Target Boosting Distribution Expansion With 5 New Sortation Centers
Target is adding to the expansion plans it laid out just a quarter ago.
The retail giant will be adding five logistics facilities called sortation centers by the end of the year in addition to the four regional distribution hubs it had already announced, Target Chief Operating Officer John Mulligan said on the company's first-quarter earnings call on Wednesday. The sortation centers will build on what executives called a successful pilot program at a 399K SF facility in the company's hometown of Minneapolis, CoStar reports.
The sortation centers pull in inventory from surrounding Target stores for online orders, centering the stores within the company's distribution network, which CEO Brian Cornell identified as a central theme of Target's strategy in the past four years. Slightly more than 95% of all of Target's sales, including online orders, were fulfilled by stores in Q1, which saw 18% comparable-store sales growth year-over-year, according to the company's earnings report.
Target's first quarter was full of high notes, including a record of $3.69 in earnings per share, a 22.9% increase in overall comparable sales compared to Q1 2020 and a $1B gain in market share for the second straight year. Apparel was the biggest driver of sales growth at 60% year-over-year.
Target executives reaffirmed the goal of $4B in capital expenditures per year going forward on real estate expansion while noting that only $500M was spent in the first quarter. Beyond distribution, that expenditure will involve redesigns to about 100 stores to bring more inventory to the front door, allowing staff to more quickly fulfill drive-up orders, Mulligan said on the call. Target also announced this week that alcohol will now be among the items that can be ordered for curbside pickup in 1,200 U.S. stores and for same-day delivery from 600 U.S. stores.
The company continues to find success in smaller-format stores in urban and dense suburban markets, focusing on those areas for the 30-plus stores it plans to add by the end of this year. While such stores have typically been less than 50K SF, newer stores could be between 50K and 100K SF, Mulligan said.