Target 2014 Annual Report Download - page 3

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Target 2014 Annual Report
Clarity as
Competitive
Advantage
2014 was a year of transition, one in which Target faced tough
moments – and emerged with momentum as we transform
our business.
A year that started with unprecedented uncertainty ended
with revitalized strategic clarity. Together, our leadership team
conducted the most comprehensive strategic review in company
history. We weighed all facets of the consumer and competitive
landscape. We picked apart each aspect of our business,
challenged long-held ideas about our guests and – after placing
everything on the table – began the tough but ultimately healthy
process of prioritizing the work that will differentiate Target and
create new platforms for profitable growth.
In the U.S., our financial performance accelerated throughout
the year. Comparable-store sales, digital channel growth and
year-over-year gross margin performance all improved as we
moved through 2014. Traffic recovered as well, in our stores and
online, which was critically important because the guest, above
all, indicates when Target is on the right track.
To build on this momentum, the leadership team is holding itself
accountable for aligning all of Target to execute on five key priorities:
Shopping on Demand -Digitally-connected families who love
to shop and demand great value are at the center of our strategy
– and central to their busy lives is the ability to shop on demand.
Target is focused on making it easy for our guests to shop
anywhere and anytime they want – in stores, online and on their
mobile devices. As a result, we are taking a channel-agnostic
approach to growing our business and investing to deliver
products and services in whatever way is most convenient for
our guests.
Category Roles -It’s an axiom of strategy that if you try to be
everything to everyone, you run the risk of being nothing special
to anyone. There are signature categories – style, baby, kids and
wellness – in which guests expect Target to be a leader. These
are categories Target has historically been known for, categories
where we are making smart investments and expect strong
returns. Other categories play important roles in our ability to
fulfill our guests’ needs, and by understanding those roles we will
better prioritize our assortment and the required investments.
Localization and Personalization -Today’s guests expect
their store experiences to be local and their digital experiences to
be relevant and personal. We have just begun to scratch the
surface of these opportunities at Target, and we are rapidly
building capabilities in these important spaces.
Urban Formats -We are testing and rolling out our urban
formatsto serve consumers in rapidly growing, densely populated
areas. We have seen strong financial results from our eight
CityTarget stores and we are pleased with initial performance
in our first TargetExpress location. On average, CityTarget
stores generate higher-than-average sales and have a favorable
merchandise mix that contributes to strong gross margins. By
integrating digital into the physical stores, we also offer guests
access to our full online assortment. Of the 15 new stores we will
open in 2015, more than half are urban formats, including one
new CityTarget and eight new TargetExpress locations.
Simplicity and Speed - To accomplish our goals, we need to
move quickly to anticipate and respond to shifts in consumer
tastes and habits. For years, Target worked to gain scale through
centralized management and repeatable processes. But the way
guests shop has changed, and Target is changing too. We are
bringing best practices from our world-class store-productivity
model to headquarters, becoming much more flexible and agile.
Simplification – cutting complexity and boosting agility – will
make Target more competitive. It will also help us control costs
and free up resources to invest in the four priorities outlined above.
I am convinced that this new clarity will unleash and accelerate
innovation at Target and make our whole organization more
responsive to consumers and our guests. Topline growth will be
one tangible result, driven by traffic in our existing stores, industry-
leading increases in digital sales and disciplined expansion of
our urban formats. But equally important is the fact that, by
accomplishing these goals, we will also create a Target that is
well-equipped to lead and compete in the new retail marketplace.
Brian Cornell, Chairman and CEO
Board of Directors Changes
At the end of his current term, Jim Johnson, founder of Johnson Capital
Partners and former vice chairman of Perseus, LLC, will be retiring from
our board. We thank Jim for his many significant contributions during his
nearly 20 years of dedicated service.