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Target’s 2020 Plan? Robotic Tech, Ultra-Small Stores and 1,000 Remodels

Target missed Wall Street’s revenue forecast Wednesday, though the mass retailer revealed plans to revamp more stores, expand store-based fulfillment and deploy robotics to rapidly replenish inventory.

Target said its fourth-quarter net earnings climbed 4.4 percent to $834 million, or $1.63 a diluted share, on a 1.8 percent increase in revenues to $23.4 billion, which just missed Wall Street’s revenue forecast of nearly $23.5 billion. Comparable sales were up 1.5 percent, inclusive of 20 percent comparable growth in digital sales. On an adjusted basis, diluted earnings per share totaled $1.69, enough to best Wall Street’s consensus estimate of $1.65 for the quarter ended Feb. 1.

“With eleven consecutive quarters of positive comparable sales growth, driven by healthy performance in both our stores and digital channels, Target’s results demonstrate that we’ve built a sustainable business model that drives strong topline growth and consistent bottom line performance,” CEO Brian Cornell said.

“The strategic investments we’ve made over the past several years to elevate the shopping experience, curate our multi-category assortment at scale, and deliver ease and convenience through our fulfillment capabilities are deepening our relationship with our [customer],” he added.

In an effort to get product onto store shelves more quickly and maximize sales, Target is turning to robotic technology that it said has been undergoing development and testing. The retailer plans to scale its move into robotics into “hundreds of stores” by the summer in a bid to “increase the speed and efficiency of its supply chain,” it said.

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“This technology enables precise sorting on an aisle-by-aisle basis to help store team members fill shelves easier and faster while reducing backroom inventory,” Target said, adding that it also will open new warehouses near important markets, such as New York and Southern California, to “more efficiently replenish stores in high-volume areas.”

The retailer also will double down on small-format stores and remodel scores of locations nationwide. This year will mark the opening of nearly three dozen of the shrunken big boxes, which Target said drove $1 billion in sales last year. The chain’s current small-size stores aren’t quite mini enough for some needs; Target plans to shrink its square footage to approximately 6,000—roughly half the size of its most compact locations and a move catering to college campuses and dense urban centers. The retailer expects to sign its first ultra-small-store lease this year, with the inaugural opening eyed for 2021.

More stores will undergo a makeover with the customer experience in mind. Target said it will redo 1,000 stores by the time 2020 comes to a close. Remodels, it added, drive an average sales lift between 2 percent and 4 percent in the first year following completion.

Store refurbishments will focus on sprucing up the front area—the first thing shoppers encounter when they walk through the front doors. Target is “testing” new setups that bring in items that make a “welcoming impression,” such as fresh flowers and curated, engaging products. It’s also doing away with the higher walls that present a barrier between customers and associates, a move designed to facilitate “helpful service” to shoppers. This is in addition to 400 electronics departments getting a makeover by the end of next year.

Target reminded investors that store-based fulfillment services such Drive Up and Order Pickup grew 500 percent and 50 percent, respectively, last year. In 2020, Target will enhance these convenience offerings by making fresh groceries and alcohol available through these click-and-collect options. It will test the addition of fresh food in Minneapolis this spring, with plans to get the service into about half its 1,868 stores in time for holiday. And it’s trialing adult beverage Order Pickup and Drive Up fulfillment in 100 Florida and Oregon stores in the season ahead, eyeing a roll-out to the “majority of its stores by the holiday season.”

Cornell claims the experience of shopping in Target is “like nothing else in retail,” pointing to its “differentiated investment strategy, durable financial model and our team’s incredible work in reinventing the Target run” as powering the retailer’s success to date.

“As we look to 2020,” he added, “we’ll continue to elevate our popular same-day services and expand our ambitious small-format and remodel programs to create an even easier and more convenient experience that inspires our millions of guests to keep shopping Target in new and different ways.”