Target Execs Forecast Upbeat Outlook, Including for New Grocery Brand

On the heels of posting a strong second quarter—including a 3.4% same-store growth driven by 2.4% traffic growth and comparable digital sales growth of 34%—executives from Target Corp., shared an upbeat outlook for continued progress on its long-term strategic initiatives.

A top priority of the Minneapolis-based retailer’s to-do list—which has been energized by 10% same-store sales increases the past two years, marking its best comp performance in more than a decade—is its new own-brand in food and beverage, Good & Gather.

About 650 of the retailer’s new private brands’ products will begin rolling into stores and on target.com, with same-day delivery, on Sept. 15. More than 2,000 items will be available by late next year. The first wave of Good & Gather items to hit stores will be in dairy, produce, ready-made pastas, meat, granola bars and sparkling water.

During a call with investors to discuss Q2 earnings, Chief Merchandising Officer Mark Tritton detailed the impetus behind the launch of Good & Gather. “We know that food and beverage is a big reason our guests like shopping at Target, since nearly three-quarters of our baskets have at least one food item in them," Tritton said. "Driven by the improvements we have implemented over the last two years,” Target has seen “consistent growth and market share gains in food and beverage for well over a year.”

Photograph courtesy of Target

To further that momentum, Tritton said, “It's critical that our approach to every aspect of our food offering—from selection to presentation—brings joy to our guests' lives. So in developing this brand, the product design and development team is focused on delivering taste, quality and ease.”

Importantly, he noted, “The entire assortment is made without artificial flavors, synthetic colors, artificial sweeteners and high fructose corn syrup, helping our guests feel confident they are serving their families affordable great tasting food that doesn't cut corners on quality ingredients.

“Good & Gather will become Target's flagship food brand, with extensions focused on kids, organic and signature product lines,” said Tritton.

Tritton described how Target’s in-house R&D team designed the new line “to make it easy for families to discover the joy of food,” with extensive research centering on determining guests’ wants and needs.

As WGB reported earlier this week, Stephanie Lundquist, EVP of food of beverage for Target, declared the reimagined brand to be its “most ambitious food undertaking yet ... with convenient, affordable options that don’t cut corners on quality or taste.”

Target has also prioritized other objectives to continue building momentum in its food and beverage business, including hiring and training industry experts; strengthening its supply chain to ensure freshness and in-stocks; revamping in-store displays; and adding new fulfillment options such as same-day delivery.

During Q2, Target’s overall food and beverage business posted low, single digit same-store sales increases, results that were led by adult beverages, which Tritton said “delivered another quarter of double-digit growth.”

Looking ahead, Target will complete more than 100 additional store remodels alongside the continued expansion of Drive Up and Shipt chainwide.

In other highlights of Target’s investors call, Brian Cornell, chairman and CEO, discussed the system outages that affected cash registers and payment systems during a busy June weekend. “These outages disappointed our guests. And once again, I want to apologize for the inconvenience it caused," he said. "While our business still delivered an outstanding quarter, these outages are a stark reminder of the need for us continue to focus on execution across every aspect of our business every day.”

Cornell praised the company’s front-line store teams across the country, “who worked tirelessly to minimize the inconvenience to our guests,” as well as its “headquarters teams, who scrambled quickly to assess root causes and recover our systems in a very short time. I have said this before and I see it every day, we have the best team in retail.”

Additionally during the call with investors on Aug. 21, Cornell said his first Target earnings call was “almost exactly five years ago” to the day. “Target has changed a lot in those five years,” he said, citing exiting Canada; selling its pharmacy business to CVS; rejuvenating its own-brand portfolio and launching dozens of new brands across multiple categories.

“We went from simply selling on a website to integrating digital within every part of our business, positioning our stores at the center of the most comprehensive suite of digital fulfillment options in the U.S.," he said. "We opened about 100 small-format stores, reaching new neighborhoods in dense urban areas and around college campuses. And we made significant changes to our team and how we work, both at headquarters and our stores."