On the executive floor of Target's Minneapolis headquarters, near the kitchen and common area, stands a showroom stocked with back-to-college linens, plaid throws, oversized candy canes, furniture, stretch denim, and much, much more. As employees browse the display of items the retailer thinks will fly off store shelves, Target's product design and development team artfully primps and styles the space, located on the 26th floor. They're readying it for a walk-through with CEO Brian Cornell, who was caught peeking at the merchandise earlier in the week.
"[Brian] is incredibly passionate about product," said Julie Guggemos, senior VP-product design and development. "He is naturally curious. He's always walking the floor."
The showroom with new products flowing through every six weeks is one of a number of ways the CEO, who joined last August, is keeping everyone from top brass to marketing and public relations clued-in to the new direction of the brand. Over the past year, Mr. Cornell has been trying to reenergize the retailer that once defined affordable chic with an instantly recognizable design aesthetic, but was caught off guard and derailed by the rapid growth of e-commerce. Same-store sales recovered after the recession with a 3% rise in 2011, and then lost ground. Last year, Target's same-store sales were up 1.3%.
"They hit that wall," said David Schick, managing director at equity research group Stifel, referring to Target. "They were running out of U.S. growth and Target was behind in the e-commerce migration. They had to do a lot all at once: stop opening stores, enhance e-commerce and at the same time, reenergize merchandising."
A big part of the ex-PepsiCo executive's turnaround plan is to move Target away from being all things to all people while it builds up its omnichannel offerings, and instead focus on four core areas where the brand can stand out: style, including home, apparel and other products; baby, encompassing clothes and gear; kids' clothes and toys; and wellness, a category that the chain is still defining, but covers things like organic food, health products and green cleaning supplies. During the second quarter of 2015, same-store sales for those four signature categories grew more than 7%, or three times its overall same-store sales growth of 2.4%, Mr. Cornell said on a conference call.
"For a long time Target was, as a general retailer, pushing a lot of things forward," said Joshua Thomas, spokesman for Target. "Now we've taken a look and said, 'That's not sustainable and that's not really helping us move the needle, so let's think about what are those categories, those products that are most important to our guest and that, frankly, we can do better than anyone else.'"
To do so, Target is freeing itself up to focus on lucrative areas with deals like its recent pact to turn over operations of its pharmacy counters and clinics to CVS Health. Mr. Cornell is also mixing up the leadership team that selects every item Target sells. The brand's longtime chief merchandising and supply chain officer stepped down last month and was recently followed by a merchandising executive who led a number of categories including grocery and health care. And the retailer is relying on a combination of national brands, exclusives like athletic brand C9 by Champion and Target's own brand portfolio to differentiate itself, while it invests more in e-commerce.