Target Seeing Better ‘Attachment Rates’ in Electronics From Store ‘Remodels’
Target is in “the middle of an unprecedented” store-remodeling plan, with the goal of being sure “we continue to provide a differentiated in-store experience,” said Chief Operating Officer John Mulligan on a Wednesday earnings call. Target completed 56 “remodels” in…
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
its Q1 ended May 5, “and we’ve already launched well over 100 more” that will be ready in Q2, he said. “The new environment invites guests to visit more often,” he said: “When guests visit, they find a team that’s better-trained and better-equipped than ever before. Because we’ve rolled out training and ongoing product education, our guests are greeted by product experts in key areas,” including electronics, he said. Target is “happy with what we’re seeing” in the early results, he said. “We’ve seen better attachment rates and warranty sales in electronics, as guests respond to the higher level of service and expertise they’re finding there.” The “pilot” project of “modernizing” its “store-operating model” is now installed in 26 “districts” of stores, said Mulligan in Q&A. “The idea here is to get experts in the areas where they know the business,” including electronics, he said. “They’re accountable for the totality of that business,” he said. “They own everything that goes on in that business.” The stock closed down 5.7 percent to $71.17 after operating income margin fell 0.9 points to 6.2 percent from the year-ago quarter. The retailer's differentiation strategy of selling certain products with higher margins that are growing faster, comprising about a third of sales, "is coming under pressure as consumers shift more to online, where Target significantly lags its peers, generating just under $4 billion of sales annually through that channel, versus $23-plus billion at Walmart and $60-plus billion for Amazon in North America," Morningstar analyst John Brick wrote investors previously, reprised in a Wednesday report. That day, he wrote he doesn't see much change to expecting 5.9 percent margins over the next decade, less than in recent years: Target may "see higher variable costs associated with e-commerce and delivery, particularly as we expect continued growth of 20% a year through this channel toward 10% of sales by fiscal 2021 (from near 6% today)."