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Target launches new paid membership program in a bid to drive increased sales

WCCO digital headlines: Morning of March 5, 2024
WCCO digital headlines: Morning of March 5, 2024 02:52

NEW YORK — Target, looking for ways to add sales, is relaunching its Target Circle loyalty program including a new paid membership with unlimited free same-day delivery in as little as an hour for orders over $35.

The loyalty program called Target Circle 360 will launch with a special offer for new members for $49 per year from April 7 through May 18. The current Target Circle program has more than 100 million members. The relaunch comes as Target aims to copy the success of Amazon's juggernaut Amazon Prime and follow Walmart's membership program.

Target unveiled a series of steps at its annual investors' meeting Tuesday that aim to rejuvenate sales and traffic. Target will refresh its stores, and over the next decade, the Minneapolis discounter will build more than 300 new stores.

Separately, the Minneapolis-based discounter reported a 58% increase in fourth-quarter profits and handily beat Wall Street expectations as the retailer cut costs and maintained a lean inventory during the critical holiday season.

Revenue rose slightly from a year ago and also topped projections. Comparable sales — those from stores or digital channels operating at least 12 months — slipped 4.4%. But the declines slowed compared with the 4.9% drop in the third quarter and 5.4% drop in the second.

Target offered a cautious outlook on sales and profits.

"This is a unique moment to clarify our roadmap for growth," Target's CEO Brian Cornell told investors at the meeting in Manhattan.

The investor meeting comes as Target's shoppers remain cautious about spending on discretionary items as they are squeezed by inflation and high borrowing and credit card costs.

Target is more vulnerable than Walmart and other big box discounters. More than half of its annual sales come from discretionary items like toys, fashion and electronic gadgets, things that many Americans have stopped buying.

Target has been trying to strike the right balance between offering good value while also infusing its stores with trendy goods. Last month, the retailer launched a new collection called Dealworthy which features nearly 400 everyday basics starting at less than $1, with most items under $10. They include clothing and accessories, home items and electronics.

At the same time, Target's deal, struck last year, with designer Kendra Scott to offer exclusive collections of earrings, necklaces has resonated with shoppers. So has its new kitchenware brand under the discounter's own label Figmint.

Target has been laser-focused on inventory levels after being burdened with heavily stocked warehouses in the summer of 2022. The inventory glut forced it to discount heavily to clear out those goods.

As for its membership program, Target will continue offering its free-to-join membership with personalized deals, member-exclusive sales throughout the year and additional perks and saving. But new for members: deals will now be applied automatically at checkout so customers don't have to search for or add individual offers. Target said that members of the free Target Circle membership program already shop five times more and spend five times more than non-members.

Target Circle (formerly called Target RedCard) credit cardholders will be able to sign up for Target Circle 360 at $49 per year if they have their card saved to their Target profile, the company said. Customers without a Target Circle Card will pay $99 per year. Cardholders will also be offer an extra 5% offer instantly on top of the Target Circle deals.

In comparison, an Amazon Prime membership costs $15 a month or $139 annually and includes free streaming of its Amazon Video, among other perks. The Walmart Plus program for free shipping costs $12.95 per month or $98 in annual fees.

Target reported net income of $1.38 billion, or $2.98 per share, for the three-month period ended Feb. 3. That compared with $876 million, or $1.89 per share, for the year-ago period. The bottom-line results for the latest quarter well surpassed estimates of $2.42 per share, according to FactSet.

Revenue rose 1.7% to $31.92 billion, above projections of $31.83 billion.

Traffic for both stores and online combined fell 1.7% during the latest quarter, but that was an improvement from the 4.1% drop in the third quarter.

For the current quarter, Target expects a comparable sales decline of 3% to 5%. Analysts are expecting a 3.6% drop, according to FactSet. It forecast adjusted earning per share to be in the range or $1.70 to $2.10. Analysts expect $2.08 per share.

For the full year, Target anticipates comparable sales unchanged to up 2%. Adjusted earnings per share should range from $8.60 to $9.60, Target said. Analysts are expecting $9.15 per share, according to FactSet.

Target shares rose more than 11% to $167.33 in midday trading.

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