Those same-day fulfillment options are also especially useful during the holiday season when time is critical for shoppers searching for gifts, giving the company strong momentum going into the key fourth quarter. In addition to e-commerce, Target has also had a lot of success with private brands, as its in-house lines generally afford higher profit margins than mass-market brands -- and when successful, their exclusivity can serve as a way to bring shoppers back to the store.
CFO Michael Fiddelke explained the strategy on the earnings cal l, saying, "On the owned-brand front, it really starts with providing product that we think the guests will respond to, and so curated owned-brand products that drive repeat purchase and loyalty over time. So we start there, and when that owned-brand product goes well, it translates favorably to the gross margin line.
In the third quarter, the company said that apparel and accessories sales jumped by double digits, a contrast with competitors like Kohl's and Walmart that have struggled in apparel. Management also credited its "distinctive owned brands" for the strong performance. Apparel isn't the only area where Target is counting on private brands to deliver growth.
Grocery is one area where Target has historically lagged behind its rivals, so the new private brand could help it gain share in an important category that drives high-frequency visits.
Perhaps more than any other retailer, Target has succeeded at capitalizing on new opportunities in the market, filling in the gaps as other retailers close stores and go out of business and responding to changing consumer demands. Its omnichannel push is one example, and its success in apparel seems to have come in part from taking share from its struggling rivals. However, the best example of this strategy may be in toys, as the company has seen significant growth in that category following the Toys R Us bankruptcy last year.
Toys helped propel Target's growth over the holidays last year, and this year, it's making another big push in toys, selling 10, new and exclusive items. Target has also teamed up with Toys R Us and will be fulfilling the revived toy brand's orders through its website. The future store design will focus on safety and ease, with additional contactless features, updates that facilitate same-day fulfillment and more room for social distancing.
With this new last-mile capability, the sortation center collects online orders from local stores multiple times a day and sorts them into efficient routes for carrier delivery. This pulls the sorting activity out of store backrooms so it can be consolidated more efficiently at one facility, giving store teams more time and space to fulfill additional orders, while reducing the load on external carriers.
This process increases store fulfillment capacity, reduces last-mile fulfillment costs and speeds delivery to guests. This year, Target expects to open two distribution centers, one in Delaware and one in Chicago. Two more are planned in to support the east and west coastal areas. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update any forward-looking statement.
Target, however, had unique advantages before the pandemic that kept its business humming during the health crisis. It fulfills nearly all of its online orders at stores, which improved the company's profits. It launched and grew numerous private label brands, which set it apart from rivals. And it was ahead of other retailers in raising employee wages, which has fended off a labor crunch and kept stores tidy. Here's what Target reported for the fiscal first quarter ended May 1, compared with Refinitiv consensus estimates:.
The more than sevenfold increase in net income from a year-ago was driven by several factors. In the early days of the pandemic, Target saw profits plummet and labor costs balloon as customers skipped over high-margin merchandise like apparel and accessories and employees took on new tasks from additional store cleaning to picking online orders.
Shoppers are once again spending more on apparel and home goods, and Target has grown sales of its own private label brands. The retailer said it has continued to attract new customers and entice them to spend more.
Available inventory changes quickly. Shop Target. We're here to help. Due to high demand, the wait to reach a team member may be longer than you're used to.
Print a page, color and then share on social with Target using TargetFeels for our team and everyone on the frontlines to see. Target created a package of helpful operational resources including templates and guides for employee health screening, benefits examples and cleaning protocols, as well as social distancing and safe employee measures.
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Mask guidance Increased cleanliness. Shop alone if you can. Does Target require guests to wear masks in stores? Is Target offering a coronavirus vaccine to guests?
Will Target have the items I need? We apologize for any inconvenience. Stationing a team member at each store entrance to clean and disinfect carts and baskets between each use. Frequently cleaning each checklane and providing hand sanitizer for our guests. Using Plexiglass partitions throughout our stores, including at checklanes, Starbucks, cafes, guest services and more. Providing team members with face masks and gloves. Strongly recommending face coverings for unvaccinated guests and team members in Target stores.
Monitoring and metering guest traffic as needed to promote social distancing and ensure a safe shopping environment. Reminding guests about social distancing by using signs, floor stickers and audio messages in our stores. We also have measures in place aimed at providing guests with an easy and safe shopping experience: Contactless In-Store Payment: Guests can use Wallet, the mobile payment option in the Target app, for a contactless self-checkout experience regardless of where guests choose to checkout in stores.
Guests can visit Target. MyCheckout: Target has 1, more MyCheckout devices at stores across the country, so team members can help guests check out anywhere in the store quickly to avoid waiting in line as needed during busy times. Are fitting rooms open at Target? Are they safe to use? Can I return products at Target amid the coronavirus pandemic? Is Target allowing the use of reusable bags in stores during the coronavirus pandemic?
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What is the best way to reach a guest service team member for help? Are you making any special accommodations for elderly guests or those who might be at greater risk? If no vulnerable guests are waiting when the store opens, and other guests are waiting to shop, store leaders may decide to open the store to all guests. Product limits still apply. Is Target continuing to sell face masks and personal protective equipment in stores? What is Target's involvement in the federal retail location testing program?
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