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Target’s Sales to Improve in 2018 but at a Slower Rate

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Target’s sales trend

The key highlight for Target in 2017 was its sales returning to a growth path after seeing declines over the past several quarters. The company’s continued business investments including low pricing, enhanced digital offerings, and the addition of new and exclusive brands has helped the company to turn around its sales. The graph below shows Target’s sales growth/decline rate trend. Notably, the company’s digital sales are growing at a brisk pace, which in turn, positively impacted the company’s top-line growth rate.

However, increased competition from Walmart (WMT), Amazon (AMZN), and Costco (COST) continue to pose challenges.

What to expect

Analysts expect the company’s sales to end the year on a positive note and mark an increase of 2.4% YoY (year-over-year) in fiscal 2017. Target’s new small-format stores and remodeled ones are expected to drive the company’s top line, as these stores are witnessing higher comps than the traditional ones and generate higher productivity.

Besides, the company’s differentiated offerings including the launch of exclusive brands further support its sales growth rate. For instance, Target’s Cat & Jack, Pillowfort, Project 62, A New Day for Women, and JoyLab, among others, are witnessing strong demand and resonate well with consumers. Plus, the company partnered with Magnolia and launched an exclusive new home and style brand Hearth & Hand, which could further help its top line.

Moreover, Target lowered prices on thousands of products to drive store traffic and stepped up its delivery process for online orders, which is expected to keep Target in the game considering Walmart’s strong investments in its digital business and expansion of Amazon into the grocery space. However, in fiscal 2018, analysts expect the company’s sales to stay flat given a heightened competitive environment.

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