Target is focused on inventory, supply chain issues

Target (NYSE:TGT) is focused on inventory, assortment and supply chain issues this year as it looks to realign merchandising to better support online initiatives.

The retailer is looking closely at categories to right-size assortment and negotiate new packaging and shipping protocols with vendors, with the goal of reducing inventory in back and reducing out-of stocks at the shelf.

"It's going to be very surgical, category by category," CEO Brian Cornell said at an investor event, according to The Wall Street Journal. "We are not taking a blunt instrument approach to this."

Target is looking to maximize its store base to help grow the online business while minimizing out-of-stocks. Digital sales grew 34 percent last year.

"Target's strategy as outlined yesterday to maximize the flexibility of its existing store base and distribution centers to also service its growing, though still relatively small, online business is consistent with our view that brick-and-mortar retailers have significant opportunities and assets to exploit as they move online," said Charlie O'Shea, lead retail analyst at Moody's, in an email. "In addition, like other retailers undertaking this transformation, such as Walmart, Target confirmed that building out an effective online business is not free and does not happen overnight."

To help, Target has brought in Arthur Valdez as exec-VP and chief supply chain and logistics officer. Valdez spent the last 16 years at Amazon, working in various roles related to supply chain, fulfillment and logistics. 

Target has focused its efforts around growing five key product categories: Style, Baby, Kids and Wellness. And while changes to the grocery department have been ongoing, substantive growth in this category has eluded the retailer.

Internally, Aaron Alt has been tasked with the job of figuring out grocery. Alt was formerly CEO of Target Canada, assigned to negotiate the retailer's exit, and has held several roles fixing things within the company, according to The Wall Street Journal.

"Our focus in 2016 and beyond is on providing a seamless, reliable and enjoyable guest experience each and every time," said Cornell in a company blog post. "We know we have a lot of work ahead, but our teams are up to the challenge. Target's leaders are engaged, the team is energized and our guest—as always—is at the center of everything we do."

For more:
-See this Wall Street Journal article (tiered subscription)
-See this A Bullseye View blog post

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