Target's (TGT) Omni-channel & Restock Program to Fuel Sales

Target CorporationTGT is trying all means to rapidly adapt to the changing retail ecosystem. The company is deploying resources to enhance omni-channel capacities, come up with new brands, remodel or refurbish stores, and expand same-day delivery options to expedite the shopping process. All these bode well for the stock that has risen and outpaced the industry in the past six months. The company has also sustained its upbeat performance in second-quarter fiscal 2018, wherein both the top and bottom lines beat the Zacks Consensus Estimate and continue to improve year over year.

With an aim to capture the booming online grocery delivery market, Target teamed up with popular online grocery delivery service Instacart. The company made significant headway further in the same-day delivery race by acquiring Internet-based grocery delivery service Shipt to provide same-day delivery of more than 55,000 groceries, essentials, home, electronics, toys and other products.

The company has rolled out Target Restock program that allows customers to restock their shipping box with essential items online and get them delivered at door step by the next business day for a nominal charge.

Target also acquired a transportation technology company - Grand Junction - to expand its supply chain and improve delivery capabilities. Drive Up, an app-based service, is another initiative to facilitate the shopping process. The service allows customers to place orders using the Target app and have them delivered to their cars. The company intends to expand the service to 1,000 stores by the end of this year.

The company continues to lay emphasis on developing smaller format stores to tap densely populated urban regions and space-crunched cities. With the changing business scenario and rising competition, Target felt the need to have stores of various sizes and formats in order to better serve its target areas. This approach helps the company to augment sales without substantial capital investment. These types of stores generally have higher sales productivity.

Target opened roughly 30 small format stores in fiscal 2017, and now plans to open another 30 new outlets in fiscal 2018. The company plans to operate more than 130 small-format outlets nationwide by the end of fiscal 2019. It remodeled 110 stores in fiscal 2017. The company plans to remodel 325 in fiscal 2018, 350 in fiscal 2019 and 325 in fiscal 2020. During the first and second quarter of fiscal 2018, the company concluded 56 and 113 remodels, respectively, and opened six small format stores in both the quarters.

Wrapping Up

Target, which shares space with Costco COST , is committed to making capital investments to the tune of roughly $3.5 billion in fiscal 2018. Analysts pointed that incremental investments may weigh on margins. However, it is better to face short-term impediments in order to attain the long-term goals. Certainly, the company has chalked out strategies to take on Amazon AMZN and Walmart WMT this holiday season.

These initiatives are likely to bolster Target's performance and cushion the stock. So far in the year, shares of this Zacks Rank #2 (Buy) company have rallied 35.2%, outperforming the industry 's growth of 24.6%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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