Target plans multiyear merchandise revamp as store openings slow

Dive Brief:

• As part of a strategic plan announced Tuesday to top $15 billion in sales growth by 2030, Target will open 20 stores this year and remodel “many more.” The retailer opened 23 stores in 2024, after announcing its goal to open more than 300 in the next decade.

• In 2025, Target will invest $4 billion to $5 billion in stores, supply chain and technology, CEO Brian Cornell told analysts Tuesday. This begins an effort to revamp merchandising in gaming, sports, toys and home; expand beauty; boost private brands, especially in food and beverage; and expand brand partnerships.

• Supply chain “updates and expansions” will include tech solutions to reduce out-of-stocks. Via its Shipt business, Target is also working to speed up delivery to customers, including expanding same-day delivery and pickup options.

Dive Insight:

Not even Target seems to expect to gain much market share with this plan, according to some analysts. 

“Underscoring the delicate position Target finds itself, the revenue plan includes the possibility of no share gains,” Roth analysts Bill Kirk and Nick Anderson said in a client note Wednesday. “Usually, a five-year plan, detailing all the best projects, is more ambitious, and would more confidently project market share gains.” 

Chief Operating Officer Michael Fiddelke did say that the company sees huge addressable market, with three out of four U.S. consumers already living within 10 miles of a Target store.

“Even as a $100 billion retailer, we make up less than 3% of a $4.2 trillion market. In fact, together with the other nine biggest retailers, we make up less than 40% of that market,” he said. “There’s a lot of market share up for grabs, and we’re well-positioned to continue to grow our share of the pie on the strength of a strategy that’s uniquely ours.”

In addition to adding to its brick-and-mortar footprint, Target will expand its third-party seller marketplace. Unlike Amazon or even Walmart, the retailer has kept Target Plus fairly limited to ensure that the offerings there are line with what its customers expect, Chief Commercial Officer Rick Gomez told analysts.

The goal is for Target Plus to exceed $5 billion in sales in 2030, from about $1 billion last year, in part by adding brands like Peloton, Daily Harvest and Honest Baby clothing, the company said. Another goal is to double the size of its in-house Roundel media business, which drove more than $2 billion last year.

But many observers don’t see the mass merchant as all that well positioned, despite its dominance in owned brands, which Wells Fargo analysts led by Edward Kelly called a “key differentiator” — and which already drive $31 billion in revenue. 

Roughly a dozen of Target’s private labels are $1 billion brands, with four on their way to being $3 billion or $4 billion brands, Cornell said. “We’ve been making big investments in our own-brand portfolio and those capabilities,” he said.

But the retailer’s underlying strength is unclear, Kelly also said, despite an encouraging holiday quarter. Consumers are wary and Target seems to have suffered some backlash after backing away from some diversity initiatives.

Target “just can’t shake this debate,” Kelly said. “It’s still unclear where [Target] sits within the retail share shift narrative.”