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Target's Short-Term Focus Spooks Long-Term Believers

Target's focus on near-term improvements, such as store remodelling and cutting prices, is disheartening signal for long-term investors.
Source: Target
By
  • Bloomberg Gadfly

NEW YORK, United States — Is Target Corp. getting desperate?

That seemed to be the case this week when CEO Brian Cornell took the stage at Shoptalk, a Las Vegas industry gathering to showcase the future of retail.

As retailers big and small discussed how they're using such tools as artificial intelligence, voice ordering, and delivery drones to better serve increasingly demanding shoppers, it stood out that Target's Cornell used the conference to proclaim the retailer's retrenchment.

In front of thousands of the industry's innovators, Cornell talked about his plans to shut down parts of its Silicon Valley operations and shutter its so-called "store of the future."

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He showed pictures of a newly remodelled store in Texas , explaining how he would channel investment dollars to projects that would yield results in the next few years, not decades. ( You could almost hear Amazon.com Inc. CEO Jeff Bezos laughing from his spaceship, er, rocket engine .)

The message was especially strange juxtaposed against those from companies such as West Elm, which outlined plans to launch a new chain of boutique hotels, or Wal-Mart Stores Inc., which launched its own startup incubator, Store No. 8. These old-school retailers might be struggling, too, but at least they're trying to look ahead to the future.

Audible sighs erupted during Cornell's presentation when he touted that Target more than doubled its digital sales in the past three years — a number that sounds impressive until you realise Target's annual online sales amounted to just $3.4 billion last year.

"What is he bragging about?" one attendee remarked. "That's the same amount of annual sales at Wayfair."

Meanwhile, at a time when retailers such as J.C. Penney Co. and Macy's Inc. are announcing swaths of store closings, Target's big news this week was that it planned to build brick-and-mortar stores in pricey urban markets — including a new flagship close to Macy's crown jewel in Manhattan's Herald Square.

Leave aside the fact that most people in that part of New York City are either tourists or suburban commuters who already have Target stores in their neighbourhoods. Forget for a moment, too, that the location is far from the city's natural Target customers, such as university students and young families. The notion that  Target's biggest idea right now revolves around building more physical locations makes it clear the chain is out of touch with reality.

Target's focus on near-term improvements, such as store remodelling and cutting prices to keep up with Walmart , might be necessary to stop its sales free fall.  But it's a pretty disheartening signal for long-term investors when a CEO decides to run his company for short-term profits over sustained success.

By Shelly Banjo; editor: Mark Gongloff. This column does not necessarily reflect the opinion of Bloomberg LP and its owners. The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of The Business of Fashion.
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