MINNEAPOLIS (WCCO) — Major changes are coming to Target after the company announced a plunge in fourth-quarter profits, citing, in part, changes to shopper preferences.
Target reported on Tuesday morning a 43-percent drop in the holiday quarter’s earnings. The announcement sent the stock tumbling to a two-year low, closing at just under $59 a share.
The 12-percent loss is the biggest single-day drop in the corporation’s history.
David Brennan, a University of St. Thomas marketing professor, says while 2016 was a dismal year for most brick-and-mortar retailers — including Macy’s and JC Penney’s — it was especially bad for Target.
“Target’s lost its pizzazz,” Brennan said. “It doesn’t have the cachet that it once did.”
In response to the slump, Target is promising the rollout of twelve new, exclusive in-store brands, like its successful children’s “Cat and Jack” line.
Brennan says groceries is another big weak spot for Target.
“Their groceries are a pretty pathetic offering, pathetic in the sense that they don’t offer the variety nor depth of assortment compared to peers, specifically Walmart, but even Costco,” he said.
CEO Brian Cornell went on CNBC as Target’s stock price plummeted.
“We think we’ve got the right plan in place. In fact, we know we have the right plan in place,” Cornell said. “We’re going to be investing in re-imaging our stores, remodeling hundreds of stores.”
Cornell said Target would not be closing any stores, and would work aggressively to make its online shopping experience — including in-store pickup — faster and easier.
But in a nod to how deep its problems are, Cornell said shareholders and consumers would have to be patient.
“This isn’t going to happen overnight. It’s going to be a three-year plan that we put in place,” Cornell said.
He said one bright spot for Target was that online sales grew 34 percent in the fourth quarter.
But analysts say Target’s online sales represent a much smaller percentage of overall sales than competitors like Walmart.