A pair of brand partnerships announced this week by Target illuminate the way the cheap-chic retailer is planning to recapture robust growth and win back customer favor.
Target said on Thursday it would open shop-in-shops for popular eyewear brand and retailer Warby Parker, starting with five locations this year and more to come at locations that do not have a Target optical section. A day earlier, the company announced it was teaming up with sportswear brand Champion to offer 500 items ranging from clothing to sporting goods.
The one-two punch of tie-ups with big popular brands serve as a reminder of what helps Target stand out in the crowded retail field and gives it its essential “Tar-zhay” aura. And as a retailer that has underperformed archrival Walmart for several quarters, Target does need to refresh its game. Last week, Walmart reported a strong holiday quarter, with U.S. comparable sales up 4.6% compared with the same period a year earlier. While Target will present its full fourth-quarter numbers on Tuesday as part of its annual meeting with Wall Street, it did say that in November and December, comparable sales had risen a better-than-expected 2%. But it didn’t raise its profit forecast, suggesting to investors that shoppers were driving a hard bargain and insisting on discounts.
“The company is making targeted pricing reductions and accelerating promotions to lure value-seeking shoppers into stores,” Bloomberg Intelligence wrote in a recent research note.
Target’s moves to stoke growth again come against a backdrop of consumer malaise, and a backlash to its move away from DEI initiatives, which stirred ire among shoppers. Investors will be listening closely for signs Target’s new brand initiatives are catching on enough to start to lift it out of its recent doldrums in an enduring way.
One of the big retail winners during COVID, Target has struggled to keep many of its customers over the past few years. The company struggled mightily for much of 2024 compared with Walmart, given that inflation was leading many consumers to focus on lower prices and prioritize essentials like groceries, a big edge for Walmart, the nation’s top grocer. In contrast, Target’s food offering is more suitable for “fill-in” trips, or complementing one’s food run with an assortment of discretionary or bonus items rather than the main staples.
Adding to the pressure on Target, Walmart has been busy improving its store-brand home furnishings and clothes, presenting the latter with mannequins, and challenging Target’s hold on the cheap-chic fashion market. (Walmart even opened a pop-up for one of its brands in New York’s trendy SoHo district during Fashion Week in early February.)
That challenges one of Target’s strongest brand identity pillars, and an emphasis on fashion that goes back decades. It has launched more than 200 collaborations with outside brands, offering teakettles by renowned architect Michael Graves, as well as clothing collections with Isaac Mizrahi in 2002 and Italian fashion house Missoni in 2011, among many others. More recently, the company brought in rivals like CVS Health and Ulta Beauty to operate stores within Target locations to offer specialized services.
The Warby Parker and Champion concepts are Target’s bet that continuing those kinds of partnerships will get it out of its slump.
