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Will Target’s Growth Measures Drive Sales Higher?

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What analysts expect

Target’s (TGT) sales are expected to increase in fiscal 2017 after falling in the past year. Analysts expect the company’s sales to improve by 3% on a YoY (year-over-year) basis in fiscal 2017. Meanwhile, its top line is further expected to grow in fiscal 2018 thanks to growth measures such as investments in price and digital business, the accelerated pace of store remodeling, the opening of new small-format stores, and the addition of fast-growing exclusive brands.

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Target’s key revenue drivers

Target’s top line is expected to benefit from its booming digital business, which is growing at a brisk pace and meaningfully contributing to its growth. The company recently acquired Shipt, which is likely to speed up its delivery process and drive sales higher. Meanwhile, the company expanded its popular Restock program to newer markets, introduced its “Drive Up” service, and extended its partnership with Google (GOOGL) to offer voice-based shopping.

The company also lowered prices on thousands of everyday items to remain afloat amid increased competition from Walmart (WMT), Amazon (AMZN), and Costco (COST). This move is resulting in higher store traffic but hurting its margins. Target was on track to remodel 110 stores in fiscal 2017 and accelerated the pace of opening small-format stores, as these stores generate higher comps and productivity.

Also, Target’s focus on merchandising through the launch of exclusive “only-at-target” brands is further supporting its top-line growth. Notably, the company’s Cat & Jack and Pillowfort brands are showing strong growth with Cat & Jack generating more than $2 billion in revenues.

All these measures are expected to drive its sales higher. However, increased competition and unfavorable mix could remain a drag.

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