American big-box retailer Target Corporation (NYSE:TGT) is attempting to reach out to a wider base of remote customers through its extensive facilities. Target has planned to deliver the orders to distant customers on the “next day” after they hit the “buy” button online. These efforts are focused on boosting its e-commerce business, which has witnessed a lull in demand owing to the tough macro backdrop. Customers are saving more for uncertain times and spending only on essentials, leaving Target’s offerings such as accessories and clothing to bite the dust on shelves.
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The company is hoping that its new delivery plans will kickstart its sluggish online orders.
Here’s How Target’s Next-Day Delivery Works
Target is currently testing an extension facility in Smyrna, Georgia, which is about 16 miles northwest of Atlanta. The retailer’s Shipt delivery service picks up orders from the extension facility and delivers them to the remote customers doorsteps the next day after they hit the “buy” button. This kind of network setup will help Target cater to an additional 500,000 customers near Atlanta, providing next-day delivery service to a total of three million people around Atlanta.
The company reported that over 96% of its online orders are fulfilled through their physical stores. Having said that, Target is also strengthening its supply chain facilities called “sortation centers” which are involved in the grouping and boxing of packages as per the most efficient delivery route. The retailer currently has nine such centers and plans to open at least six more by January 2026. TGT has also dedicated $100 million to building a larger, well-spread network of supply chain that will help the retailer to reach out to more customers promptly.
Retailers worldwide are witnessing a declining demand for discretionary products. The online demand for these products peaked during the pandemic times when customers were locked up in their houses and also received government stimulus money, which they could spend on discretionary items. Now, however, trends have changed, leaving retailers with hefty inventories and exploring strategies to boost their sales. Yesterday, Target also announced the rollout of Target Circle Week, a program similar to rival Amazon’s (NASDAQ:AMZN) Prime Day, which will offer huge discounts on selected items from July 9 to July 15.
Is Target a Good Buy Now?
According to analyst Dean Rosenblum from Bernstein, the fact that TGT stock has declined by 11.1% year-to-date presents a favorable buying opportunity. Target has also been a victim of the Pride Month controversy, which has dragged down its shares by over 12% in the past month. On June 15, Rosenblum maintained a Buy rating on the stock with a price target of $183, implying 37.4% upside potential. The analyst is highly optimistic about the resurgence in demand for both Target’s staples and discretionary products. Plus, the company announced a 1.9% increase in its quarterly dividend to $1.10 per share. This pumps the Dividend Aristocrat’s current dividend yield up, to 3.25%.
Overall, however, analysts remain split on the stock’s trajectory. On TipRanks, TGT has a Moderate Buy consensus rating based on 12 Buys and 11 Hold ratings. Also, the average Target price forecast of $177.68 implies 33.4% upside potential from current levels.
