While Amazon is adding giant fulfillment centers to satisfy online orders, Target is bulking up on smaller stores to move merchandise.
In October alone, Target opened 18 new locations, adding to the 12 it had already added since the beginning of the year. Moving forward, the big-box retailer is planning on opening up to 40 stores a year, officials said at the company’s third-quarter earnings call on Wednesday. It now has 1,897 stores nationwide.
“The key to fulfillment capacity is the store asset itself,” Chief Operating Officer John Mulligan said during the call.
The company is moving away from the large retail locations it has traditionally leased, however. Of the 30 new stores Target has opened so far in 2020, all but one was considered small-format. Macy’s recently announced a similar strategy.
“We remain really bullish on the small-format stores,” Mulligan added. The company divides its stores into three size categories: 49,999 square feet or less, 50,000 to 169,999 square feet and 170,000 square feet or more.
The announcement of more stores came after a rosy third quarter for the retailer.
Operating income was $1.9 billion from August through October, nearly doubling the $1 billion from the same time last year. Total revenue grew to $22.6 billion, a 21.3 percent year-over-year increase. It was another big quarter for Target, whose revenue remained steady compared with last quarter’s $23 billion.
Target, Amazon and Walmart have been among the few that have benefited from the pandemic, as stores have remained open and e-commerce business has boomed.
Although more than 95 percent of Target’s third quarter sales were fulfilled by its stores, its smaller digital business saw a 155 percent increase year-over-year.