Target will remodel more stores to compete with Amazon and Walmart

NEW YORK – As Target Corp. continues to be a big believer in stores, the Minneapolis-based retailer said it would remodel hundreds more stores than previously announced.

Executives told investors earlier this year that by 2019 the retailer would remodel about 600 stores, or one-third of its store base.

CEO Brian Cornell told reporters on Thursday that the initial 70 or so remodels already completed this year, including its top-to-bottom overhaul of the Nicollet Mall store next to its headquarters, have been showing positive results, so the company will remodel another 325 stores in 2020. That means 1,000 of its 1,800 stores eventually will see makeovers.

"We've seen a great response from the guest," he said. "They're rewarding us with increased traffic. It's given us confidence to move forward aggressively."

Executives had hoped that remodeled stores would lead to a 2 to 4 percent sales boost, and so far that has been the case, he said.

The store remodels are part of the $7 billion Target is investing over the next three years to revive a business that has been struggling amid competition from Amazon.com and Walmart. Other initiatives include retooling the supply chain and introducing a dozen new private label brands. It's also planning to open about 100 new stores in the next few years, most of them smaller format stores in urban areas and near college campuses.

While most of the growth in retail is happening online, Target executives emphasize that they are also using their stores as hubs from which to more quickly and efficiently ship items to customers' doorsteps.

Cornell met with reporters at one of Target's newest stores — a 43,000-square-foot store opening Friday in Manhattan's Herald Square, across from Macy's flagship store and next to retailers such as Old Navy and H&M.

Cornell, who grew up in Queens, said Target has been dreaming of opening a store in this part of Manhattan that he called "arguably the epicenter of retail." He recalled coming to Herald Square as a child to look at Christmas windows.

"For us now to be part of it is a really special day in Target's history," he said. "This is really a symbol of the future of the company."

The store, geared toward tourists and commuters, includes a large section near the entrance that features New York and Target-themed shirts and glasses to appeal to tourists looking for a souvenir. The store has sizable beauty, food and beverage departments. Also available for a limited time only in the Herald Square store is "Print All Over Me," an exclusive collection of clothing and accessories made by New York artists.

Target now has 17 stores in the five boroughs that make up New York City, eight of which have opened in the last year. At least two more are in the works for Manhattan — one in Hell's Kitchen and one in the East Village.

New York is one of several big cities where Target is aggressively expanding. The retailer sees those areas as underserved and a growing opportunity given the population growth in many of them.

"We're simply following the consumer," said Cornell.

And in those urban neighborhoods where it has opened new stores, Cornell said Target is often attracting new customers who might have shopped it in the past but not on a regular basis. Sales productivity in those stores are also twice what it is in its more suburban locations.

Cornell wouldn't say how many more stores he could see Target opening in New York, but said he saw many more opportunities.

"In a location like Manhattan, there are a lot of additional neighborhoods we're going to explore," he said.

While Walmart doesn't have any stores in New York, the retailer has announced plans to bring same-day delivery of online orders to the city following the acquisition of the logistics firm, Parcel.

But Target is stepping up its game in this area, too. In New York, where delivery is commonplace since many people commute by train and foot, Target also announced Thursday that it will expand the same-day delivery service it has been testing in its Tribeca store to its Herald Square store as well as two stores in Brooklyn. In this program, when customers are checking out of the store, they can arrange for the items to be delivered to their home for a fee of $7 to $16.

Cornell noted that in the test, customers who used the service had basket sizes about six times the average order.

Target also said Thursday that it will expand Target Restock, its next day delivery service of household essentials, nationwide. It's already up and running in 11 U.S. markets.

Kavita Kumar • 612-673-4113