Target’s first-quarter profit rose almost 8 percent as attempts to turn its business around appear to be gaining some traction. Sales at established stores fell for the fourth consecutive quarter, but the decline was less than expected, and online sales surged 22 percent.
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While the good pieces of news sent shares up more than 2 percent in midday trading Wednesday, CEO Brian Cornell still needs to find a way for Target to thrive in the face of intense pressure from Amazon and Wal-Mart. One of Target’s key problems is that customer traffic declines extended into the first quarter and the amount shoppers put in their baskets also dropped. And Target also is still struggling with groceries and essentials, which drive shoppers to the store.
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While we are pleased that our first-quarter financial performance was better than expectations, our results are not where we want them to be and we have much more work to do, Cornell told investors. He noted that results have been volatile week to week since Christmas.
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Facing those challenges, Target had announced plans in February to remodel more than a third of its 1,800 stores over the next three years, speed up its expansion of small-format stores, bolster online operations, and launch new brands.
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The company will also use stores as local distribution hubs — using the backroom storage areas to also house goods bought online directly to homes, or held there to be picked up by shoppers. Target is now using about 1,000 stores for direct shipping in a bid to match Amazon’s free, two-day delivery available to its Prime customers.
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With those measures in place, Target said it expects profits to start growing again in 2019 after taking a hit of $1 billion this year.
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Cornell had said Target wants to return to more consistent low prices on essentials to…