack kids' apparel brand has exceeded expectations and crossed the $2 billion mark only slightly more than a year after its launch. Infant brand Cloud Island has generated double digit comp increases since its launch in May.



Based on the success of these and other private brands, Target will, as previously announced, launch 12 new brands by the end of 2018, including several this fall.



6. The value of the average basket for same day-delivery orders, which is currently being tested in Target's Tribeca store in downtown Manhattan, is more than six times the store average at the store and contains nearly four times the units compared with the store's typical basket. Home is the most common category, ahead of essentials, food and beverage. The company plans to expand the same day delivery test to several other New York City locations in the fall.



BONUS: Target is REALLY excited about the upcoming Star Wars release ("Stars Wars: The Last Jedi" opens Dec. 15.) It will launch its latest Star Wars assortments on Sept. 1, which it has dubbed Force Friday. To celebrate, 500 Target stores across the country will open at midnight.


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