MINNEAPOLIS — On Tuesday, Minneapolis-based Target announced another quarter of declining sales — making it three in a row.
But just as soon as the news came out, it also launched a plan to help turn things around and it starts with a new paid membership plan.
"There's just a lot of enthusiasm around going to Target, but I think the last year shows that's not enough for them," said Wall Street Journal retail reporter Sarah Nassauer.
Despite slumping sales, Target did report a 58% increase in fourth-quarter profits and handily beat Wall Street expectations as the retailer cut costs and maintained a lean inventory during the critical holiday season.
"The positive news is about the profit," said Nassauer. "They’re ability to take falling sales and still make more money off fewer sales."
Target offered a cautious outlook on the future, since it earns most its sales from nonfood items like apparel, home and toys. And in a tough economic environment, that's what people have stopped buying.
"I think we've learned, we've got to listen to the American consumer, be on trend and understand how things are changing," said Target's CEO Brian Cornell.
Consumers are spending more on food than they have in 30 years, turning to the country's largest grocer — Walmart. And that makes Target even more vulnerable.
"Everyone is aware of that, it’s so extreme, and that means you might not go to Target and buy another throw pillow," said Nassauer.
Target is still looking ahead and predicting future growth, especially towards the end of 2024. It's leaning into creating its own brand, called Dealworthy, that has sells everyday basics for less than a $1. It also has plans to open 300 new stores across the country and remodel the rest, along with launching a new paid membership plan with free, same-day delivery in as little as an hour for orders over $35.
"It's really an acknowledgment from them that one, they needed to revamp this Target Circle thing, and two, they want to be in this membership game," said Nassauer. "They very much feel they have a plan to reverse the sales trends they saw last year."
The loyalty program called Target Circle 360 will launch with a special offer for new members for $49 per year from April 7 through May 18. Other customers will pay as much as $99. The current Target Circle program has more than 100 million members.
The relaunch comes as Target aims to copy the success of Amazon’s juggernaut Amazon Prime and follow Walmart’s membership program.
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