MINNEAPOLIS (KMSP) - Target analysts warn of a bleak sales year for the Minnesota-based company after they missed the bulls-eye on profits last year.
Target stock prices Tuesday also took a 12 percent tumble.
While CEO Brian Cornell rolls out a $7 billion plan to reverse this negative sales trend over the next three years, George John, a marketing professor at the University of Minnesota’s Carlson School of Business, calls the approach “contradictory.” And adds the plan that proves Cornell wants to have his cake and eat it, too.
“They’re trying to improve the attractiveness of their stores and the rest of it. That didn’t work so well last year,” John told FOX 9.
Target's market beat-down Tuesday marked its worst day in 18 years.
After announcing the company’s 2017 sales outlook, sharply below analysts’ expectations, CEO Brian Cornell likened the profit dip to taking shareholders through a new direction for the company.
“We’re investing in our business with a long-term view of years and decades, not months and quarters,” Cornell is quoted in an article published on the company’s website.
“We’re putting digital first and evolving our stores, digital channels and supply chain to work together as a smart network that delivers on everything guests love about Target, including more than a dozen new brands we’ll introduce over the next two years. We’re confident our strategy meets the challenges of today and will lead us well into the future.”
Target’s hefty strategy includes:
*Remodeling 600 stores
*Transforming supply chain
*Launching new brands
*More digital investments.
Some initiatives launched since the 2014 data breach that have already missed the mark, John told FOX 9, simply because they don’t get to the root of Target’s problem. One every general merchandise store is working hard to tackle, he says.
“Will people actually believe they’re now as cheap as Wal-Mart? I don’t think so,” John imparted. “You have to keep everyone happy, you have to have the merchandise people want to buy and you have to sell it at a high enough price that you make money and that’s been tough to do in a bad economy,” the professor continued.
“It’s not just [Target]. It’s Nordstrom’s, it’s Macy’s, it’s all these other department stores,” John added.
Then there’s Amazon. Online competition John calls both a threat and an opportunity.
“I think we’re all rooting for [Target] to stop that negative sales trend. That would be the best news we could get,” John smiled.
If there’s any silver lining to Target’s profit beat-down it’s that the company saw 34% growth in on-line sales through its website and mobile apps over the last year. That's higher than Amazon's overall sales growth during the holidays and even outpaced the 29% jump in online revenue growth that Walmart (WMT) posted in the fourth quarter.
E-commerce numbers, however, still only makes up a small part of Target’s overall net sales.