Minnesota retail, service sector gearing up for strong year

Buoyed by a stronger economy, many of Minnesota's largest retailers had a better-than-expected 2017 and are gearing up for another strong year of sales.

But as they continue to invest in areas such as supply chain and technology to keep up with the formidable Amazon, the challenge will be how much of their profits are squeezed in the process.

Minneapolis-based Target, the second-largest company on the Star Tribune 50 list, had forecast a small decline in comparable sales last year. Instead, it ended up with revenue of $71.9 billion, an increase of 3.4 percent. But its profits fell 4.8 percent as efforts to lower prices, increase employee wages and remodel stores took a toll on the bottom line.

This year, it continues to focus on refurbishing stores with features such as a top-to-bottom makeover of its beauty department and continuing to roll out new private-label brands to refresh its merchandising. This year, it's already launched Universal Thread, a denim-focused brand that replaces Mossimo, and has announced other new brands such as a private-label electronics line and two clothing brands aimed at teens.

At the same time, Target has been sharpening its digital game. It's rolling out same-day delivery through its subsidiary Shipt, which it acquired last year, to most of its stores by the end of this year.

Meanwhile, Richfield-based Best Buy, the third-largest company on the top 50 list, had a blockbuster year with revenue rising 7 percent to $42.2 billion. Its profits rose 6.2 percent. It has been benefiting from a stronger cycle in consumer electronics, with hot items including smart-home products, as well as the disappearance of some competitors in the market such as HHGregg as well as Sears' struggles.

Best Buy also continues to optimize its real estate, shuttering some buildings such as its 250 small-format mobile-phone stores and its location at the Mall of America. At the same time, it is opening its first new big-box store in seven years this fall outside of Salt Lake City.

The consumer electronics chain also recently strengthened ties with frenemy Amazon with a deal announced earlier this year for Best Buy to be the exclusive seller of TVs with Amazon's Fire TV embedded in them. As it continues to differentiate itself from online-only retailers, Best Buy also has been investing in an in-home adviser program.

Retail and service companies continue to be a major component of the Minnesota's top 50 list. The 10 retail companies on the list accounted for 28 percent of sales and 13 percent of profits. What's more, the market value of those 10 companies grew 18.2 percent, better than the overall list's growth of 7.8 percent.

However, some of the players are struggling. Supervalu, for example, saw a 17.5 percent revenue boost but an 80 percent profit drop. Christopher & Banks posted a net loss for the year and continued with revenue struggles, with sales dropping 4 percent.

Kavita Kumar • 612-673-4113