Target Expands Store Remodelling Plan

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Big-box retailer Target Corp. (NYSE: TGT) said at a media event Thursday that the company plans to expand its store remodelling efforts and to open more smaller stores in cities. The company had earlier said it would remodel some 600 stores over three years at a cost of $7 billion.

The new plan calls for remodelling 1,000 of its 1,800 stores, but CEO Brian Cornell did not offer a new investment total. The company also plans to expand its digital presence.

So far this year Target has remodeled 110 stores and plans to open 32 new stores and another 35 next year. Most of the new stores will be the smaller format stores similar to one the company is opening in New York across the street from Macy’s flagship department store. Target expects to open 55 such stores this year, including 11 this week alone.

Cornell noted that sales have risen between 2% and 4% at renovated stores and that the smaller stores have been twice as productive as Target’s big-box stores and have attracted new customers. The small stores generally have less than 50,000 square feet, compared to the average of 145,000 for the company’s traditional stores.

The company also has plans to customize the assortment of products it offers at its stores and to broaden delivery options by using its physical stores as distribution centers.

None of this is particularly new. Competitor Walmart has been doing many of these same things for a year or more and it is the clear leader among traditional retailers in its digital presence. But Target has to take some steps to prevent falling further behind Walmart or the 800-pound retail gorilla known as Amazon.

Amazon’s recent acquisition of Whole Foods and its new partnership with Kohl’s that lets Amazon customers return goods at Kohl’s physical stores are the online behemoth’s latest incursions into traditional retail’s brick-and-mortar turf. Amazon is willing to do whatever it takes to win, so Target has to be willing to do the same. So does Walmart, and so far at least, Walmart is making headway. Target needs to do the same.