On Wednesday, Target leaders held their annual investment community meeting to provide an update on the company’s transformation and long-term financial plans. CEO Brian Cornell, CFO Cathy Smith and COO John Mulligan offered an overview of progress made throughout 2015, and gave a look ahead at what customers and shareholders can expect in 2016 and beyond.
As Brian said in his opening remarks, Target has had quite a year. Looking ahead, Target will maintain a consistent focus on its strategic priorities, which are already driving growth. And all of the company’s efforts will be fueled by a customer-centric point of view, including updating the retailer’s loyalty programs to include more personalized offers and a simple way to participate.
The Target blog “A Bullseye View” caught up with Brian to ask a few questions about the big day.
How are you feeling coming off the first year of Target’s transformation?
Terrific. I’m really proud of the great work by our team in 2015 to drive significant progress on the strategic priorities we laid out a year ago. Guests are telling us with their feet and their clicks that we’re focusing on the right things. Traffic has been up for five straight quarters. We’ve seen industry-leading growth in digital. Our signature categories are growing about three times the rate of our overall business, thanks to investments in quality and differentiation. Our efforts around the fundamentals are improving operational performance and delivering the right foundation for future growth. And we’re just getting started.
What early progress can you point to with your work on the fundamentals?
Guests should be able to rely on Target for a hassle-free shopping experience. Every time we don’t deliver, we’re leaving sales on the table. By getting the fundamentals right in our supply chain, stores and technology, we will unlock tremendous potential for growth in our business. John Mulligan shared a few early wins today, including the work of our out-of-stock action team. They dug into each category to understand the root causes of persistent out-of-stock challenges, and were able to make simple, sustainable changes. As a result, we finished 2015 with out-of-stocks that are 40 percent lower than the year before. We also announced this week that Arthur Valdez will join Target as EVP and Chief Supply Chain & Logistics Officer and will build on the great work underway to move Target forward in this area.
Does that mean innovation takes a back seat while you work on the fundamentals?
Not at all. Meeting our guests’ needs means building a strong foundation while also thinking about the possibilities for the future. Grocery is a great example. Our team has been conducting item-by-item tear-downs and changing processes and practices to enhance freshness, assortment and convenience. And we’ve seen our guests respond to our efforts, as food outpaced our overall business in the back half of the year. But we know we’re not tapping into the full potential of our nearly $20 billion grocery business. In the near term, the addition of one grocery item to the baskets of guests who are already shopping our food assortment would add billions of dollars of incremental sales. Longer term, we are partnering with IDEO and the MIT Media Lab on a project around the future of food. Exploring opportunities to learn and innovate beyond our core businesses and fueling a culture of curiosity are critically important to our future.
What can we expect from signature categories in 2016?
We will continue to invest in our signature categories of Style, Baby, Kids and Wellness to inspire our guests with incredible products they can only find at Target. We’re making constant improvements and enhancements, things like fit and quality in Style and natural and organic food offerings in Wellness. In Kids, we’re introducing two new (private) brands this year that came to life through conversations with parents about how they shop for their kids. And, in Baby, we’re offering new moms and dads products and services for navigating this new life stage, including a connected nursery section coming to several hundred stores this summer.
What are you most focused on in the coming year?
Our focus in 2016 and beyond is on providing a seamless, reliable and enjoyable guest experience each and every time. We know we have a lot of work ahead, but our teams are up to the challenge. Target’s leaders are engaged, the team is energized and our guest—as always—is at the center of everything we do.