Home Business Target’s new favorite buzzword is “value”

Target’s new favorite buzzword is “value”

by SuperiorInvest

A customer shops the holiday section at a Target store in Clifton, New Jersey.

Adam Jeffery | CNBC

AimThe goal of these holidays: to be more like Walmart.

Leaders at the retailer said customers will see thousands of gift ideas for under $25, store displays that highlight affordability and low-priced ingredients for Thanksgiving.

But the discounter will do it with a Target twist.

The company will try to stand out with its exclusive brands and novelty items, such as a new jewelry line from Kendra Scott, Chief Growth Officer Christina Hennington said on an earnings call Wednesday.

“If there’s one thing we’ve seen is that in an environment where people are making decisions and may have budget constraints, the motivation to buy is really ‘Is this going to add value to my life? Is this something intriguing?’ And does it feel relevant or edgy or is it really for me?'” Hennington said.

Target is trying to tap into customers’ hunger for deals, which highlighted investors on the call. The company’s executive team used the word “value” 17 times. In total, they used the words “affordable,” “affordable,” or “affordable” seven times.

Target has struggled to improve sales as shoppers focus more on essentials and are more selective when purchasing clothing, electronics and more. The Minneapolis-based retailer posted strong profits on Wednesday, but its sales declined year over year and it said it expects that to continue in the holiday quarter.

In stores, Target has increased the number of end-of-aisle displays that focus on just a couple of price points, Chief Operating Officer John Mulligan said on the call. Heading into the holiday season, nearly two-thirds of those displays meet that standard. They send an “easy-to-understand message of value,” he said.

And more than a week before Thanksgiving, online shoppers have already been hit with a series of Black Friday discounts on the company’s website, such as 50% off artificial Christmas trees.

Rivalry with Walmart

Target’s performance has diverged sharply from that of Walmart, which makes more than half of its annual revenue from groceries and is known for its low prices.

Walmart, already the largest retailer, has also become a competitive threat to Target and other rivals, especially during an inflationary period. Walmart has used its grocery department to attract a growing number of higher-income shoppers. It has introduced a sleeker store design, which it is rolling out to more locations. And it’s adding popular and exclusive brands through its third-party marketplace.

Walmart is scheduled to report its fiscal third-quarter earnings before the bell on Thursday. Investors expect the company to post higher profits and revenue than a year ago.

The stock performance of the two large retailers has also been very different. As of midday Wednesday, Target shares had fallen about 13% so far this year. Before reporting fiscal third-quarter earnings, they were down nearly 26%.

Walmart shares, on the other hand, have soared 19% so far this year. This is ahead of the S&P 500’s year-to-date gains of about 17%. Its shares hit an all-time high on Wednesday.

It’s not just Walmart. Other retailers with reputations for value have also seen stronger sales. On Wednesday, TJX Cos., the parent company of TJ Maxx and Marshalls, beat Wall Street expectations for sales and profits.

In an earnings call, TJX CEO Ernie Herrman said the discount retailer is “very well prepared” for the holidays, especially as it competes in “an environment where consumers’ wallets are stretched.”

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